<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 29, 1998.
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
---------------------
GLOBE HOLDINGS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MASSACHUSETTS 3069 04-2017769
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NO.)
INCORPORATION OR CLASSIFICATION NUMBER)
ORGANIZATION) ---------------------
456 BEDFORD STREET
FALL RIVER, MASSACHUSETTS 02720
TELEPHONE: (508) 674-3585
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANTS' PRINCIPAL EXECUTIVE OFFICES)
---------------------
THOMAS A. RODGERS, III
456 BEDFORD STREET
FALL RIVER, MASSACHUSETTS 02720
TELEPHONE: (508) 674-3585
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
---------------------
COPY TO:
LAURIE T. GUNTHER
KIRKLAND & ELLIS
200 EAST RANDOLPH DRIVE
CHICAGO, ILLINOIS 60601
TELEPHONE: (312) 861-2000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after this Registration Statement becomes
effective.
---------------------
If any 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. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE TO BE OFFERING PRICE OFFERING REGISTRATION
REGISTERED REGISTERED PER UNIT(1) PRICE(1) FEE
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<S> <C> <C> <C> <C>
14% Senior Discount
Notes due 2009, Series
B..................... $49,086,000 50.872% $24,970,992 $7,367
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</TABLE>
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(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(f)
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(A), MAY DETERMINE.
---------------------
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED SEPTEMBER , 1998
PRELIMINARY PROSPECTUS
, 1998
GLOBE HOLDINGS, INC.
LOGO
OFFER TO EXCHANGE ITS 14% SENIOR DISCOUNT NOTES DUE 2009, SERIES B
FOR ANY AND ALL OF ITS OUTSTANDING 14% SENIOR DISCOUNT NOTES DUE 2009.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON ,
1998, UNLESS EXTENDED.
Globe Holdings, Inc., a Massachusetts 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 at maturity of
its 14% Senior Discount Notes due 2009, Series B (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 at maturity of its outstanding 14% Senior Discount Notes due
2009 (the "Old Notes") of which $49,086,000 principal amount at maturity is
outstanding. The form and terms of the New Notes are the same as the form and
term of the Old Notes except that (i) the New Notes will bear a Series B
designation and a different CUSIP number, (ii) the New Notes will have been
registered under the Securities Act and, therefore, will not bear legends
restricting the transfer thereof and (iii) holders of the New Notes will not be
entitled to certain rights of holders of Old Notes under the Registration
Rights Agreement (as defined). 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 August 6, 1998 (the "Indenture") by and
among the Company and Norwest Bank Minnesota, National Association, as trustee,
governing the Old Notes and the New Notes. 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 , 1998,
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.
See "The Exchange Offer."
The Notes were issued at a substantial discount from their principal amount.
The Notes will accrete in value until August 1, 2003 at a rate of 14% per
annum, compounded semiannually on February 1 and August 1 of each year to an
aggregate principal amount of $49,086,000. Cash interest on the Notes will not
accrue prior to August 1, 2003. Thereafter, the Notes will bear interest at a
rate of 14% per annum, payable semiannually in arrears on February 1 and August
1 of each year, commencing on February 1, 2004.
The Notes may be redeemed, in whole or in part, at any time on or after
August 1, 2003 at the option of the Company, at the redemption prices set forth
herein, plus, in each case, accrued and unpaid interest and Liquidated Damages
(as defined), if any, to the date of redemption. In addition, at any time prior
to August 1, 2001, the Company may, at its option, redeem up to 35% in
aggregate principal amount at maturity of the Notes at a redemption price equal
to 114.0% of the Accreted Value (as defined) thereof, plus Liquidated Damages,
if any, to the date of redemption, with the net cash proceeds of one or more
Equity Offerings (as defined); provided that not less than 65% of the aggregate
principal amount at maturity of the Notes remain outstanding immediately after
the occurrence of any such redemption. At any time prior to August 1, 2003, the
Notes may be redeemed, in whole but not in part, at the option of the Company
at any time within 180 days after a Change in Control (as defined), at a
redemption price equal to the sum of (i) 100% of the Accreted Value thereof,
together with Liquidated Damages, if any, to the date of redemption, plus (ii)
the Applicable Premium (as defined). See "Description of the Notes--Optional
Redemption."
The New Notes will be, as the Old Notes (which they replace) are, general
unsecured obligations of the Company, and will, as the Old Notes (which they
replace), be effectively subordinated to all secured obligations
(Cover continued on following page)
-------------
SEE "RISK FACTORS" BEGINNING ON PAGE 13 FOR A DESCRIPTION OF CERTAIN RISKS TO
BE CONSIDERED BY HOLDERS WHO TENDER THEIR OLD NOTES IN THE EXCHANGE OFFER.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
of the Company and all obligations of the subsidiaries of the Company. The
Notes will rank pari passu with any existing and future Senior Debt (as
defined) of the Company and will rank senior to all Subordinated Debt (as
defined) of the Company. As of June 30, 1998, on a pro forma basis after
giving effect to the Transactions, (i) the Company would have had no
outstanding Senior Debt (other than the Notes and its guarantee under the
Senior Credit Facility (as defined) and (ii) the Company's subsidiaries would
have had total debt and other liabilities of $289.1 million (excluding unused
commitments of $45.0 million under the Senior Credit Facility). See
"Description of the Notes."
The Old Notes were sold by the Company on August 6, 1998 to BancAmerica
Robertson Stephens (the "Initial Purchaser") in a transaction not registered
under the Securities Act in reliance upon an exemption under the Securities
Act (the "Initial Offering"). The Initial Purchaser subsequently placed the
Old Notes with qualified institutional buyers in reliance upon Rule 144A under
the Securities Act. Accordingly, the 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 in order to satisfy the obligations of the Company under the
Registration Rights Agreement entered into by the Company and the Initial
Purchaser in connection with the Initial Offering (the "Registration Rights
Agreement"). See "The Exchange Offer."
Based upon an interpretation by the staff of the Securities and Exchange
Commission (the "Commission") set forth in certain no-action letters issued to
third parties, the Company believes that the New Notes issued pursuant to the
Exchange Offer in exchange for Old Notes may be offered for resale, resold and
otherwise transferred by any holder thereof (other than 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 requirements of the Securities Act, provided that such 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." Holders of Old Notes wishing to accept the Exchange Offer must
represent to the Company, as required by the Registration Rights Agreements,
that such conditions have been met. 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."
Shortly before the Initial Offering, Globe Manufacturing Corp. ("Globe
Manufacturing"), a subsidiary of Globe Holdings, sold $150 million in initial
aggregate principal amount of its 10% Senior Subordinated Notes due 2008 (the
"Old Senior Subordinated Notes").
Concurrent with this Note Exchange Offer, Globe Manufacturing is offering to
exchange $1,000 principal amount of its 10% Senior Subordinated Notes due
2008, Series B (the "New Senior Subordinated Notes," and, together with the
Old Senior Subordinated Notes, the "Senior Subordinated Notes") registered
under the Securities Act pursuant to a registration statement, for each $1,000
principal amount of its outstanding Old Senior Subordinated Notes, of which
$150 million in initial aggregate principal amount is outstanding. See "The
Transactions" and "Description of the Notes."
The Company will not receive any proceeds from the Exchange Offer. The
Company has agreed to bear the expenses of the Exchange Offer. No underwriter
is being used in connection with 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
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<PAGE>
automated quotation system. The Old Notes are currently eligible for trading
in the Private Offerings, Resales and Trading through Automatic Linkages
("PORTAL"). There can be no assurance that an active market for the New Notes
will develop. See "Risk Factors--Absence of a Public Market Could Adversely
Affect the Value of New Notes." 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. Except as
described under "Book-Entry Procedures and Transfer," the Company expects that
the New Notes issued pursuant to the Exchange Offer will be represented by one
or more Global Notes (as defined), 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 Notes
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 Notes, Notes in certificated form will be
issued in exchange for Global Notes only under limited circumstances as set
forth in the Indenture. See "Book-Entry Procedures and Transfer."
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN
WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE
WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING HEREBY TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS OR
THE ACCOMPANYING LETTER OF TRANSMITTAL, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY.
PROSPECTIVE INVESTORS IN THE NEW NOTES ARE NOT TO CONSTRUE THE CONTENTS OF
THIS PROSPECTUS AS INVESTMENT, LEGAL OR TAX ADVICE. EACH INVESTOR SHOULD
CONSULT ITS OWN COUNSEL, ACCOUNTANT AND OTHER ADVISORS AS TO LEGAL, TAX,
BUSINESS, FINANCIAL AND RELATED ASPECTS OF THE NEW NOTES. THE COMPANY IS NOT
MAKING ANY REPRESENTATION TO ANY PROSPECTIVE INVESTOR IN THE NEW NOTES
REGARDING THE LEGALITY OF AN INVESTMENT THEREIN BY SUCH PERSON UNDER
APPROPRIATE LEGAL INVESTMENT OR SIMILAR LAWS.
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-4 (the "Exchange Offer Registration Statement," which term shall encompass
all amendments, exhibits, annexes and schedules thereto) pursuant to the
Securities Act, and the rules and regulations promulgated thereunder, covering
the Exchange Offer contemplated 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,
and periodic reports and other information filed by the Company with the
Commission 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, and inspected at the Commission's regional offices at 7 World
Trade Center, Suite 1300, New York, New York 10048 and Citicorp Center, Suite
1400, 500 West Madison Street, Chicago, Illinois 60601. Copies of such
iii
<PAGE>
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 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.
In addition, 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 Notes
remain outstanding, it will furnish to the holders of the Notes and, to the
extent permitted by applicable law or regulation, file with the Commission (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 thereof by the Company's
independent certified public accountants and (ii) all reports that would be
required to be filed on Form 8-K if it were required to file such reports. In
addition, for so long as any of the Notes remain outstanding, the Company has
agreed to make available to any prospective purchaser of the Notes or
beneficial owner of the Notes, in connection with any sale thereof, the
information required by Rule 144A(d)(4) under the Securities Act.
The Company is a Massachusetts corporation with its principal executive
offices located at 456 Bedford Street, Fall River, Massachusetts 02720, and
its telephone number is (508) 674-3585.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All reports and other documents filed by the Company pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act after the date of this
Prospectus and prior to the Expiration Date shall be deemed to be incorporated
by reference herein and to be a part hereof from the date of the filing of
such reports and documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained
herein (or in any other subsequently filed document which also is incorporated
or deemed to be incorporated by reference herein) modifies or supersedes such
previous statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus and the Exchange Offer Registration Statement.
This Prospectus incorporates documents by reference which are not presented
herein or delivered herewith. These documents are available without charge
upon request from Lawrence R. Walsh, Vice President of Finance and
Administration of Globe Holdings, Inc., 456 Bedford Street, Fall River,
Massachusetts 02720, telephone (508) 674-3585. In order to ensure timely
delivery of the documents, any request should be made by , 1998
(five business days prior to the expiration date).
MARKET SHARE AND INDUSTRY DATA
The market share and industry data presented herein are based upon estimates
by management of the Company, utilizing various third party sources, where
available. While management believes that such estimates are reasonable and
reliable, in certain cases such estimates cannot be verified by information
available from independent sources. Accordingly, no assurance can be given
that such market share and industry data are accurate in all material
respects.
iv
<PAGE>
CERTAIN TERMINOLOGY
As used herein, the following terms have the meanings specified below:
circular knit: a type of weft knit in which the fabric is produced in the
form of a tube, with threads running continuously around the fabric. In
weft knit fabrics, the thread runs crosswise in the fabric, as opposed to
lengthwise in warp knits. Circular knits are used in active wear, swimwear,
casual wear and dress wear.
denier: a weight per unit of length measure of any linear material. In
fibers, a weight numerically equal to the weight in grams of 9,000 meters
of the material. Lower numbers represent finer sizes, and higher numbers
represent coarser sizes.
elastomeric: describes any material (including yarn, fiber, film and
sheets) which exhibits pronounced elastic properties, such elastic
properties being the material's primary value attributes.
gauge: the number of needles, fibers or other elements in a determined
unit of length. For latex thread, gauge means the number of individual
rubber threads which, when placed cross-sectionally beside one another, fit
into a length of one inch. Lower numbers represent coarser sizes and higher
numbers represent finer sizes.
narrow fabric: any knit or woven fabric that is twelve inches or less in
width and has a selvage on each side (other than ribbon and seam bindings).
Narrow fabric applications include waist bands and straps.
nonwoven: a type of fabric in which the fibers are fused or bonded in a
random web or mat, as opposed to interlacing sets as in woven fabric.
Nonwovens are employed in diapers, adult incontinence products, feminine
hygiene products and medical bandages.
spandex: a manufactured fiber in which the fiber-forming substance is a
long-chain synthetic polymer comprised of at least 85% segmented
polyurethane.
warp knit: a type of knit in which the threads run lengthwise in the
fabric, as opposed to crosswise in weft knits. Examples of warp knits
include milanese knits, raschel knits and tricot knits. Warp knit
applications include intimate apparel, body shaping garments, swimwear and
footwear.
woven: a type of fabric generally composed of two sets of yarns, warp and
filling, that is formed by weaving interlacing sets of these yarns.
v
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by and should be read in
conjunction with the detailed information and consolidated financial statements
and notes thereto appearing elsewhere in this Prospectus. As used in this
Prospectus, unless the context otherwise indicates, "Company" or "Globe" or
"Globe Holdings" refers to Globe Holdings, Inc. (formerly known as Globe
Manufacturing Co.) and its subsidiaries, and "Globe Manufacturing" refers to
Globe Manufacturing Corp. (formerly known as Globe Elastic Co., Inc.), the
Company's wholly owned subsidiary. Except as otherwise set forth herein,
references to "pro forma" information for a period ending on a specified date
means information that gives pro forma effect to the Transactions as if the
Transactions had occurred on such date for balance sheet data and as of the
beginning of the period for statement of income data. See "--The Transactions."
THE COMPANY
OVERVIEW
Globe is a leading domestic manufacturer and worldwide supplier of spandex
and latex elastomeric fibers, marketing its products to more than 500
customers. The Company's fibers are used in a broad range of applications,
including men's and women's hosiery, waistbands, intimate apparel, performance
athletic wear, swimwear, casual wear, suiting fabrics, body shaping (or
foundation) garments, personal care products (including diapers and adult
incontinence products) and footwear. The Company has produced elastomeric
fibers exclusively for over 50 years and has developed long-term relationships
with many of its principal customers, including Fruit of the Loom, Inc.,
Kimberly-Clark Corporation, Minnesota Mining & Manufacturing Company, Sara Lee
Hosiery, Unifi, Inc. and Worldtex, Inc. During the twelve months ended June 30,
1998, the Company had net sales of $179.1 million and EBITDA (as defined) of
$46.3 million.
Spandex fiber, which accounted for 80% of the Company's 1997 sales, is a
highly desirable component of fabrics designed for performance, durability,
comfort, control and resilience due to its unique chemical and physical
properties. Spandex fiber is produced in a broad range of fine and heavy
deniers and is sold on a private label basis and under brand names such as the
Company's GLOSPAN(R) and CLEERSPAN(R), DuPont's Lycra(R) and Bayer's
Dorlastan(R). Recent advances in fabric manufacturing technologies have
facilitated the use of spandex fiber in an increasing number of apparel and
non-apparel applications. Globe has benefited from this recent proliferation of
spandex fiber applications due to its exclusive focus on elastomeric fibers,
superior customer service, broad product line, strong market position and
efficient manufacturing processes.
Management estimates that in 1997 the worldwide market for spandex fiber was
approximately 240 million pounds, representing approximately $2.0 billion in
sales. From 1993 to 1997, worldwide sales of spandex fiber increased at an
estimated 11% compound annual growth rate, and the worldwide spandex fiber
market is expected to grow at approximately 9% over the next three years. Since
1993, demand for fine denier spandex has increased faster than the overall
market due to its growing use in lightweight and high quality apparel
applications and this trend is expected to continue.
The Company operates three manufacturing facilities, which are located in
Fall River, Massachusetts, Tuscaloosa, Alabama and Gastonia, North Carolina.
Since 1993, Globe has invested $97.5 million to increase manufacturing
capacity, enhance productivity and shift its product mix to the faster growing,
higher margin fine denier spandex fiber. During this period, the Company's
annual fine denier spandex fiber production
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<PAGE>
capacity increased from 2.6 million to 10.6 million pounds. As a result of the
Company's capital investment program and continuous improvement initiatives in
its manufacturing facilities, Globe's fine denier spandex fiber production
yields have improved by 35% and sales per employee have increased by 43% since
1993.
TUSCALOOSA PLANT EXPANSION
Globe is expanding production capacity at its Tuscaloosa, Alabama fine denier
spandex fiber manufacturing facility in response to existing demand from
current customers (the "Tuscaloosa Plant Expansion"). Through June 30, 1998,
Globe had spent approximately $16.1 million of the estimated $22.1 million
project cost. The Tuscaloosa facility, built in 1994, has undergone three prior
capacity expansions. The Tuscaloosa Plant Expansion will increase the Company's
fine denier manufacturing capacity by 3.6 million pounds per annum, or 34%,
with approximately half of this increased capacity expected to be on line in
the fourth quarter of 1998 and the balance expected to be on line in the first
quarter of 1999. As of June 30, 1998, Globe's list price for 40 denier spandex
fiber, the primary product currently produced at the Company's Tuscaloosa
facility, was $11.50 per pound.
COMPETITIVE STRENGTHS
The Company's exclusive focus on elastomeric fibers for over 50 years has
enabled it to develop the following competitive strengths:
Long-Term Customer Relationships and Superior Customer Service. Globe has
established long-term relationships with its principal customers by focusing on
superior technical and customer service. The Company has been a supplier to
Fruit of the Loom, Inc., Kimberly-Clark Corporation, Minnesota Mining and
Manufacturing Company, Sara Lee Hosiery, Unifi, Inc. and Worldtex, Inc. for
over ten years. Seven of the Company's ten largest customers have selected
Globe as their preferred supplier of spandex fiber. Globe provides analytical
laboratory services and on-site technical assistance to improve customers'
manufacturing and engineering processes. As a result, a number of the Company's
major customers have selected it as a technology partner to assist in the
development of new spandex applications.
Broad Product Line. The Company believes that it offers the broadest line of
spandex and latex elastomeric fibers in the world. The Company produces a full
line of spandex fibers in deniers ranging from 15 to 5040. These products
feature an assortment of stretch, strength and other performance
characteristics that may be customized for specific applications and
manufacturing processes. Globe also manufactures a wide variety of latex
threads in multiple gauges and formulations. This broad range of product
offerings differentiates the Company in the industry and represents a
competitive advantage, as many customers purchase multiple deniers of spandex
fiber, as well as various gauges of latex thread, and prefer to utilize one
vendor for their elastomeric fiber requirements. The proprietary technologies
and customized equipment used by Globe in its multiple manufacturing processes
enable the Company to cost-effectively produce this broad product line.
Strong Positions in Growing Markets. The Company has established a strong
market position in each of its principal product lines. The Company has an
estimated 16% share of the domestic spandex fiber market and an estimated 7%
share of the worldwide spandex fiber market (based on pounds produced).
Management estimates that worldwide sales of spandex fiber will increase at a
compound annual growth rate of approximately 9% over the next three years and
that fine denier spandex sales will exceed the overall market growth rate
during this period. Fine denier spandex demand has been driven by strong
consumer demand for lightweight and high quality apparel and technological
advances allowing for the use of spandex fibers in the manufacture of such
apparel.
Cost-Efficient Manufacturing. Management believes that the Company's
manufacturing operations are among the most efficient in the industry, allowing
the Company to become one of the world's lowest cost producers of high quality
spandex fiber. Globe has developed proprietary chemical formulations and highly
2
<PAGE>
efficient manufacturing processes that utilize sophisticated process control
systems and custom fabricated manufacturing equipment designed and built by the
Company's engineers. Management believes that Globe's in-house capability to
design, engineer and build its own manufacturing equipment distinguishes the
Company from many of its competitors and provides it with an important
competitive advantage in maintaining product quality as well as controlling
design, development and maintenance costs. In addition, increased production
volume at the Company's facilities has enabled the Company to achieve
significant economies of scale and raw material purchasing power.
Experienced Management Team. The Company is led by an experienced management
team with a track record of achieving profitable growth, developing new
manufacturing processes and expanding the Company's customer base. Between 1993
and the twelve months ended June 30, 1998, the Company's net sales increased
from $107.6 million to $179.1 million and EBITDA increased from $23.7 million
to $46.3 million. The Company's executive officers average approximately 20
years with the Company. The Company's senior management team has a substantial
financial interest in the Company's continued success through their direct
investment in the Company.
BUSINESS STRATEGY
The Company's business objective is to become the leading global supplier of
elastomeric fiber for use in selected apparel and non-apparel markets. The
Company seeks to achieve this objective by pursuing the following strategies:
Continue Shift in Product Mix to Higher Growth, More Profitable Fine Denier
Products. Since 1993, Globe has expanded its annual production capacity of
higher growth fine denier spandex fiber from 2.6 million to 10.6 million
pounds. Fine denier spandex fiber is used in applications requiring lightweight
or high quality fabric, and has been generally more profitable than heavy
denier spandex fiber due to the complexity of the manufacturing process
required and strong market demand. Fine denier spandex fiber sales accounted
for approximately 49% of Globe's 1997 total sales, up from 25% in 1993. The
Tuscaloosa Plant Expansion, which will increase the Company's annual production
capacity for fine denier spandex fiber to 14.2 million pounds, will enable the
Company to further address the increase in demand for fine denier spandex
fiber.
Develop Innovative Spandex Fiber Applications. Globe's product managers and
research and development engineers work closely with existing and prospective
customers to develop innovative applications for spandex fiber. For example,
the Company worked with a fleece manufacturer for over two years to develop a
new four-way stretch fleece product for outerwear that incorporates Globe's
spandex fiber. Cooperative efforts such as this have enabled Globe to enhance
its relationships with existing customers and attract new customers.
Improve Manufacturing Productivity; Reduce Production Costs. The Company
seeks to continually improve manufacturing efficiency and reduce production
costs in order to maintain its position as one of the world's lowest cost
producers of high quality spandex fiber. The Company seeks to improve
manufacturing yields, increase equipment utilization, and reduce production
costs by upgrading process monitoring equipment, enhancing production processes
and increasing throughput. Each of the Company's manufacturing facilities is
certified under ISO 9001, and the Company actively incorporates the principles
of continuous improvement.
Increase International Sales. Globe estimates that the international market
accounts for two-thirds of the worldwide spandex fiber market. International
spandex fiber markets are growing rapidly due to increasing consumerism of the
world's population, coupled with increases in personal disposable income. From
1993 to 1997, Globe's international sales increased from 19% of sales to 28% of
sales (primarily in western Europe and Latin America) as the Company expanded
the size and geographic scope of its international sales to 46 countries. The
Company seeks to further expand its international sales by leveraging its
existing sales and marketing infrastructure and capitalizing on Globe's
expanded manufacturing capacity.
3
<PAGE>
THE TRANSACTIONS
The consummation of the Initial Offering occurred shortly after the
effectiveness of the recapitalization (the "Recapitalization") of the Company.
The Recapitalization was effected pursuant to an agreement and plan of merger
dated June 23, 1998 (the "Merger Agreement") between the Company and Globe
Acquisition Company ("MergerCo"), a newly formed affiliate of Code Hennessy &
Simmons, pursuant to which MergerCo merged with and into the Company (the
"Merger"). As a result of the Merger and the Recapitalization, Code Hennessy &
Simmons, certain members of management and certain other investors have an
aggregate investment of $75.0 million in the Company, comprised of a rollover
of approximately $7.2 million (the "Retained Investment") by management and
other pre-Merger shareholders of the Company (the "Pre-Merger Shareholders"),
an equity investment by Code Hennessy & Simmons and certain other investors in
an aggregate amount equal to $42.8 million (the "New Investment" and, together
with the Retained Investment, the "Equity Investment") and the CHS Loan of
$25.0 million to the Company, which was repaid with the proceeds of the Initial
Offering. Immediately prior to the Merger, the Company transferred
substantially all of its assets and liabilities to Globe Manufacturing (the
"Asset Drop Down").
Pursuant to the Merger and the Recapitalization: (i) Globe Manufacturing
incurred approximately $120.0 million of borrowings (consisting of $115.0
million in term loans and approximately $5.0 million in revolving loans) under
a new senior secured credit facility (the "Senior Credit Facility"); (ii) Globe
Manufacturing received gross proceeds of $150.0 million from the offering (the
"Initial Senior Subordinated Note Offering") of the Old Senior Subordinated
Notes; (iii) Code Hennessy & Simmons provided the CHS Loan to the Company; (iv)
Globe Holdings repaid its indebtedness outstanding under certain loan credit
facilities (collectively, the "Old Credit Facility"); (v) holders of the shares
of common stock of the Company outstanding prior to the Recapitalization
received cash (including the payment by the Company of fees and expenses on
their behalf) equal to $315.0 million less (x) the amount of the Company's
outstanding indebtedness for borrowed money as of the date of the Merger and
(y) the amount of the Retained Investment (the "Cash Merger Consideration");
and (vi) the Company deposited $15.0 million (the "Escrow Amount") into escrow
to secure certain indemnification and other obligations of the Pre-Merger
Shareholders under the Merger Agreement. See "Recent Developments," "Use of
Proceeds," "Certain Relationships and Related Transactions--Recapitalization,"
and "Description of Senior Credit Facility."
The Initial Offering, the Asset Drop Down, the Initial Senior Subordinated
Note Offering, the CHS Loan (and the repayment thereof with the proceeds of the
Initial Offering), the Equity Investment, the Recapitalization, the Merger, the
initial borrowings under the Senior Credit Facility and the repayment of
borrowings under the Old Credit Facility are collectively referred to herein as
the "Transactions." See "Use of Proceeds" and "Description of Senior Credit
Facility."
RECENT DEVELOPMENTS
On August 6, 1998 the Company consummated the Initial Offering under Rule
144A of the Securities Act, pursuant to which the Company issued and sold
49,086 units (the "Units"), each consisting of one Old Note and one warrant (a
"Warrant") to purchase 1.4155 shares of Class A Common Stock, $.01 par value,
of the Company. The Units were initially sold to BancAmerica Robertson
Stephens. The aggregate purchase price of the Units was $25,000,000 and the net
proceeds to the Company were $24,562,490, after deducting underwriting
discounts and commissions and other expenses payable by the Company. The Old
Notes were issued pursuant to the terms of the Indenture. Concurrently with the
consummation of the private placement, the Company and BancAmerica Robertson
Stephens entered into the Registration Rights Agreement, which grants the
holders of the Old Notes certain exchange and registration rights. The Exchange
Offer is intended to satisfy such exchange rights which terminate upon the
consummation of the Exchange Offer.
4
<PAGE>
THE EXCHANGE OFFER
Securities Offered........ $49,086,000 aggregate principal amount at maturity
of 14% Senior Discount Notes due 2009, Series B.
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, $49,086,000 aggregate principal
amount at maturity of Old Notes are outstanding.
The Company will issue the New Notes to holders on
or promptly after the Expiration Date.
Based on an interpretation 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.
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 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."
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
could not rely on the position of the staff of the
Commission enunciated 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 in such instance may result in
such holder incurring liability under the
Securities Act for which the holder is not
indemnified by the Company.
5
<PAGE>
Expiration Date........... 5:00 p.m., New York City time, on ,
1998 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.....................
No cash interest will be payable in respect of the
New Notes prior to August 1, 2003. Thereafter, cash
interest on the New Notes will accrue on the
principal amount at maturity at the rate of 14% per
annum and will be payable semi-annually on February
1 and August 1 of each year, commencing February 1,
2004. The Old Notes will continue to accrete at the
rate of 14% per annum to, but excluding, the date
of issuance of the New Notes. Any Old Notes not
tendered or accepted for exchange will continue to
accrete at the rate of 14% per annum in accordance
with their terms. The Accreted Value of New Notes
upon issuance will equal the Accreted Value of the
Old Notes accepted for exchange immediately prior
to issuance of the New Notes.
Conditions to the The Exchange Offer is subject to certain customary
Exchange Offer............ conditions, which may be waived by the Company. See
"The Exchange Offer--Conditions."
Procedures for Tendering Each holder of Old Notes wishing to accept the
Old Notes................. 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, together with the Old Notes and any
other required documentation to the Exchange Agent
(as defined) 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 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 under
Rule 405 of the Securities Act, of the Company. See
"The Exchange Offer--Purpose and Effect of the
Exchange Offer" and "--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 foreign person pursuant to the requirements of
Rule 904 under the Securities Act, or (iv) pursuant
to an effective registration statement under the
Securities
6
<PAGE>
Act. See "The Exchange Offer--Consequences of
Failure to Exchange."
Shelf Registration If any holder of the Old Notes (other than any such
Statement................. holder which is an "affiliate" of the Company
within the meaning of Rule 405 under the Securities
Act) is not eligible under applicable securities
laws to participate in the Exchange Offer, and such
holder has satisfied certain conditions relating to
the provision of information to the Company for use
therein, the Company has agreed to register the Old
Notes on a shelf registration statement (the "Shelf
Registration Statement") and use its best efforts
to cause it to be declared effective by the
Commission as promptly as practical on or after the
consummation of the Exchange Offer. The Company has
agreed to maintain the effectiveness of the Shelf
Registration Statement for, under certain
circumstances, a maximum of two years, to cover
resales of the Old Notes held by any such holders.
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.
Guaranteed Delivery Holders of Old Notes who wish to tender their Old
Procedures................ 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."
Use of Proceeds........... There will be no cash proceeds to the Company from
the exchange pursuant to the Exchange Offer.
Exchange Agent............ Norwest Bank Minnesota, National Association is
serving as Exchange Agent in connection with the
exchange offer of New Notes for Old Notes.
7
<PAGE>
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 and have a different CUSIP
number than the Old Notes, (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 liquidated damages 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 Indentures. See "Description of New
Notes."
Issuer.................... Globe Holdings, Inc.
Securities Offered........ $49,086,000 aggregate principal amount at maturity
of 14% Senior Discount Notes due 2009, Series B.
Maturity Date............. August 1, 2009.
Interest Payment Dates.... Cash interest will not accrue or be payable on the
New Notes prior to August 1, 2003. Thereafter, cash
interest on the New Notes will accrue at a rate of
14% per annum and will be payable semi-annually in
arrears on February 1 and August 1 of each year,
commencing February 1, 2004.
Original Issue Discount... The New Notes are being offered with original issue
discount for United States federal income tax
purposes. Although cash interest will not be due on
the New Notes prior to February 1, 2004, original
issue discount will accrue from the Issue Date and
will be included as interest income periodically
(including for periods ending prior to February 1,
2004) in a holder's gross income for United States
federal income tax purposes in advance of receipt
of the cash payments to which the income is
attributable.
Mandatory Sinking Fund or
Redemption................
None.
Optional Redemption....... The New Notes may be redeemed, in whole or in part,
at any time on or after August 1, 2003, at the
option of the Company, at the redemption prices set
forth herein, plus, in each case, accrued and
unpaid interest and Liquidated Damages, if any, to
the date of redemption. In addition, at any time
prior to August 1, 2001, the Company may, at its
option, redeem up to 35% in aggregate principal
amount at maturity of the New Notes at a redemption
price of 114% of the Accreted Value thereof, plus
Liquidated Damages, if any, to the date of
redemption, with the net cash proceeds of one or
more Equity
8
<PAGE>
Offerings, provided that not less than 65% of the
aggregate principal amount at maturity of the New
Notes remain outstanding immediately after the
occurrence of any such redemption.
Change of Control......... In the event of a Change of Control, each Holder
will have the right to require the Company to make
an offer to repurchase such Holder's New Notes, in
whole or in part, at a price, on or prior to August
1, 2003, equal to 101% of the Accreted Value
thereof, together with Liquidated Damages, if any,
to the date of repurchase and thereafter at a price
equal to 101% of the aggregate principal amount
thereof, plus accrued and unpaid interest and
Liquidated Damages, if any, to the date of
repurchase. In addition, upon the occurrence of a
Change of Control at any time prior to August 1,
2003, the New Notes may be redeemed, in whole but
not in part, at the option of the Company at a
redemption price equal to the sum of (i) 100% of
the Accreted Value thereof, together with
Liquidated Damages, if any, to the date of
redemption, plus (ii) the Applicable Premium.
Ranking................... The New Notes will be senior unsecured obligations
of the Company and will be effectively subordinated
to all obligations of the subsidiaries of the
Company (including Globe Manufacturing) and to all
secured obligations of the Company to the extent of
the value of the assets securing such obligations.
The New Notes will rank pari passu with any
existing and future Senior Debt of the Company and
will rank senior to all Subordinated Debt of the
Company. The Company is a holding company with no
operations of its own and its only material asset
is the capital stock of Globe Manufacturing (all of
which is pledged to secure obligations under the
Senior Credit Facility). As a result of this
holding company structure, the New Notes will
effectively rank junior in right of payment to all
creditors of Globe Manufacturing and its
subsidiaries, including the lenders under the
Senior Credit Facility, holders of the Senior
Subordinated Notes and trade creditors. As of June
30, 1998, on a pro forma basis after giving effect
to the Transactions, (i) the Company would have had
no outstanding Senior Debt (other than the New
Notes and its guarantee under the Senior Credit
Facility) and (ii) the Company's subsidiaries would
have had total debt and other liabilities of $289.1
million (excluding unused commitments of $45.0
million under the Senior Credit Facility). The
Indenture (as defined) permits the Company and its
subsidiaries to incur additional debt, subject to
certain limitations. See "Description of the New
Notes."
Guarantees................ None.
Certain Covenants......... The Indenture pursuant to which the New Notes will
be issued (the "Indenture"), among other things,
limits the ability of the Company and its
Restricted Subsidiaries to: (i) incur additional
debt; (ii) issue Disqualified Stock; (iii) make
certain restricted payments; (iv) grant liens on
assets; (v) merge, consolidate or transfer
substantially all of their assets; (vi) enter into
transactions with Related Persons; (vii)
9
<PAGE>
impose restrictions on any Restricted Subsidiary's
ability to pay dividends or make certain other
payments to the Company and its Restricted
Subsidiaries; (viii) enter into certain guarantees;
(ix) sell assets; and (x) issue capital stock of
Restricted Subsidiaries.
A description of the terms of the Notes, including definitions of terms which
are capitalized above, is set forth herein under "Description of the Notes."
RISK FACTORS
See "Risk Factors" for a discussion of certain factors that should be
considered before tendering Old Notes in exchange for New Notes, including
factors affecting forward-looking statements. These risk factors are generally
applicable to the Old Notes as well as the New Notes.
10
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
The following information is qualified in its entirety by the consolidated
financial statements of the Company. The following summary consolidated
financial data as of the dates and for the periods indicated were derived from
the audited and unaudited consolidated financial statements of the Company
contained elsewhere in this Prospectus. The unaudited consolidated financial
data at June 30, 1998 and for the six months ended June 30, 1997 and June 30,
1998 include all adjustments (consisting only of normal recurring adjustments)
which management considers necessary for a fair presentation of the financial
information for these unaudited periods. The results of operations for the six
months ended June 30, 1998 are not necessarily indicative of the results of
operations that may be expected for the full fiscal year 1998. The unaudited
pro forma consolidated financial data and the summary unaudited pro forma
consolidated balance sheet data as of June 30, 1998 give effect to the
Transactions as if they had occurred on such date (for balance sheet data) or
at the beginning of the period (for statement of income data). None of the pro
forma consolidated financial data set forth below (including the summary
unaudited pro forma consolidated balance sheet data) purport to be indicative
of the results that actually would have been obtained had all of the events
been completed as of the date assumed and for the periods presented and are not
intended to be a projection of the Company's future results or financial
position. The following summary consolidated financial information should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the consolidated financial statements
of the Company and the related notes thereto.
<TABLE>
<CAPTION>
PRO FORMA
FISCAL YEAR ENDED SIX MONTHS SIX MONTHS
DECEMBER 31, PRO FORMA ENDED JUNE 30, ENDED
---------------------------- DECEMBER 31, ---------------- JUNE 30,
1995 1996 1997 1997 1997 1998 1998
-------- -------- -------- ------------ ------- ------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME
DATA:
Net sales............... $128,319 $152,603 $170,941 $170,941 $84,283 $92,490 $ 92,490
Cost of sales........... 97,182 110,609 115,099 115,099 56,450 59,556 59,556
-------- -------- -------- -------- ------- ------- --------
Gross margin........... 31,137 41,994 55,842 55,842 27,833 32,934 32,934
Selling, general and
administrative
expenses............... 18,515 21,705 24,381 24,286 10,616 12,083 12,042
Research and development
costs.................. 2,260 2,533 2,633 2,633 1,190 2,040 2,040
-------- -------- -------- -------- ------- ------- --------
Operating income....... 10,362 17,756 28,828 28,923 16,027 18,811 18,852
Other income (expenses):
Interest, net........... (6,030) (5,285) (3,968) (29,406) (2,097) (1,788) (14,805)
Loss in investment in
joint venture (1)...... (643) -- -- -- -- -- --
Other income, etc....... 438 875 372 372 86 655 655
-------- -------- -------- -------- ------- ------- --------
Income before income
taxes and
extraordinary income.. 4,127 13,346 25,232 (111) 14,016 17,678 4,702
Provision for income
taxes.................. 1,718 4,784 8,383 (1,805) 5,255 6,638 1,422
-------- -------- -------- -------- ------- ------- --------
Income before
extraordinary item.... 2,409 8,562 16,849 1,694 8,761 11,040 3,280
Loss from write-off of
deferred financing
cost, net (2).......... 1,294 -- 301 301 301 -- --
-------- -------- -------- -------- ------- ------- --------
Net income.............. $ 1,115 $ 8,562 $ 16,548 $ 1,393 $ 8,460 $11,040 $ 3,280
======== ======== ======== ======== ======= ======= ========
OTHER FINANCIAL DATA:
Gross margin %.......... 24.3% 27.5% 32.7% 32.7% 33.0% 35.6% 35.6%
EBITDA (3) (5).......... $ 22,480 $ 28,960 $ 42,377 $ 42,249 $21,203 $25,161 $ 25,097
EBITDA margin % (4) (5). 17.5% 19.0% 24.8% 24.7% 25.2% 27.2% 27.1%
Depreciation and
amortization........... $ 10,688 $ 9,676 $ 12,208 $ 12,208 $ 4,562 $ 5,366 $ 5,366
Capital expenditures.... 8,640 5,806 17,101 17,230 6,913 17,127 17,192
Ratio of Earnings to
Fixed Charges.......... N/A(9) 1.29x
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
JUNE 30, 1998
------------------
PRO
ACTUAL FORMA (5)
-------- ---------
(DOLLARS
IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash........................................................ $ 2,466 $ 2,919
Working capital............................................. 14,877 28,961
Working capital as adjusted (7)............................. 30,567 32,873
Property, plant and equipment, net.......................... 69,814 69,814
Total assets................................................ 121,853 136,169
Total debt (8).............................................. 60,716 296,273
Shareholders' equity (deficit) (8).......................... 42,149 (179,052)
</TABLE>
- ---------------------
(1) Represents the Company's share of the operating losses incurred by a joint
venture in which the Company acquired a 40% interest in 1990. The Company
accounted for its investment in the joint venture using the equity method
of accounting.
(2) Reflects non-recurring charges related to the write-off of the unamortized
balance of deferred financing costs in the year in which the related
refinancing occurred. The amounts are shown net of applicable income tax.
(3) EBITDA represents income before interest expense (net), income taxes,
depreciation and amortization, gain or loss on disposal of assets, noncash
charges associated with net periodic postretirement benefit costs, non-cash
stock based compensation and extraordinary, unusual, non-recurring charges
consisting of (a) those referred to in footnotes (1) and (2) above, (b)
certain nonrecurring legal expenses related to environmental matters of
$454,000 in 1997, $308,000 and $67,000 in the six months ended June 30,
1997 and 1998, respectively, and $214,000 in the twelve months ended June
30, 1998 and (c) fees and expenses relating to the Transactions. EBITDA is
not intended to represent cash flow from operations or net income as
defined by generally accepted accounting principles and should not be
considered as a measure of liquidity or an alternative to, or more
meaningful than, operating income or operating cash flow as an indication
of the Company's operating performance. EBITDA is included herein because
management believes that certain investors find it a useful tool for
measuring the Company's ability to service its debt.
(4) EBITDA margin represents EBITDA as calculated in footnote (3) above as a
percentage of net sales.
(5) The unaudited pro forma consolidated financial data and related ratios give
effect to the consummation of the Transactions as if they occurred on the
first day of such period for statement of income data and as of such date
for balance sheet data. Pro forma EBITDA represents EBITDA for such period
as adjusted (a) to exclude the amount ($872,000) by which the salary and
bonus paid by the Company to Thomas A. Rodgers, Jr. during such period
exceeds the amount that will be paid to Mr. Rodgers following the
Transactions, and (b) to include the annual $1.0 million management fee to
be paid to an affiliate of Code Hennessy & Simmons following the
consummation of the Transactions. In connection with the Transaction the
Company incurred a one time compensation expense charge of $3,318
associated with the vesting of stock options and $2,320 associated with
bonuses paid to certain members of management. Although the Company expects
to charge such amounts in the period following the transaction date, such
charge is not reflected in the accompanying pro forma financial
information. See "Management" and "Certain Relationships and Related
Transactions--Management Agreement" and "--Consulting Agreement."
(6) Cash interest expense represents interest expense less the non-cash
amortization of debt issuance costs and less the non-cash interest expense
from the accretion of original issue discount on the Notes.
(7) Working capital as adjusted represents the difference between current
assets less cash, and current liabilities less the current portions of long
term debt and long term capital leases and notes payable.
(8) Of the $25.0 million gross proceeds from the Offering, $24.4 million has
been allocated to the Notes and $0.6 million has been allocated to the
Warrants.
(9) Earnings on a pro forma basis for the full year ended December 31, 1997
were inadequate to cover fixed charges by $746.
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RISK FACTORS
The following risk factors should be considered carefully in addition to the
other information contained in this Prospectus, before tendering the Old Notes
in exchange for the New Notes. In connection with the forward-looking
statements which appear in this Prospectus, prospective purchasers of New
Notes should carefully review the factors discussed below and the cautionary
statements referred to in "Disclosure Regarding Forward-Looking Statements."
The risk factors set forth below are generally applicable to the Old Notes as
well as the New Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes, as set forth in the legend thereon, as a
consequence of the 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. The Company does not
currently anticipate that it will register the Old Notes under the Securities
Act. Based on interpretations by the staff of the Commission set forth in no-
action letters issued to third parties, including Exxon Capital Holdings
Corporation, SEC No-Action Letter (available April 13, 1988) (the "Exxon
Capital Letter"), Morgan Stanley & Co. Incorporated, SEC No-Action Letter
(available June 5, 1991) (the "Morgan Stanley Letter"), and similar letters,
the Company believes that the New Notes issued pursuant to the Exchange Offer
may be offered for resale, resold or 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 such Holder has no arrangement with any person to
participate in the distribution of such New Notes. Notwithstanding the
foregoing, each broker-dealer that receives New Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with any resale of New Notes received in exchange for Old Notes where such Old
Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities (other than Old Notes acquired directly
from the Company). The Company has agreed that, for a period of 180 days from
the Expiration Date, it will make this Prospectus available to any broker-
dealer for use in connection with any such resale. See "Plan of Distribution."
Any holder who tenders in the Exchange Offer for the purpose of participating
in a distribution of the New Notes cannot rely on the Morgan Stanley Letter or
similar letters and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction. To the extent that 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."
ABSENCE OF A PUBLIC MARKET COULD ADVERSELY AFFECT THE VALUE OF THE NOTES
The Old Notes were issued to, and the Company believes 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 this 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 new
issues 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.
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The Initial Purchaser has advised the Company that they currently intend to
make a market in the New Notes, but they are 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 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 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.
FAILURE TO FOLLOW EXCHANGE OFFER PROCEDURES COULD ADVERSELY AFFECT HOLDERS
Issuance of the New Notes in exchange for the Old Notes pursuant to the
Exchange Offer will be made only after a timely receipt by the Company of such
Old Notes, a properly completed and duly executed Letter of Transmittal (or
Agent's Message) and all other required documents. Therefore, holders of the
Old Notes desiring to tender such Old Notes in exchange for New Notes should
allow sufficient time to ensure timely delivery. The Company is under no duty
to give notification of defects or irregularities with respect to the tenders
of Old Notes for exchange. Old Notes that are not tendered or are tendered but
not accepted will, following the consummation of the Exchange Offer, continue
to be subject to the existing restrictions upon transfer thereof, and, upon
consummation of the Exchange Offer certain registration rights under the
Registration Rights Agreement will terminate. 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. Each broker-dealer that receives New Notes for its own
account in exchange for Old Notes, where such Old Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such New Notes. See "Plan of Distribution." 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. See "The Exchange Offer."
SUBSTANTIAL LEVERAGE AND DEBT SERVICE REQUIREMENTS
The Company is highly leveraged. As a result of the Transactions, including
the Initial Offering and the Initial Senior Subordinated Note Offering and the
payment of a substantial portion of the net proceeds therefrom as the Cash
Merger Consideration, the Company's aggregate indebtedness for borrowed money
and interest expense increased and its shareholders' equity decreased. On a
pro forma basis, after giving effect to the Transactions, the Company would
have had total Debt (as defined) of $296.3 million and a shareholders' deficit
of approximately $179.1 million as of June 30, 1998. In addition, subject to
the restrictions in the Senior Credit Facility, the Indenture and the
indenture governing the Senior Subordinated Notes (the "Senior Subordinated
Note Indenture"), the Company may incur additional Debt from time to time to
finance working capital, capital expenditures, acquisitions, or for other
purposes.
The Indenture, the Senior Subordinated Note Indenture and the Senior Credit
Facility (or any replacement facilities of the Company or any subsidiary of
the Company) contain certain restrictive financial and other covenants. The
Company's high degree of leverage and restrictions in its debt agreements
could have important consequences to the holders of the Securities, including
the following: (i) a substantial portion of the Company's cash flow from
operations will be dedicated to debt service and will not be available for
operations and other
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purposes; (ii) the Company's ability to obtain additional financing in the
future for working capital, capital expenditures, acquisitions or other
purposes may be limited or impaired; (iii) the Company's operating flexibility
with respect to certain matters will be limited by covenants contained in the
Indenture, the Senior Subordinated Note Indenture and the Senior Credit
Facility which will limit the ability of the Company and its Restricted
Subsidiaries to, among other things, incur additional indebtedness, grant
liens on assets, merge, consolidate or transfer substantially all of their
assets, enter into transactions with Related Persons, impose restrictions on
any Restricted Subsidiary's ability to pay dividends or make certain other
payments to the Company and its Restricted Subsidiaries, enter into certain
guarantees, sell assets and issue capital stock of Restricted Subsidiaries;
(iv) the Company will be substantially more leveraged than certain of its
competitors, which may place the Company at a competitive disadvantage; (v)
the Company's degree of leverage may make it more vulnerable to economic
downturns, may reduce its flexibility in responding to changing business and
economic conditions and may limit its ability to pursue other business
opportunities, to finance its future operations or capital needs, and to
implement its business strategy; and (vi) certain of the Company's borrowings
will be at variable rates of interest, which will expose the Company to the
risk of increased interest rates. See "Business--Business Strategy,"
"Description of Senior Credit Facility," "Description of Senior Subordinated
Notes" and "Description of the Notes."
Required payments of principal and interest on the Company's long-term debt
are expected to be financed from cash flow from operations and debt
financings. The Company's ability to generate cash for the repayment of debt
will be dependent upon the future performance of the Company's businesses,
which will in turn be subject to financial, business, economic, and other
factors affecting the business and operations of the Company, including
factors beyond its control, such as prevailing economic conditions. There can
be no assurance that cash flow from operations will be sufficient to enable
the Company to service its debt and meet its other obligations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
HOLDING COMPANY STRUCTURE; EFFECTIVE SUBORDINATION
Globe is a holding company and does not have any material operations or
assets other than ownership of Globe Manufacturing. Accordingly, the Notes are
effectively subordinated to all existing and future liabilities of the
Company's subsidiaries, including indebtedness under the Senior Credit
Facility and the Senior Subordinated Notes. As of June 30, 1998, after giving
pro forma effect to the Transactions, the aggregate amount of liabilities of
the Company's subsidiaries to which holders of the Notes would be effectively
subordinated would have been approximately $286.6 million. The Company and its
subsidiaries may incur additional indebtedness in the future, subject to
certain limitations contained in the instruments governing their indebtedness.
Any right of the Company to participate in any distribution of assets of its
subsidiaries upon the liquidation, reorganization or insolvency of any such
subsidiary (and the consequent right of the holders of the Notes to
participate in the distribution of those assets) will be subject to the prior
claims of the respective subsidiary's creditors. See "Description of Senior
Credit Facility."
LIMITATION ON THE PAYMENT OF FUNDS TO THE COMPANY BY ITS SUBSIDIARIES
The Company's cash flow, and consequently its ability to service its debt,
including its obligations under the Indenture, is dependent upon the cash
flows of its subsidiaries and the payment of funds by such subsidiaries to the
Company in the form of loans, distributions or otherwise. The Company's
subsidiaries have no obligations, contingent or otherwise, to pay any amounts
due pursuant to the Notes or to make any funds available therefor. In
addition, the Senior Credit Facility and the Senior Subordinated Note
Indenture impose, and agreements entered into in the future may impose,
significant restrictions on distributions and the making of loans by Globe
Manufacturing to the Company. Accordingly, repayments of the Notes may depend
upon the ability of the Company to effect an equity offering or to refinance
the Notes.
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ORIGINAL ISSUE DISCOUNT
The Old Notes were issued at a substantial discount from their principal
amount. The New Notes are treated as a continuation of the Old Notes for
Federal income tax purposes and the New Notes will also be considered to have
been issued at a substantial discount. Consequently, holders generally will be
required to include amounts in gross income for U.S. Federal income tax
purposes in advance of receipt of any cash payment on the Notes to which the
income is attributable. In addition, the Notes will be subject to the
"applicable high yield discount obligation" rules under the Internal Revenue
Code of 1986, as amended, which will defer and, in part, eliminate the
Company's ability to deduct original issue discount that accrues with respect
to the Notes. Prospective investors should consult their own tax advisors with
respect to the application of the original discount rules and the "applicable
high yield discount obligation" rules (including the limited availability of a
dividends received deduction for a corporate holder). See "Certain United
States Federal Tax Considerations" for a more detailed discussion of the U.S.
Federal income tax considerations relevant to holders with respect to the
purchase, ownership and disposition of the Notes.
If a bankruptcy case is commenced by or against the Company under the United
States Bankruptcy Code (the "Bankruptcy Code") after the issuance of the
Notes, the claim of a holder of Notes with respect to the principal amount
thereof will likely be limited to an amount equal to the sum of (i) the issue
price of the Notes and (ii) the original issue discount that is not deemed to
constitute "unmatured interest" for purposes of the Bankruptcy Code. Any
original issue discount that was not amortized as of any such bankruptcy
filing would likely constitute "unmatured interest."
CHANGE OF CONTROL
A Change of Control (as defined) could require the Company and Globe
Manufacturing to refinance substantial amounts of indebtedness, including
indebtedness under the Notes, the Senior Subordinated Notes and the Senior
Credit Facility. Upon the occurrence of a Change of Control, the holders of
the Notes would be entitled to require the Company to repurchase the Notes at
a purchase price equal to 101% of the Accreted Value thereof plus Liquidated
Damages, if any (if such date of repurchase is prior to August 1, 2003) or
101% of the principal amount of such Notes, plus accrued and unpaid interest
and Liquidated Damages, if any, to the date of repurchase (if such date of
repurchase is on or after August 1, 2003). The source of funds for any such
repurchase would be cash dividended to the Company by Globe Manufacturing or
other sources, including borrowings, sales of equity or funds provided by a
new controlling person. The Senior Credit Facility and the Senior Subordinated
Note Indenture limit the ability of Globe Manufacturing to issue dividends,
and there can be no assurance that sufficient funds will be available at the
time of any Change of Control to make any required repurchases of the Notes
tendered. In addition, the Senior Credit Facility prohibits the repurchase of
the Notes by the Company in such an event, unless and until such time as the
indebtedness under the Senior Credit Facility is repaid in full. These
requirements and the effective subordination of the Notes will limit the
ability of the Company to repurchase the Notes. The Company's failure to make
such repurchases in such instances would result in a default under the Notes.
Future indebtedness of the Company may also contain restrictions or repayment
requirements with respect to certain events or transactions that would
constitute a Change of Control. In the event of a Change of Control, there can
be no assurance that the Company would have sufficient assets to satisfy all
of its obligations under the Notes. The effect of such requirements may make
it more difficult or delay attempts by others to obtain control of the
Company. See "Description of the Notes--Change in Control," "Description of
Senior Credit Facility" and "Description of Senior Subordinated Notes."
COMPETITION
The elastomeric fiber industry is highly competitive. The Company competes
in the spandex fiber markets primarily with E.I. du Pont de Nemours and
Company ("DuPont") and Bayer AG ("Bayer"), both of which have domestic
facilities, and with a number of foreign competitors. The Company's primary
competitors in the latex thread markets are foreign producers. Some of the
Company's competitors have substantially greater
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financial, marketing, manufacturing, distribution, sales and support
resources, market share and brand awareness than the Company. There can be no
assurance that the Company will be able to compete successfully in the future
against its competitors or that the Company will not experience increased
price competition, which could materially and adversely affect the Company's
results of operations, financial condition and its ability to meet its
obligations under the Notes. See "Business--Competition."
ENVIRONMENTAL COMPLIANCE
The Company is subject to comprehensive and evolving federal, state and
local environmental, health and safety requirements, including laws and
regulations relating to air emissions, wastewater management, the handling and
disposal of waste and the cleanup of properties affected by hazardous
substances. Violations of environmental, health and safety laws may result in
the imposition of significant fines and other penalties, and certain
environmental laws impose joint and several liability, without regard to
fault, on persons responsible for releases of hazardous substances to the
environment.
The Company's management believes that its operations have been and are in
substantial compliance with environmental, health and safety requirements, and
that it has no liabilities arising under such requirements, except as would
not be expected to have a material adverse effect on the Company's operations,
financial condition or competitive position. Some risk of environmental,
health and safety liability is inherent in the Company's business, however,
and there can be no assurance that material environmental, health or safety
costs will not arise in the future.
Since 1986, the Company has received requests for information and related
correspondence from the U.S. Environmental Protection Agency (the "U.S. EPA")
and other third parties indicating that the Company might be responsible under
the federal Comprehensive Environmental Response, Compensation, and Liability
Act of 1980 ("CERCLA") or equivalent state laws (collectively, the "Superfund
laws") for costs associated with the investigation and cleanup of ten
contaminated sites. The Company's management believes that the Company has
resolved its involvement with respect to eight of these sites (five of which
were inter-related) since 1988 and that the Company's involvement in matters
arising under the Superfund laws will not have a material adverse effect on
the Company's operations, liquidity or financial condition.
In December 1996, the Company's management learned that U.S. EPA and the
U.S. Attorney's Office were conducting an investigation into whether the
Company had engaged in criminal violations of environmental laws with respect
to its Fall River, Massachusetts facility. The investigators have not informed
the Company of the scope of their inquiry. The Company has provided certain
information regarding its Fall River operations to the federal investigators
and believes it has cooperated fully with their inquiry. The Company does not
know whether the investigation is currently active. If the Company is charged
with violations of environmental laws, it may be subject to substantial fines
and other penalties, which could have a material adverse effect on the
Company's results of operations, financial condition and its ability to meet
its obligations under the Notes. See "Business--Environmental, Health and
Safety Matters."
DEPENDENCE ON SIGNIFICANT CUSTOMERS
The Company's top ten customers accounted for approximately 48% of 1997
sales, with one customer, Unifi, Inc. (a manufacturer of covered yarns for
men's and women's hosiery and narrow fabrics), accounting for approximately 9%
of 1997 sales. As is customary in the elastomeric fiber industry, the Company
does not generally have long-term supply agreements with its customers. While
the Company believes its customer relationships are generally good, a
significant decrease or interruption in business from any of the Company's
significant customers could have a material adverse effect on the Company's
results of operations, financial condition and its ability to meet its
obligations under the Notes. See "Business--Customers."
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DEPENDENCE ON SUPPLIERS
During 1997, raw materials represented 42% of the Company's total cost of
sales and 28% of net sales. The primary raw materials used by the Company are
polytetramethylene ether glycol, which the Company purchases from BASF
Corporation ("BASF"), and polyester resin, which the Company purchases from
two suppliers. These materials are used in a wide variety of products, and
based on its experience, management believes that adequate quantities of these
materials will be available from existing or alternative suppliers in the
foreseeable future. There can be no assurance, however, that such materials
will continue to be available in adequate supply in the future or that
shortages or disruptions in supply will not result in a material adverse
effect on the Company's results of operations, financial condition or ability
to meet its obligations under the Notes. The Company's ten largest suppliers
accounted for approximately 93% of its total raw material purchases and 31% of
its total cost of sales in 1997, with BASF, Polyurethane Specialties Corp. and
Ennar-Latex, Inc. accounting for 39%, 24% and 16% of such raw material
purchases, respectively. Although the prices for the Company's raw materials
have generally been stable over the past five years, the prices of certain of
the raw materials used by the Company have fluctuated, and there can be no
assurance that the prices of the Company's raw materials will not fluctuate in
the future. A significant increase in the price of raw materials that cannot
be passed on to customers could have a material adverse effect on the
Company's results of operations, financial condition and its ability to meet
its obligations under the Notes.
FOREIGN SALES RISK
Sales to international customers represented approximately 28% of sales in
1997 and 47% of total receivables as of December 31, 1997, and the Company is
seeking to increase its international sales. Demand for the Company's products
is affected by economic and political conditions in each of the countries in
which it sells its products and by certain other risks of doing business
abroad, including fluctuations in the value of currencies (which may affect
demand for products priced in United States dollars), import duties, changes
to import and export regulations (including quotas), possible restrictions on
the transfer of funds, labor or civil unrest, long payment cycles, greater
difficulty in collecting accounts receivable and the burdens and cost of
compliance with a variety of foreign laws. Changes in policies by foreign
governments could result in, for example, increased duties, higher taxation,
currency conversion limitations, or limitations on imports or exports, any of
which could have a material adverse effect on the Company's results of
operations, financial condition and its ability to meet its obligations under
the Notes. Globe's principal export markets are Europe, Central/South America
and Asia. The current economic crisis in Asia has resulted in a flood of
fiber, fabric and apparel into Europe from Asia, which has had a negative
impact on prices and the Company's sales in Europe. A continued economic
crisis in Asia may precipitate further downturns in spandex fiber consumption
in all of Globe's export markets.
TEXTILE INDUSTRY AND CYCLICALITY
In 1997, approximately 92% of the Company's sales were to the textile and
apparel industries. These industries are highly cyclical and are characterized
by rapid shifts in consumer demand, as well as competitive pressures and price
and demand volatility. The demand for the Company's products is principally
dependent upon the level of demand for certain types of apparel. The demand
for apparel is in turn dependent on consumer spending, which may be adversely
affected by economic downturns, changing retailer and consumer demands,
declines in consumer confidence or spending, and other factors beyond the
Company's control. A reduction in the level of demand for apparel or a
decrease in consumer demand for products containing elastomeric fibers could
have a material adverse effect on the Company's result of operations,
financial condition and its ability to meet its obligations under the Notes.
CONTROL BY PRINCIPAL SHAREHOLDER
Code Hennessy & Simmons owns approximately 75.6% of the outstanding voting
stock of the Company. Consequently, Code Hennessy & Simmons, through its
ability to designate all of the members of the board of directors of the
Company, exercises significant influence over the policies and direction of
the Company. Code Hennessy & Simmons' interests may differ from the interests
of the holders of the Notes. See "Management--Executive Officers and
Directors" and "Certain Relationships and Related Transactions."
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PROTECTION OF INTELLECTUAL PROPERTY
The Company's success is dependent on the proprietary technology included in
its manufacturing processes. Much of this technology is not patented. The
Company relies primarily on intellectual property laws, confidentiality
procedures and contractual provisions to protect its intellectual property.
The Company seeks to protect the majority of its technology under trade secret
laws, which afford only limited protection. There can be no assurance that
intellectual property laws will protect the confidentiality of the Company's
technology and processes. Despite the Company's efforts to protect its
proprietary rights, unauthorized parties may attempt to obtain and use
information that the Company regards as proprietary. Furthermore, there can be
no assurance that others will not independently develop similar technology or
design around any intellectual property rights held by the Company. In
addition, no assurance can be given that alternative technologies will not be
developed that are superior to or less costly than the Company's existing
technology.
The Company may in the future be notified that it is infringing certain
patent or other intellectual property rights of others, although there are no
such pending lawsuits against the Company or unresolved notices that it is
infringing intellectual property rights of others. No assurance can be given
that in the event of such infringement, licenses could be obtained on
commercially reasonable terms, if at all, or that litigation will not occur.
The failure to obtain necessary licenses or other rights or the occurrence of
litigation arising out of such claims could have a material adverse effect on
the Company's results of operations and financial condition and its ability to
meet its obligations under the Notes.
EXPANSION OF PRODUCTION CAPACITY
All of the Company's significant spandex fiber competitors have been engaged
in production expansion, product improvement and global marketing programs
since 1993. The Company's ability to achieve its strategic objectives and to
retain or increase its current share of the spandex fiber market will require
it to make significant capital expenditures in order to expand its production
capacity, particularly for fine denier spandex fiber. The Company is adding
3.6 million pounds of fine denier spandex fiber capacity to its facility in
Tuscaloosa, Alabama at an estimated cost of $22.1 million, with approximately
half of this increased capacity expected to be on line in the fourth quarter
of 1998 and the balance expected to be on line in the first quarter of 1999.
There can be no assurance that the expansion will be completed within the
Company's timetable or budget. A lengthy delay in the completion of the
Tuscaloosa plant expansion or significant cost over-runs in connection
therewith could have a material adverse effect on the Company's result of
operations, financial condition and its ability to meet its obligations under
the Notes.
ANTITRUST AND ANTIDUMPING PROCEEDINGS
In April 1997 two domestic purchasers of extruded latex thread filed a
complaint against a number of foreign manufacturers and distributors of such
thread, including an Indonesian limited liability company in which the Company
then owned a 40% interest (the "Joint Venture"). The complaint alleges an
international conspiracy to restrain trade in, and fix prices of, the thread
in the United States ("U.S."). Neither the Company nor Globe Manufacturing has
been named as a defendant in the case. The Joint Venture has alleged in its
motion to dismiss that not all parties to the conspiracy have been joined, and
there can be no assurance that the Company will not be named in the future.
On March 31, 1998 a petition was filed with the U.S. Department of Commerce
alleging subsidization and dumping of Indonesian extruded latex thread. The
Department of Commerce is currently conducting an investigation into the
allegations. The proceedings could result in additional duties being levied on
extruded latex thread imported from Indonesia. During 1996 and 1997, the
Company purchased approximately $5.9 million and $9.9 million of latex thread
from the Joint Venture for resale in the North American market.
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DEPENDENCE ON SENIOR MANAGEMENT
The Company's success depends to a significant extent upon the efforts and
abilities of the Company's senior management employees. The loss of the
services of one or more of such persons could have a material adverse effect
on the Company. The Company believes that its continued future success will
depend on its ability to attract, retain or develop highly skilled managerial,
technical and marketing personnel. There can be no assurance that it will be
able to do so. See "Management."
IMPACT OF THE YEAR 2000 ISSUE
The year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of the
Company's computer programs that have date-sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000.
If the Company, its significant customers or suppliers fail to make
necessary modifications and conversions on a timely basis, the year 2000 issue
could have a material adverse effect on Company operations. However, the
impact cannot be quantified at this time. The Company believes that its
competitors face similar risks.
The Company has established a corporate-wide project team to identify non-
compliant software and complete the corrections required for the year 2000
issue. The Company has completed its repairs for major manufacturing systems
in all locations. The Company also completed its repair of its major financial
systems. The Company's current target is to resolve compliance issues in its
distribution systems and other ancillary systems by March 31, 1999. The
Company also has made inquiry of its major customers and suppliers to assess
their compliance. Nevertheless, there can be no absolute assurance that there
will not be a material adverse effect on the Company if third party
governmental or business entities do not convert or replace their systems in a
timely manner and in a way that is compatible with the Company's systems.
Costs related to the year 2000 issue are funded through operating cash
flows. Through June 30, 1998, the Company expended approximately $108,000 in
systems development and remediation efforts, including the cost of new
software and modifying the applicable code of existing software. The Company
estimates remaining costs to be between $50,000 and $100,000. The Company
presently believes that the total cost of achieving year 2000 compliant
systems is not expected to be material to the Company's financial condition,
liquidity or results of operations.
Time and cost estimates are based on currently available information.
Developments that could affect estimates include, but are not limited to, the
availability and cost of trained personnel, the ability to locate and correct
all relevant computer code and systems and remediation success of the
Company's customers and suppliers.
CERTAIN INSOLVENCY CONSIDERATIONS
The incurrence by the Company of indebtedness such as the Notes to finance
the Transactions 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, or the
exchange of the Old Notes for New Notes, and the application of the proceeds
therefrom, either (a) the Company incurred such indebtedness with the intent
of hindering, delaying or defrauding creditors or (b) the Company received
less than reasonably equivalent value or consideration for incurring such
indebtedness and (i) was insolvent or was rendered insolvent by reason of such
transactions, (ii) was engaged in a business or transaction for which the
assets remaining with the Company constituted unreasonably small capital or
(iii) intended to incur, 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 or obligations of
the Company, avoid the issuance of such indebtedness and direct the
20
<PAGE>
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 mature.
There can be no assurance as to what standard a court would apply in order
to determine insolvency. A court may find that the Company did not receive
fair consideration or reasonably equivalent value for the incurrence of the
indebtedness represented by the Old Notes. In addition, if a court were to
find that any of the components of the Transactions constituted a fraudulent
transfer, a court may find that the Company did not receive fair consideration
or reasonably equivalent value for the incurrence of the indebtedness
represented by the Old Notes and the New Notes.
The Company believes that it received equivalent value at the time the
indebtedness under the Notes was incurred. In addition, the Company does not
believe that, after giving effect to the Transactions, it (i) was or will be
insolvent or rendered insolvent, (ii) was or will be engaged in a business or
transaction for which its remaining assets constituted unreasonably small
capital or (iii) intends or intended to incur, or believes or believed that it
will or would incur, debts beyond its ability to pay such debts as they
mature. These beliefs are based on the Company's operating history and
analysis of internal cash flow projections and estimated values of assets and
liabilities of the Company at the time of the Initial Offering. There can be
no assurance, however, that a court passing on these issues would make the
same determination.
ABSENCE OF ESTABLISHED PUBLIC MARKET
The Notes are a new issue of securities for which there is no established
trading market. While application has been made to have the Notes accepted for
trading in the PORTAL market, there can be no assurance that an active trading
market for the Notes will develop in the PORTAL market or elsewhere. The
Company has been advised by the Initial Purchaser that the Initial Purchaser
currently intends to make a market in the Notes; however, it is not obligated
to do so and any market making activity may be discontinued at any time.
Therefore, there can be no assurance that an active public market for the
Notes will develop or, if developed, will continue to exist. If a public
trading market develops for the Notes, future trading prices of the Notes will
depend on many factors, including, among other things, prevailing interest
rates, the Company's results of operations and the markets for similar
securities. See "Plan of Distribution."
RISKS REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus contains certain forward-looking statements, including,
without limitation, statements concerning the Company's future financial
position, business strategy, budgets, projected costs and plans and objectives
of management for future operations. These forward-looking statements are made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. Forward-looking statements generally can be identified by
the use of forward-looking terminology such as "may," "will," "expect,"
"intend," "estimate," "anticipate," "believe," "should," "plans," or
"continue" or the negative thereof or variations thereon or similar
terminology. Without limiting the foregoing, forward-looking statements are
set forth herein under the captions "Prospectus Summary," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business." Although the Company believes that the expectations reflected in
such forward-looking statements are reasonable, it can give no assurance that
such expectations will prove to have been correct. These forward-looking
statements are subject to a number of risks and uncertainties, including,
without limitation, those identified under "Risk Factors" and elsewhere in
this Prospectus and other risks and uncertainties indicated from time to time
in the Company's filings with the Securities and Exchange Commission. Actual
results could differ materially from these forward-looking statements.
21
<PAGE>
USE OF PROCEEDS
This Exchange Offer is intended to satisfy certain of the Company's
obligations under the Purchase Agreement and the Registration Rights
Agreement. The Company will not receive any cash proceeds from the issuance of
the New Notes offered hereby. In consideration for issuing the New Notes
contemplated in this Prospectus, the Company will receive Old Notes in like
principal amount, the form and terms of which are the same as the form and
terms of the New Notes (which replace the Old Notes), except as otherwise
described herein. The Old Notes surrendered in exchange for New Notes will be
retired and canceled and cannot be reissued. Accordingly, issuance of the New
Notes will not result in any increase or decrease in the indebtedness of the
Company. As such, no effect has been given to the Exchange Offer in the pro
forma statements or capitalization table.
The net proceeds to the Company from the sale of the Old Notes in the
Initial Offering (after deducting discounts and estimated fees and expenses)
were utilized by the Company to repay the CHS Loan.
See "Certain Relationships and Related Transactions--Recapitalization,"
"Description of Senior Credit Facility" and "Description of Senior
Subordinated Notes."
22
<PAGE>
CAPITALIZATION
The following table sets forth the unaudited historical consolidated
capitalization of the Company as of June 30, 1998 and as adjusted on a pro
forma basis to give effect to the Transactions as if they had occurred on June
30, 1998. See "Use of Proceeds." This table should be read in conjunction with
the "Selected Consolidated Financial Data" and the related notes thereto, and
the Company's consolidated financial statements, including related notes
thereto, included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF JUNE 30,
1998
-------------------
ACTUAL PRO FORMA
-------- ---------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Cash and cash equivalents........................... $ 2,466 $ 2,919
======== =========
Long-term debt (including current maturities):
Old Credit Facility............................... $ 60,625 $ --
Senior Credit Facility: (1)
Revolving loan facility......................... -- 6,800
Term loan facility.............................. -- 115,000
Old Senior Subordinated Notes..................... -- 150,000
Old Notes (2)..................................... -- 24,382
Capital lease obligations......................... 91 91
-------- ---------
Total long-term debt.......................... 60,716 296,273
-------- ---------
Shareholders' equity (deficit):
Series A Cumulative Preferred Stock, $0.01 par
value, 30,000 shares authorized, no shares issued
and outstanding actual; no shares authorized,
issued or outstanding pro forma.................. -- --
Class A Preferred stock, $0.01 par value, no
shares authorized, issued or outstanding actual,
40,000 shares authorized and 29,100 shares issued
and outstanding pro forma (3).................... -- --
Paid in capital on preferred stock................ -- 25,850
Common Stock:
Class A Common Stock, $0.01 par value, 2,000,000
shares authorized, 100,000 issued and outstanding
actual; 5,000,000 shares authorized, 2,179,150
shares issued and outstanding pro forma (4)...... -- --
Class B Common Stock, $0.01 par value, 2,000,000
shares authorized, 931,404 shares issued and
outstanding actual; 350,000 shares authorized, no
shares issued or outstanding pro forma........... -- --
Class C Common Stock, $0.01 par value, no shares
authorized, issued or outstanding actual; 600,000
shares authorized, no shares issued or
outstanding actual............................... -- 22
Paid in capital on common stock (2)............... 10,785 17,830
Less treasury stock............................. (32,844) --
-------- ---------
Retained earnings (deficit)................... 64,190 (222,754)
-------- ---------
42,149 (179,052)
-------- ---------
Total capitalization.......................... $102,865 $ 117,221
======== =========
</TABLE>
- ----------------------
(1) The Senior Credit Facility provides for term loans in an aggregate
principal amount of $115.0 million and revolving loans of up to $50.0
million. See "Description of Senior Credit Facility."
(2) Of the $25.0 million gross proceeds from the Initial Offering, $24.4
million has been allocated to the Notes and $0.6 million has been
allocated to the Warrants.
(3) Excludes the 900 shares of Class A Preferred Stock issuable upon exercise
of options.
(4) Excludes the 69,481 shares of Common Stock issuable upon exercise of the
Warrants and the 67,395 shares of Common Stock issuable upon exercise of
stock options.
23
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following information is qualified in its entirety by the consolidated
financial statements of the Company. The following selected consolidated
financial data as of the dates and for the periods indicated were derived from
the audited and unaudited consolidated financial statements of the Company
contained elsewhere in this Prospectus, except data as of, and for the years
ended December 31, 1993, and 1994, which was derived from audited consolidated
financial statements of the Company not included in this Prospectus. The
unaudited consolidated financial statements for the six months ended June 30,
1997 and June 30, 1998 include all adjustments consisting only of normal
recurring adjustments which management considers necessary for a fair
presentation of results for these unaudited periods. The results of operations
for the six months ended June 30, 1998 are not necessarily indicative of
results of operations that may be expected for the full fiscal year 1998. The
following selected consolidated financial information should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the consolidated financial statements of the
Company and the related notes thereto appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
FISCAL YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------------------ -----------------
1993 1994 1995 1996 1997 1997 1998
-------- -------- -------- -------- -------- ------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME
DATA:
Net sales............... $107,612 $112,475 $128,319 $152,603 $170,941 $84,283 $ 92,490
Cost of sales........... 75,980 84,321 97,182 110,609 115,099 56,450 59,556
-------- -------- -------- -------- -------- ------- --------
Gross margin........... 31,632 28,154 31,137 41,994 55,842 27,833 32,934
Selling, general and
administrative
expenses............... 13,467 14,152 18,515 21,705 24,381 10,616 12,083
Research and development
costs.................. 1,561 3,506 2,260 2,533 2,633 1,190 2,040
-------- -------- -------- -------- -------- ------- --------
Operating income....... 16,604 10,496 10,362 17,756 28,828 16,027 18,811
Other income (expenses):
Interest, net........... (2,212) (3,514) (6,030) (5,285) (3,968) (2,097) (1,788)
Loss in investment in
joint venture (1)...... -- (617) (643) -- -- -- --
Other income, etc....... 492 341 438 875 372 86 655
-------- -------- -------- -------- -------- ------- --------
Income before income
taxes and
extraordinary income.. 14,884 6,706 4,127 13,346 25,232 14,016 17,678
Provision for income
taxes.................. 5,680 2,882 1,718 4,784 8,383 5,255 6,638
-------- -------- -------- -------- -------- ------- --------
Income before
extraordinary item.... 9,204 3,824 2,409 8,562 16,849 8,761 11,040
Loss from write-off of
deferred financing
cost,
net (2)................ -- -- 1,294 -- 301 301 --
-------- -------- -------- -------- -------- ------- --------
Net income............. $ 9,204 $ 3,824 $ 1,115 $ 8,562 $ 16,548 $ 8,460 $ 11,040
======== ======== ======== ======== ======== ======= ========
OTHER FINANCIAL DATA:
Gross margin %.......... 29.4% 25.0% 24.3% 27.5% 32.7% 33.0% 35.6%
EBITDA (3).............. $ 23,747 $ 20,509 $ 22,480 $ 28,960 $ 42,377 $21,203 $ 25,161
EBITDA margin % (4)..... 22.1% 18.2% 17.5% 19.0% 24.8% 25.2% 27.2%
Depreciation and
amortization........... $ 5,284 $ 8,228 $ 10,688 $ 9,676 $ 12,208 $ 4,562 $ 5,366
Capital expenditures.... $ 24,542 $ 24,284 $ 8,640 $ 5,806 $ 17,101 $ 6,913 $ 17,127
Ratio of earnings to
fixed charges (5)...... 6.4x 1.9x 1.6x 3.4x 6.3x 6.8x 8.8x
<CAPTION>
DECEMBER 31, JUNE 30,
------------------------------------------------ -----------------
1993 1994 1995 1996 1997 1997 1998
-------- -------- -------- -------- -------- ------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash.................... $ 2,241 $ 1,336 $ 3,143 $ 3,101 $ 1,947 $ 2,376 $ 2,466
Working capital......... 8,021 9,391 5,052 4,263 19,453 19,339 14,877
Working capital as
adjusted (6)........... 11,308 19,361 20,747 17,250 27,518 25,522 30,567
Property, plant and
equipment, net......... 40,332 56,323 53,499 50,122 57,950 52,554 69,814
Total assets............ 69,599 93,414 92,824 91,329 105,133 98,509 121,853
Total debt.............. 50,141 69,182 66,698 50,615 56,917 59,215 60,716
Redeemable cumulative
preferred stock........ 6,466 6,466 6,466 6,466 -- -- --
Shareholders' equity.... 2,324 5,298 5,563 13,594 31,109 20,230 42,149
</TABLE>
24
<PAGE>
- ----------------------
(1) Represents the Company's share of the operating losses incurred by a joint
venture in which the Company acquired a 40% interest in 1990. The Company
accounted for its investment in the joint venture using the equity method
of accounting.
(2) Reflects non-recurring charges related to the write-off of the unamortized
balance of deferred financing costs in the year in which the related
refinancing occurred. The amounts are shown net of applicable income tax.
(3) EBITDA represents income before interest expense (net), income taxes,
depreciation and amortization, gain or loss on disposal of assets, noncash
charges associated with net periodic postretirement benefit costs, non-
cash stock based compensation and extraordinary, unusual, non-recurring
charges consisting of (a) those referred to in footnotes (1) and (2)
above, and (b) certain nonrecurring legal expenses related to
environmental matters of $454,000 in 1997, $308,000 and $67,000 in the six
months ended June 30, 1997 and 1998, respectively, and $214,000 in the
twelve months ended June 30, 1998. EBITDA is not intended to represent
cash flow from operations or net income as defined by generally accepted
accounting principles and should not be considered as a measure of
liquidity or an alternative to, or more meaningful than, operating income
or operating cash flow as an indication of the Company's operating
performance. EBITDA is included herein because management believes that
certain investors find it a useful tool for measuring the Company's
ability to service its debt.
(4) EBITDA margin represents EBITDA as calculated in footnote (3) above as a
percentage of net sales.
(5) For purposes of determining the ratio of earnings to fixed charges,
earnings are defined as earnings before taxes plus fixed charges. Fixed
charges consist of interest expense, capitalized interest costs,
amortization of debt issuance costs and the portion of rental expense on
capital and operating leases deemed representative of the interest factor.
(6) Working capital as adjusted represents the difference between current
assets less cash, and current liabilities less the current portions of
long term debt and long term capital leases and notes payable.
25
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
26
<PAGE>
GLOBE HOLDINGS, INC.
The following unaudited pro forma financial statements (the "Pro Forma
Financial Statements") are based on the historical financial statements of the
Company included elsewhere in this Prospectus.
The unaudited pro forma balance sheet gives effect to the Transactions as
though such events were consummated on June 30, 1998. The unaudited pro forma
statement of operations for the year ended December 31, 1997 gives effect to
the Transactions as if such events were consummated on January 1, 1997. The
unaudited pro forma statement of operations for the six months ended June 30,
1998 gives effect to the Transactions as if such events were consummated on
January 1, 1997. The pro forma adjustments are based upon available
information and certain assumptions that the Company believes are reasonable.
The Pro Forma Financial Statements do not purport to be indicative of the
results that would have been obtained had such transactions described above
occurred as of the assumed dates. In addition, the Pro Forma Financial
Statements do not purport to project the Company's results of operations for
any future date or period.
The Pro Forma Financial Statements should be read in conjunction with the
financial statements of the Company and the notes thereto, included elsewhere
herein.
27
<PAGE>
GLOBE HOLDINGS, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
AS OF JUNE 30, 1998
---------------------------------
1998 ADJUSTMENTS PRO FORMA
-------- ----------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................. $ 2,466 $ 453 (a) $ 2,919
Accounts receivable, net................... 29,659 -- 29,659
Receivable from joint venture.............. 210 -- 210
Taxes receivable........................... -- 2,266 (b) 2,266
Inventories................................ 11,825 -- 11,825
Prepaid expenses and other assets.......... 1,207 -- 1,207
Deferred income taxes...................... 2,449 -- 2,449
-------- ------- --------
Total current assets......................... 47,816 2,719 50,535
Property, plant and equipment:
Land and land improvements................. 942 -- 942
Building and building improvements......... 33,122 -- 33,122
Manufacturing equipment.................... 79,265 -- 79,265
Furniture and equipment.................... 2,087 -- 2,087
Autos and trucks........................... 319 -- 319
Construction in progress................... 23,086 -- 23,086
-------- ------- --------
138,821 -- 138,821
Less accumulated depreciation.............. (69,007) -- (69,007)
-------- ------- --------
Net property, plant and equipment............ 69,814 -- 69,814
Deferred income taxes........................ 2,694 112 (b) 2,806
Cash surrender value of life insurance, net
of loans.................................... 927 -- 927
Intangible assets............................ -- -- --
Investment in joint venture.................. -- -- --
Notes receivable from officers............... 286 -- 286
Other Assets................................. 10 -- 10
Deferred financing costs, new................ -- 11,791 (c) 11,791
Deferred financing costs, net of
amortization................................ 306 (306)(d) --
-------- ------- --------
Total assets............................. $121,853 $14,316 $136,169
======== ======= ========
</TABLE>
- --------
(a) Reflects the impact of the sources and uses of funds of the Transactions.
(b) Reflects a statutory income tax rate of 40.2% for the pro forma
adjustments related to certain pro forma changes.
(c) Reflects the cost of raising additional debt.
(d) Reflects write off of deferred fees associated with Old Credit Facility.
28
<PAGE>
GLOBE HOLDINGS, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
AS OF JUNE 30, 1998
----------------------------------
1998 ADJUSTMENTS PRO FORMA
-------- ----------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable......................... $ 8,883 $ -- $ 8,883
Accrued expenses......................... 5,900 (40)(e) 5,860
Payable to joint venture................. -- -- --
Dividend payable......................... -- -- --
Note payable............................. 10,000 (3,200)(f) 6,800
Taxes payable............................ -- -- --
Long-term lease obligations due within
one year................................ 31 -- 31
Long-term debt obligations due within one
year.................................... 8,125 (8,125)(f) --
-------- --------- ---------
Total current liabilities.................. 32,939 (11,365) 21,574
Long-term debt............................. 42,500 72,500 (f) 115,000
Senior subordinated notes.................. -- 150,000 (g) 150,000
Senior discount notes...................... -- 24,382 (k) 24,382
Long-term lease obligation................. 60 -- 60
Other long-term postretirement liability... 4,205 -- 4,205
Minimum pension liability.................. -- -- --
STOCKHOLDERS' EQUITY
Preferred stock.......................... -- -- --
Common stock, Class A.................... 2 (2)(h) --
Common stock, Class B.................... 16 (16)(h) --
Common stock, Class C.................... -- 22 (i) 22
Paid in capital.......................... 10,785 32,895 (i) 43,680
Retained earnings........................ 67,508 (290,262)(h) (222,754)
-------- --------- ---------
78,311 (257,363) (179,052)
Less treasury stock, at cost:
Common, Class A.......................... (4,187) 4,187 (h) --
Common, Class B.......................... (28,657) 28,657 (h) --
-------- --------- ---------
(32,844) 32,844 --
Unearned compensation...................... (3,318) 3,318 (j) --
-------- --------- ---------
Total stockholders' equity................. 42,149 (221,201) (179,052)
-------- --------- ---------
Total liabilities & stockholders'
equity................................ $121,853 $ 14,316 $ 136,169
======== ========= =========
</TABLE>
- --------
(e) Reflects payment of certain Old Credit Facility fees.
(f) Reflects net payment of Old Credit Facility and proceeds of new Senior
Credit Facility.
(g) Reflects proceeds from the Old Notes.
(h) Reflects payment for redemption of previous stockholders and retirement of
treasury stock.
(i) Reflects new equity contribution.
(j) Reflects vesting of outstanding options.
(k) Reflects proceeds from the Senior Discount Notes.
29
<PAGE>
GLOBE HOLDINGS, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 31,
-------------------------------------
1997 ADJUSTMENTS PRO FORMA(D)
-------- ----------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net sales................................. $170,941 $ -- $170,941
Cost of sales............................. 115,099 -- 115,099
-------- -------- --------
Gross margin.......................... 55,842 -- 55,842
Selling, general and administrative
expenses................................. 24,381 (95)(a) 24,286
Research and development costs............ 2,633 -- 2,633
-------- -------- --------
Operating income...................... 28,828 95 28,923
Other Income/(Expense)....................
Interest................................ (3,968) (25,438)(b) (29,406)
Loss in investment in joint venture..... -- -- --
Other income, net....................... 372 -- 372
-------- -------- --------
Income before income taxes and
extraordinary items.................. 25,232 (25,343) (111)
Provision for income taxes................ 8,383 (10,188)(c) (1,805)
-------- -------- --------
Income before extraordinary item...... $ 16,849 $(15,155) $ 1,694
======== ======== ========
</TABLE>
- --------
(a) Represents amortization of debt issuance costs associated with the old
credit facility.
(b) Adjustment to reflect pro forma interest expense calculated using (i)
7.94% per annum on $6,000 for the revolver; (ii) 7.94% on $60,000 for the
Term Loan A; (iii) 8.44% on $55,000 for the Term Loan B; (iv) 10.0% on
$150,000 for the Senior Subordinated Note; (v) accretion of the 14% senior
discount note; (vi) amortization of deferred finance charges; (vii) less
capitalized interest costs of $635.
(c) Reflects a statutory income tax rate of 40.2% for the pro forma
adjustments.
(d) In connection with the transaction the Company incurred a one time
compensation expense charge of $3,318 associated with the vesting of stock
options and $2,320 associated with bonuses paid to certain members of
management. Although the Company expects to charge such amounts in the
period following the transaction date, such charge is not reflected in the
accompanying pro forma financial information.
30
<PAGE>
GLOBE HOLDINGS, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
FOR PERIOD ENDED JUNE 30,
-------------------------------------
1998 ADJUSTMENTS PRO FORMA(D)
------- ----------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net sales................................. $92,490 $ -- $ 92,490
Cost of sales............................. 59,556 -- 59,556
------- -------- --------
Gross margin.......................... 32,934 -- 32,934
Selling, general and administrative
expenses................................. 12,083 (41) (a) 12,042
Research and development costs............ 2,040 -- 2,040
------- -------- --------
Operating income...................... 18,811 41 18,852
Other Income/(Expense)
Interest................................ (1,788) (13,017) (b) (14,805)
Loss in investment in joint venture..... -- -- --
Other income, net....................... 655 -- 655
------- -------- --------
Income before income taxes............ 17,678 (12,976) 4,702
Provision for income taxes................ 6,638 (5,216) (c) 1,422
------- -------- --------
Net income................................ $11,040 $ (7,760) $ 3,280
======= ======== ========
</TABLE>
- --------
(a) Represents amortization of debt issuance costs associated with the old
credit facility.
(b) Reflects pro forma interest expense calculated using (i) 7.94% per annum
on $6,000 for the revolver; (ii) 7.94% on $60,000 for the Term Loan A;
(iii) 8.44% on $55,000 for the Term Loan B; (iv) 10.0% on $150,000 for the
Senior Subordinated Note; (v) accretion of the 14% senior discount note;
(vi) amortization of deferred finance charges; (vii) less capitalized
interest costs of $469.
(c) Reflects a statutory income tax rate of 40.2% for the pro forma
adjustments.
(d) In connection with the transaction the Company incurred a one time
compensation expense charge of $3,318 associated with the vesting of stock
options and $2,320 associated with bonuses paid to certain members of
management. Although the Company expects to charge such amounts in the
period following the transaction date, such charge is not reflected in the
accompanying pro forma financial information.
31
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the Company's financial condition
and results of operations is qualified in its entirety by, and should be read
in conjunction with, the consolidated financial statements of the Company and
related notes thereto included elsewhere in this Prospectus. This discussion
contains forward-looking statements that involve risks and uncertainties. The
Company's actual results could differ materially from those anticipated in the
forward-looking statements as a result of certain factors including, but not
limited to, those discussed in "Risk Factors," "Business" and elsewhere in
this Prospectus. The Company disclaims any obligation to update information
contained in any forward-looking statement. See "Risk Factors--Risks Regarding
Forward-Looking Statements."
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated information derived
from the consolidated financial statements of income expressed as a percentage
of net sales. There can be no assurance that the trends in sales growth or
operating results will continue in the future.
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30,
-------------------- -------------
1995 1996 1997 1997 1998
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net sales.................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales................................ 75.7% 72.5% 67.3% 67.0% 64.4%
Gross margin................................. 24.3% 27.5% 32.7% 33.0% 35.6%
Selling, general & administrative expenses... 14.4% 14.2% 14.3% 12.6% 13.1%
Research and development expenses............ 1.8% 1.7% 1.5% 1.4% 2.2%
Operating income............................. 8.1% 11.6% 16.9% 19.0% 20.3%
</TABLE>
Six Months Ended June 30, 1998 Compared to Six Months Ended June 30, 1997
Net sales of the Company for the six months ended June 30, 1998 increased
$8.2 million, or 9.7%, to $92.5 million from $84.3 million for the
corresponding period in 1997. The increase in sales was primarily attributable
to a 34.0% increase in fine denier spandex fiber volume and a 6.4% increase in
average heavy denier spandex fiber price associated with a change in mix
within the Company's heavy denier product line.
Gross margin of the Company for the six months ended June 30, 1998 increased
$5.1 million, or 18.3%, to $32.9 million from $27.8 million for the
corresponding period in 1997. The Company's gross margin as a percentage of
net sales increased to 35.6% for the six months ended June 30, 1998 from 33.0%
for the corresponding period in 1997. The increase in gross margin was
primarily due to a 4.9% reduction in fine denier spandex fiber unit costs
attained through operating efficiencies and economies of scale resulting from
increased capacity at the Company's Tuscaloosa, Alabama facility and a
favorable shift in product mix towards higher margin fine denier spandex fiber
products. Fine denier spandex fiber sales represented 56.0% of total sales in
the six months ended June 30, 1998, compared to 47.2% in the corresponding
period in 1997.
Selling, general and administrative expenses for the Company for the six
months ended June 30, 1998 increased $1.5 million, or 14.2%, to $12.1 million
from $10.6 million for the corresponding period in 1997. Selling, general and
administrative expenses for the Company as a percentage of net sales increased
to 13.1% for the six months ended June 30, 1998 from 12.6% in the
corresponding period in 1997. The change from the previous year was primarily
due to an increase in allowances for bad debt and additional selling expenses
associated with an increased level of foreign sales.
Research and development expenses for the Company for the six months ended
June 30, 1998 increased $0.8 million, or 66.7%, to $2.0 million from $1.2
million for the corresponding period in 1997. Research and
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development expenses for the Company as a percentage of net sales increased to
2.2% for the six months ended June 30, 1998 from 1.4% for the corresponding
period in 1997. The increase in research and development expense was
associated with the development of new heavy denier spandex fiber products.
Net interest expense for the Company for the six months ended June 30, 1998
decreased $0.3 million, or 14.3%, to $1.8 million from $2.1 million in the
corresponding period in 1997. The decrease in interest expense was primarily
attributable to an increase in capitalized interest as well as a decrease in
interest rates.
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996
Net sales of the Company for 1997 increased $18.3 million, or 12.0%, to
$170.9 million from $152.6 million in 1996. The increase in sales was
primarily due to a 5.3% increase in average fine denier spandex fiber prices
and a 17.7% increase in fine denier spandex fiber volume.
Gross margin of the Company for 1997 increased $13.8 million, or 32.9%, to
$55.8 million from $42.0 million in 1996. The Company's gross margin as a
percentage of net sales increased to 32.7% in 1997 from 27.5% in 1996. The
increase in gross margin reflects a reduction in fine denier spandex fiber
unit costs attributable to economies of scale created by an increase in fine
denier spandex fiber capacity at the Company's Tuscaloosa, Alabama facility,
gains in efficiencies achieved through improved production processes and a
decline in latex raw material costs. The increase in gross margin also
reflects a favorable shift in product mix toward higher margin fine denier
spandex fiber products. Fine denier spandex fiber sales represented 49.4% of
total net sales in 1997 compared to 44.2% in 1996.
Selling, general and administrative expenses for the Company in 1997
increased $2.7 million, or 12.4%, to $24.4 million from $21.7 million in 1996.
The increase in selling, general and administrative expenses was primarily
attributable to the higher level of net sales achieved in 1997. As a
percentage of net sales, selling, general and administrative expenses
increased to 14.3% in 1997 from 14.2% in 1996.
Research and development expenses for the Company in 1997 increased $0.1
million, or 4.0%, to $2.6 million from $2.5 million in 1996. Research and
development expenses for the Company as a percentage of net sales decreased to
1.5% in 1997 from 1.7% in 1996. The decrease was primarily due to the higher
level of net sales attained in 1997.
Net interest expense for the Company in 1997 decreased $1.3 million, or
24.5%, to $4.0 million from $5.3 million in 1996. The decrease in interest
expense was primarily due to a decline in interest rates and the
capitalization of $0.5 million of interest expense in 1997 in connection with
a capital expansion project.
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
Net sales of the Company for 1996 increased $24.3 million, or 18.9%, to
$152.6 million from $128.3 million in 1995. The increase in sales was
primarily due to a 56.4% increase in fine denier spandex fiber volume related
to increased manufacturing capacity.
Gross margin of the Company for 1996 increased $10.9 million, or 35.0%, to
$42.0 million from $31.1 million for the corresponding period in 1995. The
Company's gross margin as a percentage of net sales increased to 27.5% in 1996
from 24.3% in 1995. The increase in gross margin was primarily due to a
favorable shift in product mix toward higher margin fine denier spandex fiber
products. Fine denier spandex fiber sales represented 44.2% of total net sales
in 1996 compared to 34.8% in 1995. In addition, the Company's gross margin in
1995 was negatively impacted by Globe's first expansion of its Tuscaloosa
facility, which temporarily reduced manufacturing efficiencies, and by lower
average selling prices of fine denier spandex resulting from Bayer entering
the domestic market.
Selling, general and administrative expenses for the Company in 1996
increased $3.2 million, or 17.3%, to $21.7 million from $18.5 million in 1995.
Selling, general and administrative expenses for the Company as a percentage
of net sales decreased to 14.2% in 1996 from 14.4% in 1995. The decrease in
selling, general and administrative expense as a percentage of net sales was
primarily attributable to the increase in sales noted above.
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Research and development expenses for the Company in 1996 increased $0.2
million, or 8.7%, to $2.5 million from $2.3 million in 1995. Research and
development expenses for the Company as a percentage of net sales decreased to
1.7% in 1996 from 1.8% in 1995. The decrease in research and development
expense as a percentage of net sales reflects the higher level of net sales
achieved in 1996.
Net interest expense for the Company in 1996 decreased $0.7 million, or
11.7%, to $5.3 million from $6.0 million in 1995. The decrease in interest
expense was primarily due to a decrease in the average debt outstanding
throughout the year and a decline in interest rates.
The Company reported an extraordinary loss of $1.3 million, net of tax, in
1995 to reflect the write-off of unamortized deferred financing costs
associated with the restatement of its credit agreement.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities was $12.7 million in 1995, $21.9
million in 1996 and $20.3 million in 1997. The increase in cash provided by
operating activities for 1996 was primarily due to increases in profitability,
accounts payable, taxes payable, accrued expenses and a reduction of inventory
balances, partially offset by an increase in accounts receivable. The
reduction in cash provided by operating activities in 1997 was due to
increases in accounts receivable, inventory balances and deferred tax assets,
and a reduction in taxes payable, partially offset by an increase in
amortization of unearned compensation. For the six months ended June 30, 1998,
cash provided by operating activities was $14.0 million compared to $7.2
million for the same period in 1997. This increase was primarily attributable
to increases in profitability, accounts payable and accrued expenses and a
reduction in inventory, partially offset by an increase in accounts
receivable. The average days' sales outstanding for accounts receivable was
approximately 44, 54 and 56 days for the years ended 1995, 1996 and 1997,
respectively. Average days' sales outstanding was 64 days at June 30, 1998.
The increase in average days' sales outstanding was primarily attributable to
an increase in foreign sales. Foreign sales represented 27.5% and 32.2% of
sales for the year end December 31, 1997 and for the six months ended June 30,
1998, respectively.
The Company's inventories decreased from $15.9 million at December 31, 1995
to $11.8 million at December 31, 1996. This decrease was primarily
attributable to a decrease in fine denier spandex fiber quantities and cost
aggregating to a 42%, or $2.3 million, decrease. The Company's inventory
increased from $11.8 million at December 31, 1996 to $13.8 million at December
31, 1997. This increase was primarily due to higher fine denier production
capacity and anticipated higher heavy denier sales levels. The Company's
inventories decreased from $13.5 million at June 30, 1997 to $11.8 million at
June 30, 1998. This decrease was primarily due to lower fine denier spandex
thread manufacturing costs and reduced latex thread inventory.
The Company's accounts payable increased from $4.7 million at December 31,
1995 to $7.2 million at December 31, 1996. The Company's accounts payable
increased from $7.2 million at December 31, 1996 to $7.4 million at December
31, 1997. The increase in accounts payable was attributable to capital
expenditures incurred to increase fine denier spandex fiber capacity. The
Company's accounts payable increased from $7.7 million at June 30, 1997 to
$8.9 million at June 30, 1998. The increase was primarily due to capital
expenditures incurred to increase fine denier capacity.
The Company has historically financed its operations and acquisitions
through a combination of internally generated funds and borrowings under its
existing credit agreement. The Company financed the construction of the
Tuscaloosa plant, as well as the subsequent expansions of the facility, under
its existing credit facilities.
Capital expenditures were $5.8 million in 1996, $17.1 million in 1997 and
$17.1 million for the six months ended June 30, 1998. Capital expenditures
incurred during 1996 consisted primarily of general maintenance and process
improvement expenditures, and the capital expenditures incurred during 1997
consisted primarily of expenditures for the expansion of the Tuscaloosa
facility and general maintenance and process improvement expenditures. The
capital expenditures incurred during the first six months of 1998 included
$12.6 million of plant expansion expenditures. The Company anticipates that
its capital expenditures for the balance of 1998 will
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be approximately $10.0 million, of which $6.0 million is related to the
Tuscaloosa Plant Expansion and $1.5 million is related to the Company's new
enterprise resource planning system, which is expected to be installed in 1998
and 1999. The Company estimates that based on anticipated levels of operations
its capital expenditures will be approximately $6.0 million in each of 1999
and 2000.
In connection with the Transactions, Globe Manufacturing entered into the
Senior Credit Facility enabling Globe Manufacturing to borrow up to $165.0
million, subject to certain borrowing conditions. The Senior Credit Facility
is fully secured and consists of a $115.0 million term loan facility, which
was fully drawn upon the consummation of the Transactions, and a $50.0 million
revolving loan facility. The revolving loan facility is available for general
corporate and working capital purposes. The obligations of Globe Manufacturing
under the Senior Credit Facility are fully and unconditionally guaranteed by
the Company. See "Description of Senior Credit Facility." In connection with
the Transactions, Globe Manufacturing also issued $150.0 million in aggregate
principal amount of the Old Senior Subordinated Notes. See "Description of
Senior Subordinated Notes."
After consummation of the Initial Offering and the other Transactions, the
Company's total consolidated debt significantly increased. Interest payments
on the Senior Subordinated Notes and under the Senior Credit Facility
represent significant liquidity requirements for the Company. The Senior
Subordinated Notes require semi-annual interest payments and interest on the
loans under the Senior Credit Facility is due at least quarterly. The Company
is a holding company with no operations of its own and its only material asset
is the capital stock of Globe Manufacturing (all of which is pledged to secure
obligations under the Senior Credit Facility). The Senior Credit Facility and
the Senior Subordinated Note Indenture impose, and agreements entered into in
the future may impose, significant restrictions on distributions and the
making of loans by Globe Manufacturing to the Company. Accordingly, repayments
of the Notes may depend upon the ability of the Company to effect an equity
offering or to refinance the Notes.
Although there can be no assurance, the Company anticipates that its
consolidated cash flow generated from operations and borrowings under the
Senior Credit Facility will be sufficient to fund the Company's working
capital needs, planned capital expenditures, scheduled interest payments
(including interest payments on the Senior Subordinated Notes and amounts
outstanding under the Senior Credit Facility) and other cash needs for the
next twelve months. However, the Company may require additional funds if it
enters into strategic alliances, acquires significant assets or businesses or
makes significant investments in furtherance of its growth strategy. The
ability of the Company to satisfy its capital requirements will be dependent
upon the future financial performance of the Company, which in turn will be
subject to general economic conditions and to financial, business, and other
factors, including factors beyond the Company's control.
Instruments governing the Company's indebtedness, including the Indenture,
the Senior Credit Facility and the Senior Subordinated Note Indenture, contain
financial and other covenants that restrict, among other things, the Company's
ability to incur additional indebtedness, incur liens, pay dividends or make
certain other restricted payments, consummate certain asset sales, enter into
certain transactions with affiliates, merge or consolidate with any other
person or sell, assign, transfer, lease, convey or otherwise dispose of
substantially all of the assets of the Company. Such limitations, together
with the highly leveraged nature of the Company, could limit corporate and
operating activities, including the Company's ability to respond to market
conditions, to provide for unanticipated capital investments or to take
advantage of business opportunities. See "Risk Factors--Substantial Leverage
and Debt Service Requirements."
IMPACT OF THE YEAR 2000 ISSUE
The year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of the
Company's computer programs that have date-sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000.
If the Company, its significant customers or suppliers fail to make
necessary modifications and conversions on a timely basis, the year 2000 issue
could have a material adverse effect on Company operations. However, the
impact cannot be quantified at this time. The Company believes that its
competitors face similar risks.
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The Company has established a corporate-wide project team to identify non-
compliant software and complete the corrections required for the year 2000
issue. The Company has completed its repairs for major manufacturing systems
in all locations. The Company also completed its repair of its major financial
systems. The Company's current target is to resolve compliance issues in its
distribution systems and other ancillary systems by March 31, 1999. The
Company also has made inquiry of its major customers and suppliers to assess
their compliance. Nevertheless, there can be no absolute assurance that there
will not be a material adverse effect on the Company if third party
governmental or business entities do not convert or replace their systems in a
timely manner and in a way that is compatible with the Company's systems.
Costs related to the year 2000 issue are funded through operating cash
flows. Through June 30, 1998, the Company expended approximately $
in systems development and remediation efforts, including the cost of new
software and modifying the applicable code of existing software. The Company
estimates remaining costs to be between $ and $ . The Company
presently believes that the total cost of achieving year 2000 compliant
systems is not expected to be material to the Company's financial condition,
liquidity or results of operations.
Time and cost estimates are based on currently available information.
Developments that could affect estimates include, but are not limited to, the
availability and cost of trained personnel, the ability to locate and correct
all relevant computer code and systems and remediation success of the
Company's customers and suppliers.
INFLATION
The Company does not believe that inflation has had any material effect on
the Company's business over the past three years.
IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards No. 130, Reporting Comprehensive
Income ("Statement 130"), which establishes standards for the reporting and
display of comprehensive income and its components in a full set of general
purpose financial statements. Statement 130 is effective for fiscal years
beginning after December 15, 1997. Disclosure of total comprehensive income is
required in interim period financial statements. Management does not believe
that comprehensive income for prior periods will differ significantly from net
income in those periods.
In June, 1997, the FASB issued Statement of Financial Accounting Standards
No. 131, Disclosures about Segments of an Enterprise and Related Information
("Statement 131"), which is effective for years beginning after December 15,
1997. However, Statement 131 need not be applied to interim financial
statements in the initial year of application. Statement 131 establishes
standards for the way that public business enterprises report information
about operating segments in annual financial statements and requires that
those enterprises report selected information about operating segments in
interim financial reports. It also establishes standards for related
disclosures about products and services, geographic areas, and major
customers. Since Statement 131 is effective for financial statements for
fiscal years beginning after December 15, 1997, the Company will adopt the new
requirements retroactively in 1998. Management has not yet determined the
impact Statement 131 will have on disclosures of the Company's reported
segments.
In February 1998, the FASB issued Statement of Financial Accounting
Standards No. 132, Employers' Disclosures about Pensions and Other
Postretirement Benefits ("Statement 132"), that revises disclosure
requirements of FASB Statements No. 87, Employers' Accounting for Pensions,
and No. 106, Employers'
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Accounting for Postretirement Benefits Other Than Pensions. Statement 132 is
effective for fiscal years beginning after December 15, 1997. The Statement
does not change the recognition or measurement of pension or post-retirement
benefit plans, but standardizes disclosure requirements for pensions and other
post-retirement benefits, eliminates certain disclosures and requires
additional information. Management does not anticipate that the adoption of
Statement 132 will have a material impact on its financial position or the
results of its operations.
In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133, Accounting for Derivative Instruments and for Hedging Activities
("Statement 133"). Statement 133 is effective for years beginning after June
15, 1999. Statement 133 provides a comprehensive and consistent standard for
the recognition and measurement of derivatives and hedging activities.
Management does not anticipate that the adoption of Statement 133 will have a
material impact on its financial position or the results of its operations.
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BUSINESS
OVERVIEW
Globe is a leading domestic manufacturer and worldwide supplier of spandex
and latex elastomeric fibers, marketing its products to more than 500
customers. The Company's fibers are used in a broad range of applications,
including men's and women's hosiery, waistbands, intimate apparel, performance
athletic wear, swimwear, casual wear, suiting fabrics, body shaping (or
foundation) garments, personal care products (including diapers and adult
incontinence products) and footwear. The Company has produced elastomeric
fibers exclusively for over 50 years and has developed long-term relationships
with many of its principal customers, including Fruit of the Loom, Inc.,
Kimberly-Clark Corporation, Minnesota Mining & Manufacturing Company, Sara Lee
Hosiery, Unifi, Inc. and Worldtex, Inc. During the twelve months ended June
30, 1998, the Company had net sales of $179.1 million and EBITDA of $46.3
million.
Spandex fiber, which accounted for 80% of the Company's 1997 sales, is a
highly desirable component of fabrics designed for performance, durability,
comfort, control and resilience due to its unique chemical and physical
properties. Spandex fiber is produced in a broad range of fine and heavy
deniers and is sold on a private label basis and under brand names such as the
Company's GLOSPAN(R) and CLEERSPAN(R), DuPont's Lycra(R) and Bayer's
Dorlastan(R). Recent advances in manufacturing technologies have facilitated
the use of spandex fiber in an increasing number of apparel and non-apparel
applications. Globe has benefited from this recent proliferation of spandex
fiber applications due to its exclusive focus on elastomeric fibers, superior
customer service, broad product line, strong market position and efficient
manufacturing processes.
Management estimates that in 1997 the worldwide market for spandex fiber was
approximately 240 million pounds, representing approximately $2.0 billion in
sales. From 1993 to 1997, worldwide sales of spandex fiber increased at an
estimated 11% compound annual growth rate, and the worldwide spandex fiber
market is expected to grow at approximately 9% over the next three years.
Since 1993, demand for fine denier spandex has increased faster than the
overall market due to its growing use in lightweight and high quality apparel
applications and this trend is expected to continue.
The Company operates three manufacturing facilities, which are located in
Fall River, Massachusetts, Tuscaloosa, Alabama and Gastonia, North Carolina.
Since 1993, Globe has invested $97.5 million to increase manufacturing
capacity, enhance productivity and shift its product mix to the faster
growing, higher margin fine denier spandex fiber. During this period, the
Company's annual fine denier spandex fiber production capacity increased from
2.6 million to 10.6 million pounds. As a result of the Company's capital
investment program and continuous improvement initiatives in its manufacturing
facilities, Globe's fine denier spandex fiber production yields have improved
by 35%, and sales per employee have increased by 43% since 1993.
TUSCALOOSA PLANT EXPANSION
Globe is expanding production capacity at its Tuscaloosa, Alabama fine
denier spandex fiber manufacturing facility in response to existing demand
from current customers. Through June 30, 1998, Globe had spent approximately
$16.1 million of the estimated $22.1 million project cost. The Tuscaloosa
facility, built in 1994, has undergone three prior capacity expansions. The
Tuscaloosa Plant Expansion will increase the Company's fine denier
manufacturing capacity by 3.6 million pounds per annum, or 34%, with
approximately half of this increased capacity expected to be on line in the
fourth quarter of 1998 and the balance expected to be on line in the first
quarter of 1999. As of June 30, 1998, Globe's list price for 40 denier spandex
fiber, the primary product produced at the Company's Tuscaloosa facility, was
$11.50 per pound.
COMPETITIVE STRENGTHS
The Company's exclusive focus on elastomeric fibers for over 50 years has
enabled it to develop the following competitive strengths:
Long-Term Customer Relationships and Superior Customer Service. Globe has
established long-term relationships with its principal customers by focusing
on superior technical and customer service. The Company
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has been a supplier to Fruit of the Loom, Inc., Kimberly-Clark Corporation,
Minnesota Mining and Manufacturing Company, Sara Lee Hosiery, Unifi, Inc. and
Worldtex, Inc. for over ten years. Seven of the Company's ten largest
customers have selected Globe as their preferred supplier of spandex fiber.
Globe provides analytical laboratory services and on-site technical assistance
to improve customers' manufacturing and engineering processes. As a result, a
number of the Company's major customers have selected it as a technology
partner to assist in the development of new spandex applications.
Broad Product Line. The Company believes that it offers the broadest line of
spandex and latex elastomeric fibers in the world. The Company produces a full
line of spandex fibers in deniers ranging from 15 to 5040. These products
feature an assortment of stretch, strength and other performance
characteristics that may be customized for specific applications and
manufacturing processes. Globe also manufactures a wide variety of latex
threads in multiple gauges and formulations. This broad range of product
offerings differentiates the Company in the industry and represents a
competitive advantage, as many customers purchase multiple deniers of spandex
fiber, as well as various gauges of latex thread, and prefer to utilize one
vendor for their elastomeric fiber requirements. The proprietary technologies
and customized equipment used by Globe in its multiple manufacturing processes
enable the Company to cost-effectively produce this broad product line.
Strong Positions in Growing Markets. The Company has established a strong
market position in each of its principal product lines. The Company has an
estimated 16% share of the domestic spandex fiber market and an estimated 7%
share of the worldwide spandex fiber market (based on pounds produced).
Management estimates that worldwide sales of spandex fiber will increase at a
compound annual growth rate of approximately 9% over the next three years and
that fine denier spandex sales will exceed the overall market growth rate
during this period. Fine denier spandex demand has been driven by strong
consumer demand for lightweight and high quality apparel and technological
advances allowing for the use of spandex fibers in the manufacture of such
apparel.
Cost-Efficient Manufacturing. Management believes that the Company's
manufacturing operations are among the most efficient in the industry,
allowing the Company to become one of the world's lowest cost producers of
high quality spandex fiber. Globe has developed proprietary chemical
formulations and highly efficient manufacturing processes that utilize
sophisticated process control systems and custom fabricated manufacturing
equipment designed and built by the Company's engineers. Management believes
that Globe's in-house capability to design, engineer and build its own
manufacturing equipment distinguishes the Company from many of its competitors
and provides it with an important competitive advantage in maintaining product
quality as well as controlling design, development and maintenance costs. In
addition, increased production volume at the Company's facilities has enabled
the Company to achieve significant economies of scale and raw material
purchasing power.
Experienced Management Team. The Company is led by an experienced management
team with a track record of achieving profitable growth, developing new
manufacturing processes and expanding the Company's customer base. Between
1993 and the twelve months ended June 30, 1998, the Company's net sales
increased from $107.6 million to $179.1 million and EBITDA increased from
$23.7 million to $46.3 million. The Company's executive officers average
approximately 20 years with the Company. The Company's senior management team
has a substantial financial interest in the Company's continued success
through their direct investment in the Company.
BUSINESS STRATEGY
The Company's business objective is to become the leading global supplier of
elastomeric fiber for use in selected apparel and non-apparel markets. The
Company seeks to achieve this objective by pursuing the following strategies:
Continue Shift in Product Mix to Higher Growth, More Profitable Fine Denier
Products. Since 1993, Globe has expanded its annual production capacity of
higher growth fine denier spandex fiber from 2.6 million to 10.6 million
pounds. Fine denier spandex fiber is used in applications requiring
lightweight or high quality fabric, and has been generally more profitable
than heavy denier spandex fiber due to the complexity of the manufacturing
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process required and strong market demand. Fine denier spandex fiber sales
accounted for approximately 49% of Globe's 1997 total sales, up from 25% in
1993. The Tuscaloosa Plant Expansion, which will increase the Company's annual
production capacity for fine denier spandex fiber to 14.2 million pounds, will
enable the Company to further address the increase in demand for fine denier
spandex fiber.
Develop Innovative Spandex Fiber Applications. Globe's product managers and
research and development engineers work closely with existing and prospective
customers to develop innovative applications for spandex fiber. For example,
the Company worked with a fleece manufacturer for over two years to develop a
new four-way stretch fleece product for outerwear that incorporates Globe's
spandex fiber. Cooperative efforts such as this have enabled Globe to enhance
its relationships with existing customers and attract new customers.
Improve Manufacturing Productivity; Reduce Production Costs. The Company
seeks to continually improve manufacturing efficiency and reduce production
costs in order to maintain its position as one of the world's lowest cost
producers of high quality spandex fiber. The Company seeks to improve
manufacturing yields, increase equipment utilization, and reduce production
costs by upgrading process monitoring equipment, enhancing production
processes and increasing throughput. Each of the Company's manufacturing
facilities is certified under ISO 9001, and the Company actively incorporates
the principles of continuous improvement.
Increase International Sales. Globe estimates that the international market
accounts for two-thirds of the worldwide spandex fiber market. International
spandex fiber markets are growing rapidly due to increasing consumerism of the
world's population, coupled with increases in personal disposable income. From
1993 to 1997, Globe's international sales increased from 19% of sales to 28%
of sales (primarily in western Europe and Latin America) as the Company
expanded the size and geographic scope of its international sales to 46
countries. The Company seeks to further expand its international sales by
leveraging its existing sales and marketing infrastructure and capitalizing on
Globe's expanded manufacturing capacity.
INDUSTRY OVERVIEW
The Company competes primarily in the worldwide market for spandex fiber and
the domestic market for latex thread.
Spandex Fiber
The worldwide spandex fiber industry has experienced significant growth in
recent years. First developed in the early 1960s, spandex fiber has repeatable
stretch and recovery capabilities, end-to-end uniformity, and unlike most
other elastomeric fibers, is resistant to breakdown from exposure to
oxidation, ozone, light, solvents, body oils, and perspiration. In addition,
advances in polymer chemistry and manufacturing technology have allowed
manufacturers to produce increasingly finer elastomeric fibers. These
production advances and the physical characteristics of spandex fiber have
made spandex fiber a highly desirable component of an increasing number of
applications.
As the production capabilities of spandex fiber suppliers have improved,
fabric manufacturers have also developed new processes that have allowed them
to integrate spandex fiber into a number of new applications. Traditionally,
manufacturers of circular knit fabrics were unable to use spandex fiber in the
manufacturing process unless the spandex fiber had been covered with another
fiber, such as cotton or nylon. Recently, new technologies enabling
manufacturers to knit uncovered spandex fibers have spurred an increased use
of spandex fiber in sheer, lightweight circular knit products.
Suppliers of spandex fiber such as the Company generally target six end-use
markets for their fibers: circular knits (which includes product applications
such as active wear, swimwear and casual wear); hosiery; nonwovens (personal
care products such as diapers); narrow fabrics (waistbands and straps); warp
knits (intimate apparel and body shaping garments); and stretch wovens.
Stretch wovens include fabrics that are used in men's suits and pants, as well
as other new applications, and this segment represents a growth opportunity
for industry participants such as Globe.
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Management estimates that in 1997 the worldwide market for spandex fiber was
approximately 240 million pounds, representing approximately $2.0 billion in
sales. From 1993 to 1997, worldwide sales of spandex fiber increased at an
estimated 11% compound annual growth rate, and the worldwide spandex fiber
market is projected to grow at a compound annual growth rate of approximately
9% over the next three years. Since 1993, demand for fine denier spandex fiber
has increased faster than the overall market due to its growing use in
lightweight and high quality apparel applications and this trend is expected
to continue. Currently, approximately 61% of spandex fiber consumption occurs
in the major industrialized regions, including the U.S., Japan, and western
Europe. International spandex fiber markets are growing rapidly due to
increasing consumerism of the world's population, coupled with increases in
personal disposable income.
Spandex fiber is currently produced throughout the world. Management
estimates that there are approximately 16 spandex fiber manufacturers in the
world, with the top 5 manufacturers accounting for approximately 77% of the
worldwide market. These manufacturers are expected to increase capacity to
meet anticipated demand and maintain their respective market shares.
Latex Thread
The Company estimates that in 1997 the U.S. market for extruded latex thread
was approximately 35 million pounds. The primary markets include men's
hosiery, narrow fabrics and fused tapes. Fine gauges of latex thread are
typically used in men's hosiery. Medium and heavy gauges are used in narrow
fabrics and fused tapes. Fused tapes are used for face masks and insert
elastics. The Company produces a heat resistant latex thread which resists
degradation caused by repeated household laundry drying cycles.
PRODUCTS AND CUSTOMERS
Products
The Company develops, manufactures and sells spandex and latex elastomeric
fibers. The Company's products include fine denier spandex fiber (15 to 140
denier), heavier denier spandex fiber (184 to 5040 denier), and latex thread
in a variety of gauges. Spandex fiber accounted for 80% of the Company's sales
in 1997, and latex thread accounted for the remaining 20%.
Spandex Fiber. The unique chemical and physical properties of spandex fiber
make it a desirable component of fabrics designed for performance, durability,
comfort, control and resilience. Spandex fiber, produced from polyether or
polyester, has repeatable stretch and recovery capabilities, end-to-end
uniformity, and unlike most other elastomeric fibers, is resistant to
breakdown from exposure to oxidation, ozone, light, solvents, body oils and
perspiration. Such properties, together with the wide range of available
deniers, make spandex fiber suitable for a broad range of applications,
including men's and women's hosiery, waistbands, intimate apparel, performance
athletic wear, swimwear, casual wear, suiting fabrics, body shaping (or
foundation) garments, personal care products (including diapers and adult
incontinence products) and footwear. Spandex fiber can be made in deniers much
finer than alternative elastomeric fibers while retaining uniform physical
properties, and can be heat set in finishing, thereby allowing manufacturers
to create ultra sheer and lightweight, yet highly elastic fabrics. Although
spandex fiber typically accounts for a small percentage of the total fiber in
an application (ranging from 2% in men's suits to 40% in women's foundation
garments), it can be used to enhance the performance of an increasing number
of apparel and non-apparel products.
Latex Thread. The Company's first product was latex thread. Extruded latex
thread, which is round, was developed in the 1940's to replace cut rubber
thread, which was square and limited in size and usage. Finer gauge latex
thread is used in men's hosiery and athletic socks. Mid-range gauges are
typically used for narrow fabrics, such as waistbands, straps and insert
elastics, and for specialty products and medical garments. Coarse gauge latex
thread is also used for narrow fabrics and in specialty products. The Company
has engineered various latex thread compound formulations in response to
market needs for high-strength, chemical and heat resistance, and durability,
and the Company believes opportunities exist for additional uses for latex
thread.
41
<PAGE>
The Company's products have historically been sold to a variety of customers
in five end-markets: circular knits, hosiery, nonwovens, narrow fabrics and
warp knits. In addition, the Company has recently begun selling products to
the stretch woven market for use in suiting fabrics and outerwear linings. The
following table lists the Company's principal product lines, applications for
these products, the fiber utilized in the products, and representative
customers.
<TABLE>
<CAPTION>
PRODUCT LINE
AND PERCENTAGE REPRESENTATIVE
OF 1997 SALES PRODUCT APPLICATIONS FIBER UTILIZED CUSTOMERS
-------------- ------------------------------ ----------------- --------------
<C> <C> <C> <S>
Hosiery Women's sheer hosiery 10-560 denier Unifi, Inc.
36% of sales Men's hosiery spandex fiber; Sara Lee Ho-
Athletic socks fine gauge latex siery
thread Kayser Roth
Hosiery, Inc.
McMichael
Mills, Inc.
Worldtex, Inc.
Tanofil A.G.
Golden Lady
S.P.A.
Americal Cor-
poration
Pennaco Ho-
siery, Inc.
Circular Knits Active wear 20-105 denier C.K.M. Indus-
35% of sales Swimwear spandex fiber tries, Inc.
Casual wear Textivision,
Dress wear SA de CV
Cotton athletic wear Tanofil,
A.G./Karl Na-
gele GmbH &
Co. K.G.
Texere 2000
Inc.
Elatex--D&S
International
Taiwan
Narrow Fabrics Waistband elastics 280-5040 denier Fruit of the
16% of sales Straps spandex fiber; Loom, Inc.
Insert elastics 22-50 gauge Asheboro Elas-
Accent laces latex thread tic Corp.
Hanes Mens-
wear, Inc.
Beech Island
Knitting Co.
North East
Knitting, Inc.
Sun Hing
Elastics &
Lace Flat A.C.
Nonwovens Diapers 280-1400 denier Kimberly-Clark
8% of sales Adult incontinence products spandex fiber; Corporation
Feminine hygiene products 30-50 gauge latex Minnesota Min-
Medical bandages thread ing & Manufac-
Industrial protective clothing turing Com-
pany
Paragon Trade
Brands, Inc.
Warp Knits Intimate apparel 20-560 denier Guilford Mills
5% of sales Body shaping garments spandex fiber Inc.
Swimwear The Moore Com-
Footwear pany, Inc.--
Darlington
Fabrics Divi-
sion
Liberty Fab-
rics, Inc.
Charbert Divi-
sion of NFA
Corp.-- Alton
Operating
Corp.
</TABLE>
The Company has historically maintained a strong position in the hosiery and
narrow fabrics markets. Management estimates that Globe's spandex fibers are
utilized in the waistband of over 90% of the pantyhose sold in the United
States. In addition, the Company believes it is the leading domestic supplier
of latex thread for men's dress hosiery and men's underwear waistbands.
Fine denier spandex fiber accounted for approximately 49% of the Company's
total 1997 sales, up from 25% in 1993. Based on current market demand for
products which utilize lightweight or high quality fabrics, the Company
believes that fine denier products manufactured for the circular knit, warp
knit and stretch woven markets will represent an increasing percentage of
Globe's sales.
Customers
The Company sells its products to a diverse customer base of intermediate
and end-use manufacturers. Intermediate users of the Company's products, which
include Unifi, Inc., C.K.M. Industries, Inc. and Worldtex, Inc., cover the
elastomeric fibers with other materials, and then either sell them to another
manufacturer or knit or weave them. The Company's end-use customers, which
include Fruit of the Loom, Inc., Sara Lee Hosiery,
42
<PAGE>
Hanes Menswear, Inc., and Kayser-Roth Corporation (manufacturer of No Nonsense
pantyhose), produce finished goods from the elastomeric fibers supplied by the
Company. Most of the Company's customers rely on sophisticated technologies
and production techniques to manufacture products of which the Company's
fibers are a significant value-added component. These customers typically
operate high speed, high volume production lines. In order to run their
production lines efficiently and avoid costly line stoppages, customers rely
on the Company's ability to provide reliable, on time delivery of high quality
products. A number of the Company's customers have selected Globe as a
preferred supplier of elastomeric fiber.
Globe markets its products to over 500 customers. The Company's top ten
customers accounted for approximately 48% of 1997 sales, with sales to Unifi,
Inc., a manufacturer of covered yarns for men's and women's hosiery and for
narrow fabrics, accounting for approximately 9% of 1997 sales. Export sales
represented approximately 28% of the Company's total sales in 1997. As is
customary in the industry, the Company generally does not have long-term
supply agreements with its customers.
SALES AND MARKETING
Globe's sales and marketing functions are organized into three product
lines: hosiery/narrow fabrics; wide fabrics (including circular knits, warp
knits, stretch wovens); and nonwovens. Each product line requires different
technical expertise and is the responsibility of one of the Company's product
managers. Management believes that organizing its sales and marketing team by
product line is the most efficient and effective way to develop and maintain
customer relationships, to stay abreast of technical and other developments
that may result in changing customer or consumer preferences and to take
advantage of new business opportunities.
The Company markets and sells its products under the direction of three
product managers who are supported by an extensive organization comprised of
26 individuals, including key account managers, inside sales staff, field
sales personnel, and technical service and customer service personnel. By
providing dedicated support to key customers, the Company believes it can
better support these larger customers, who, in many cases, have a variety of
different product application or production requirements. Domestic sales are
handled primarily by the Company's internal sales organization. International
sales activity is coordinated by a senior manager and supported by a dedicated
customer service staff. The Company sells its products internationally through
35 commissioned agents or authorized distributors, covering 46 countries.
Technical service is an integral part of Globe's sales and marketing efforts
and includes providing product testing analysis of fabric composition at the
Company's laboratories, assisting customers with the integration of Globe's
products into the customer's production process and the development of methods
to enhance a customer's products through the incorporation of the Company's
elastomeric fibers. The Company's sales and marketing organization regularly
provides market feedback to Globe's research and development teams. The
Company believes this high level of service has been instrumental in retaining
and attracting customers.
Globe sells spandex fiber under its GLOSPAN(R) and CLEERSPAN(R) brand names.
The Company does not require customers to co-brand their fabrics or products
with its brand name. The Company believes that this marketing strategy is
attractive for customers who seek to build their own brand identity and desire
flexibility in sourcing their spandex fiber requirements.
COMPETITION
Spandex Fiber. The Company competes in the spandex fiber markets primarily
on the basis of product quality, service, price and product innovation. The
Company competes in the spandex fiber market primarily with DuPont and Bayer,
both of which have domestic facilities, and with a number of foreign
competitors. Some of the Company's competitors have substantially greater
financial, marketing, manufacturing, distribution, sales and support
resources, market share and brand awareness than the Company. The Company
seeks to differentiate its product offerings by providing a high level of
technical and customer service, and believes that DuPont and Bayer are the
only other major spandex fiber suppliers that provide similar levels of
technical and customer service.
43
<PAGE>
Despite significant growth in demand for spandex fiber since 1990, the
number of spandex fiber manufacturers has remained relatively constant
primarily due to the technological expertise required to produce spandex fiber
and the substantial capital requirements to establish a spandex fiber
manufacturing facility. Because spandex fiber production is not labor-
intensive, the Company believes that the availability of low-cost unskilled
labor does not provide foreign manufacturers with a significant competitive
advantage.
Latex Thread. The Company competes in the latex thread market on the basis
of product quality, product variety and price. The Company focuses its latex
thread product marketing efforts on high quality and specialty latex thread,
which requires high levels of customer support. The Company believes that its
customer service and product quality, and its ability to respond to the just-
in-time inventory needs of domestic customers, permit it to compete
effectively with foreign latex thread manufacturers. The Company's primary
competitors in the latex thread markets are foreign producers. See "Risk
Factors--Competition."
SUPPLIERS
During 1997, raw materials represented 42% of the Company's total cost of
sales and 28% of net sales. The primary raw materials used by the Company are
polytetramethylene ether glycol, which the Company purchases from BASF, and
polyester resin, which the Company purchases from two suppliers. These
materials are used in a wide variety of products, and based on its experience,
management believes that adequate quantities of these materials will be
available from existing or alternative suppliers in the foreseeable future.
The Company's ten largest suppliers accounted for approximately 93% of its
total raw material purchases and 31% of its total cost of sales in 1997, with
BASF, Polyurethane Specialties Corp. and Ennar Latex, Inc. accounting for 39%,
24% and 16% of such raw material purchases, respectively. The prices for the
Company's raw materials have generally been stable over the past five years,
although there can be no assurance that they will not fluctuate in the future.
See "Risk Factors--Dependence on Suppliers."
INTELLECTUAL PROPERTY
The Company utilizes a variety of proprietary technology in its
manufacturing processes. In addition to its proprietary technology, management
believes that the Company's research, development and engineering skills, as
well as its technical know-how, are significant to the Company's business.
Much of the Company's technology is not patented. The Company relies primarily
on intellectual property laws, confidentiality procedures and contractual
provisions to protect its intellectual property. The Company seeks to protect
the majority of its technology under trade secret laws, which afford only
limited protection. See "Risk Factors--Protection of Intellectual Property."
The Company owns certain brand names and trademarks used in its business,
including GLOSPAN(R) and CLEERSPAN(R).
MANUFACTURING
General. The Company utilizes multiple manufacturing processes that allow it
to cost-effectively produce a broad range of elastomeric fibers. The Company
utilizes real-time control and monitoring systems that continuously monitor
key process variables using a sophisticated closed loop system of computers,
sensors and custom software.
Spandex Fiber. The Company produces spandex fiber in a wide variety of
deniers, using dry-spin and reaction spin processes. Typically, spandex fiber
of heavier deniers is produced by the reaction spin process, while fine denier
threads are produced by the dry-spin process.
In 1985, the Company began commercial production of fine denier spandex
fiber using a dry-spin, polyether-based process at its Fall River facility.
Fine denier fiber production is a continuous process accomplished by vertical
spinning of the polymer from the top of a production cell to the bottom, where
the chamber is heated and filled with nitrogen in order to strip the solvent
from the fiber. The solvent is removed from the cell chamber as a gas,
recovered and recycled in a separate process. The process is monitored and
44
<PAGE>
controlled by a state-of-the-art computer system developed specifically for
the Company. The Company produces fine denier spandex fiber using the dry-spin
process at its facilities in Fall River, Massachusetts and Tuscaloosa,
Alabama, and currently has the capacity to produce 10.6 million pounds of fine
denier spandex fiber annually using the dry-spin process. The Company's dry-
spin operations run 24 hours a day, 7 days a week, 52 weeks a year.
The Company believes that it is the only manufacturer of spandex fiber using
the reaction spin process, which is based on technology proprietary to the
Company. The process begins with the preparation of the prepolymer which is
transported to an extruder, where it is processed through pumps and filters.
The resulting pressure forces the prepolymer through a series of tubes and
spinerettes, which distribute the prepolymer into a spinning tank where the
chemical reaction which gives the fiber its elasticity occurs and the fibers
are formed. The fibers are heated, cured and dried in ovens and then cooled,
lubricated and spooled for shipment. In some cases, the Company uses a
proprietary process which permits the Company to deliver the fiber in "knit-
tape" form, which facilitates its use for certain customers. The Company
conducts reaction spin production at its Fall River, Massachusetts, and
Gastonia, North Carolina facilities. It currently has the capacity to produce
13.4 million pounds of heavy denier spandex fiber annually using the reaction
spin process.
Latex Thread. The Company manufactures latex thread through a batch process
which begins with the combination of latex (a natural rubber material) and
various base chemicals. This compound is matured, heated and fed to extruders,
where it is pumped through a series of filters and distributed separately out
of a group of capillaries. These capillaries produce latex thread which is
then moved through an acid bath reservoir before being washed, dried and
cured. At the end of the extruder, the fibers are combined into ribbons of
various counts depending on customer needs. The Company produces latex thread
at its Fall River, Massachusetts facility, and currently has the capacity to
produce 11.0 million pounds of latex thread annually.
FACILITIES
The following table sets forth certain information with respect to the
Company's principal facilities.
<TABLE>
<CAPTION>
SQUARE
LOCATION FOOTAGE OWNED/LEASED PRINCIPAL FUNCTION
-------- ------- ------------ --------------------------
<S> <C> <C> <C>
Fall River, Massachusetts... 375,000 Owned Headquarters
Fine denier spandex fiber
Heavy denier spandex fiber
Latex thread
Gastonia, North Carolina.... 180,000 Owned Heavy denier spandex fiber
80,000 Owned Distribution center
10,000 Leased Warehouse
Tuscaloosa, Alabama......... 157,000 Owned Fine denier spandex fiber
Rancho Dominguez, 15,000 Leased Warehouse
California.................
</TABLE>
The Company believes that its facilities are adequate and suitable for the
purposes for which they are utilized by the Company. The Company is currently
expanding production capacity at its Tuscaloosa, Alabama fine denier spandex
fiber manufacturing facility in response to existing demand from current
customers. See "--Tuscaloosa Plant Expansion."
EMPLOYEES
As of June 30, 1998, the Company had approximately 902 employees. Of these,
approximately 174 are salaried employees and 728 are hourly workers. Of the
approximately 174 salaried employees, 57 perform manufacturing functions, 48
are technical employees, 25 perform sales and marketing functions and 44
perform administrative functions. None of the Company's employees are covered
by a collective bargaining agreement. The Company believes its relationships
with its employees are good.
45
<PAGE>
ENVIRONMENTAL, HEALTH AND SAFETY MATTERS
The Company is subject to stringent environmental, health and safety
requirements, including laws and regulations relating to air emissions,
wastewater management, the handling and disposal of waste and the cleanup of
properties affected by hazardous substances. The Company's management believes
that its operations have been and are in substantial compliance with
environmental, health and safety requirements, and that it has no liabilities
arising under such requirements, except as would not be expected to have a
material adverse effect on the Company's operations, financial condition or
competitive position.
During 1996 and 1997, respectively, the Company spent approximately $0.3
million and $0.9 million on environmental, health and safety compliance
activities at its three operating locations. The Company estimates that
approximately $1.0 million will be spent in 1998 on such activities, including
efforts to resolve pending compliance issues relating to air emissions and
wastewater discharges from the Company's Fall River, Massachusetts facility.
Although the Company's management believes its estimate of 1998 costs to be
reasonable, there can be no assurances that actual expenditures will not
exceed the estimated amount.
Since 1986, the Company has received requests for information and related
correspondence from the U.S. EPA and other third parties indicating that the
Company might be responsible under CERCLA or Superfund laws for costs
associated with the investigation and cleanup of ten contaminated sites. The
Company's management believes that the Company has resolved its involvement
with respect to eight of these sites (five of which were inter-related) since
1988 and that the Company's involvement in matters arising under the Superfund
laws will not have a material adverse effect on the Company's operations,
liquidity or financial condition.
In December 1996, the Company's management learned that the U.S. EPA and the
U.S. Attorney's Office were conducting an investigation into whether the
Company had engaged in criminal violations of environmental laws with respect
to its Fall River, Massachusetts facility. The investigators have not informed
the Company of the scope of their inquiry. The Company has provided certain
information regarding its Fall River operations to the federal investigators
and believes it has cooperated fully with their inquiry. The Company does not
know whether the investigation is currently active. If the Company is charged
with violations of environmental laws, it may be subject to substantial fines
and other penalties. Based on the Company's discussions with the investigators
and the results of the Company's internal investigation of this matter, the
Company's management does not believe that the investigation will result in
any monetary or other penalties that would have a material adverse effect on
the Company's financial condition, results of operations and its ability to
meet its obligations under the Notes. The Merger Agreement provides that the
Indemnification Escrow Fund will be available to indemnify the Company from,
among other items, any liabilities arising out of this investigation to the
extent related to the activities of the Company prior to the Merger. This
indemnity expires on December 31, 2001. See "Certain Relationships and Related
Transactions--Recapitalization" and "Risk Factors--Environmental Compliance."
LEGAL PROCEEDINGS
In April 1997 two domestic purchasers of extruded latex thread filed a
complaint against a number of foreign manufacturers and distributors of such
thread, including an Indonesian limited liability company in which Globe
Holdings then owned a 40% interest (the "Joint Venture"). The complaint
alleges an international conspiracy to restrain trade in, and fix prices of,
the thread in the U.S. Neither the Company nor Globe Manufacturing has been
named as a defendant in the case. The Joint Venture has alleged in its motion
to dismiss that not all parties to the conspiracy have been joined. There can
be no assurance that the Company will not be named in the future. The Merger
Agreement provides that the Indemnification Escrow Fund will be available to
indemnify the Company from, among other items, any liabilities arising out of
any criminal or civil antitrust claims or investigations resulting from the
above-described proceedings to the extent related to the Company's activities
prior to the Merger. This indemnity expires on December 31, 2001.
46
<PAGE>
On March 31, 1998 a petition was filed with the U.S. Department of Commerce
alleging subsidization and dumping of Indonesian extruded latex thread. The
Department of Commerce is currently conducting an investigation into the
allegations. The proceedings could result in additional duties being levied on
extruded latex thread imported from Indonesia. During 1996 and 1997, the
Company purchased approximately $5.9 million and $9.9 million of latex thread
from the Joint Venture for resale in the North American market.
From time to time, the Company has been and is involved in various legal
proceedings, all of which management believes are routine in nature and
generally incidental to the conduct of its business. The ultimate legal and
financial liability of the Company with respect to such proceedings cannot be
estimated with certainty, but the Company believes, based on its examination
of such matters, that none of such proceedings, if determined adversely to the
Company, would have a material adverse effect on the Company's results of
operations, financial condition and its ability to meet its obligations under
the Notes.
47
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company and Globe Manufacturing,
and their ages as of July 14, 1998 are set forth below:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Thomas A. Rodgers, Jr... 84 Chairman
Thomas A. Rodgers, III.. 53 President and Chief Executive Officer, Director
Lawrence R. Walsh....... 46 Vice President, Finance and Administration
Americo Reis............ 64 Vice President, Operations
Robert L. Bailey........ 60 Vice President, Sales and Marketing
William J. Girrier...... 42 Director of Marketing and Business Development
Kevin T. Cardullo....... 38 Director of Finance and Accounting
Andrew W. Code.......... 39 Director
Peter M. Gotsch......... 34 Director
Edward M. Lhee.......... 28 Director
</TABLE>
The present principal occupations and recent employment history of each of
the executive officers and directors of the Company listed above are set forth
below.
Thomas A. Rodgers, Jr., co-founded Globe Holdings in 1945. He has served as
Chairman since 1945, and served as President from 1945 to 1992.
Thomas A. Rodgers, III, is the son of Thomas A. Rodgers, Jr., and has served
as President of the Company since 1992. He served as the Executive Vice
President and Chief Operating Officer of the Company from 1985 to 1992. Mr.
Rodgers joined the Company in 1968. Mr. Rodgers has been a Director of the
Company since 1972.
Lawrence R. Walsh has served as Vice President, Finance and Administration
of the Company since 1982. From 1976 to 1982, he was employed by Smith
Precious Metals Co.
Americo Reis joined the Company in 1959, and has served as the Company's
Vice President, Operations since 1982. From 1957 to 1959, he served in the
U.S. Army and from 1954 to 1957, he was employed by Goodyear Tire & Rubber Co.
Robert L. Bailey has served as the Company's Vice President, Sales and
Marketing since he joined the Company in 1979. From 1972 to 1979, he served as
Vice President of Sales for the Yarn Division of Texfi Industries, Inc., and
from 1967 to 1972 was Vice President of Sales for Intercontinental Fibers.
William J. Girrier has been with the Company since 1990, first as Marketing
Manager and then as Director of Marketing and Business Development. From 1987
to 1990, he was an Associate Manager of The Robbins Group, a commercial real
estate development company. From 1978 to 1987, he served as a Naval Officer in
various command and staff positions at the Pentagon and onboard warships.
Kevin T. Cardullo has served as the Company's Director of Finance and
Accounting since 1992. He is a Certified Public Accountant, and worked as a
Senior Manager with Ernst & Young from 1986 to 1992. Mr. Cardullo was with
Coopers & Lybrand from 1983 to 1986.
Andrew W. Code is a Partner of Code Hennessy & Simmons LLC ("CHS"), which
manages three private equity funds, including Code, Hennessy & Simmons III,
L.P. Since founding the first such fund in 1988, Mr. Code has been actively
involved in the investment organization and investment management activities
of CHS. Mr. Code was a Vice President with Citicorp's Leveraged Capital Group
from 1986 to 1988, and prior to 1986 he was employed by American National
Bank. He is a director of SCP Pool Corporation, a distributor of swimming pool
supplies.
48
<PAGE>
Peter M. Gotsch has been a Partner of CHS since 1997, and has been employed
by CHS and its affiliates since 1989. From 1987 to 1989, Mr. Gotsch was a
Corporate Banking Officer at The First National Bank of Chicago, N.A. He is a
director of SCP Pool Corporation.
Edward M. Lhee has been an associate of CHS since 1997. From 1995 to 1997,
he attended the Kellogg Graduate School of Management. From 1992 to 1995, Mr.
Lhee was employed by Morgan Stanley & Co., where he worked as a financial
analyst in the mergers and acquisitions and corporate finance departments.
The following table summarizes the compensation paid by Globe Holdings and
its subsidiaries to the Company's Chief Executive Officer and four other most
highly compensated executive officers at December 31, 1997 (collectively, the
"Named Executive Officers") for services rendered to the Company in 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
---------------------------- ------------
OTHER ANNUAL SECURITIES ALL OTHER
NAME AND PRINCIPAL SALARY BONUS COMPENSATION UNDERLYING COMPENSATION
POSITION YEAR ($) ($) (1) OPTIONS/SARS ($) (2)
- ------------------ ---- ------- ------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Thomas A. Rodgers, Jr... 1997 759,668 5,000 -- -- 198,796
Chairman
Thomas A. Rodgers, III.. 1997 549,042 197,500 -- 11,250 1,900
President
Americo Reis............ 1997 211,982 72,500 -- 3,750 1,900
Vice President,
Operations
Lawrence R. Walsh....... 1997 218,889 72,500 -- 3,750 3,166
Vice President, Finance
and Administration
Robert L. Bailey........ 1997 176,828 72,500 -- 3,750 1,900
Vice President, Sales
and Marketing
</TABLE>
- ----------------------
(1) Other Annual Compensation was not reportable.
(2) Reflects reimbursement of premiums for life insurance for Thomas A.
Rodgers, Jr. and Company contributions under a 401(k) plan for the other
Named Executive Officers.
The following table sets forth information with respect to all options
granted in fiscal 1997 to the Named Executive Officers.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS GRANT DATE VALUE
- ------------------------------------------------------------------------- ----------------
PERCENT OF
NUMBER OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE OR GRANT DATE
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION PRESENT VALUE
NAME GRANTED (1) FISCAL YEAR ($/SH) DATE (2) ($)
- ---- ------------ ------------ ----------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
Thomas A. Rodgers, Jr... -- -- -- -- --
Thomas A. Rodgers, III.. 11,250 50.0% 30.00 12/31/07 2,468,700
Americo Reis............ 3,750 16.7% 30.00 12/31/07 822,900
Lawrence R. Walsh....... 3,750 16.7% 30.00 12/31/07 822,900
Robert L. Bailey........ 3,750 16.7% 30.00 12/31/07 822,900
</TABLE>
- ----------------------
(1) The options vested upon consummation of the Recapitalization and the
Merger, and are exercisable for common stock and preferred stock of Globe
Holdings pursuant to the Recapitalization. See "Certain Relationships and
Related Transactions--Recapitalization." The Company expects to implement
a new stock option plan.
(2) The Black-Scholes option pricing model was used to determine the grant
date present value of the options. The grant date present value of the
options was calculated to be $219.44 per share, based on an expected life
of 5 years and an assumed risk-free interest rate of 5.7%.
49
<PAGE>
The following table sets forth information with respect to all options
exercised in fiscal 1997 and the year-end value of unexercised options held by
the Named Executive Officers.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
UNDERLYING
UNEXERCISED VALUE OF
OPTIONS/SARS UNEXERCISED IN-THE-
AT FISCAL MONEY OPTIONS/SAR'S
YEAR END AT FISCAL YEAR-END
------------- -------------------
SHARES ACQUIRED VALUE EXERCISABLE/
ON EXERCISE REALIZED UNEXERCISABLE EXERCISABLE/
NAME (#) ($) (#) UNEXERCISABLE ($)
- ---- --------------- -------- ------------- -------------------
<S> <C> <C> <C> <C>
Thomas A. Rodgers, Jr... -- -- -- --
Thomas A. Rodgers, III.. -- -- 11,250/11,250 2,385,000/2,385,000
Americo Reis............ -- -- 3,750/ 3,750 795,000/ 795,000
Lawrence R. Walsh....... -- -- 3,750/ 3,750 795,000/ 795,000
Robert L. Bailey........ -- -- 3,750/ 3,750 795,000/ 795,000
</TABLE>
PENSION PLANS
Globe maintains a Non-Qualified Pension Plan and a Deferred Compensation
Plan, pursuant to which each of Thomas A. Rodgers, III, Americo Reis, Lawrence
R. Walsh and Robert L. Bailey (the "Participating Executives") will be
entitled to receive certain payments upon retirement. Under the Non-Qualified
Pension Plan, each of the Participating Executives will receive a lump sum
distribution upon retirement at age 65. The amounts payable under the Non-
Qualified Pension Plan were determined by the Company and its consultants to
approximate 50% of estimated final compensation. Pursuant to the Deferred
Compensation Plan, each Participating Executive is entitled to receive,
beginning at his retirement at age 65, an annual distribution payable for the
following 15 years. The following table shows the estimated annual benefits
payable under the Non-Qualified Pension Plan and the Deferred Compensation
Plan for each of the Participating Executives.
<TABLE>
<CAPTION>
ESTIMATED ANNUAL BENEFIT UPON
RETIREMENT AT AGE 65
-------------------------------
NON-QUALIFIED DEFERRED
NAME PENSION PLAN COMPENSATION PLAN
---- ------------- -----------------
<S> <C> <C>
Thomas A. Rodgers, Jr. (1)................ $ -- $ --
Thomas A. Rodgers, III.................... $206,400 $90,000
Americo Reis.............................. $ 86,400 $25,000
Lawrence R. Walsh......................... $104,000 $15,000
Robert L. Bailey.......................... $ 96,000 $20,000
</TABLE>
- ----------------------
(1) Thomas A. Rodgers, Jr. does not participate in the Non-Qualified Pension
Plan or the Deferred Compensation Plan.
EMPLOYMENT AGREEMENTS
Each of Messrs. Thomas A. Rodgers, III, Americo Reis, Lawrence R. Walsh and
Robert L. Bailey are parties to an Employment Agreement with Globe Holdings
dated as of December 31, 1997 (the "Employment Agreements"). The Employment
Agreements were transferred to Globe Manufacturing pursuant to the Asset Drop
Down. The Employment Agreements provide for annual base salaries for Messrs.
Rodgers, Reis, Walsh and Bailey of at least $549,000, $212,000, $219,000 and
$200,000, respectively, and provide that such executives shall generally be
entitled to participate in all bonus and benefit plans made available to
executives. The Employment Agreements have a term of three years, but may be
terminated earlier by the Company or the executive. If an executive's
employment is terminated by the Company without Cause or by the executive with
Good Reason (each as defined in the Employment Agreements), then the Company
will be required to pay the executive his base salary through December 2000
and the maximum amount he would have been entitled to under the Company's
incentive plans for the year in which the termination occurred, and will also
be required to provide insurance benefits for three years from the date of
termination, except to the extent the executive obtains comparable benefits
from a subsequent employer.
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<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following summaries of the material terms of certain agreements to which
the Company is a party do not purport to be complete and are subject to, and
are qualified in their entirety by reference to, all of the provisions of such
agreements, including the definitions of certain terms therein and the
exhibits and schedules thereto. Copies of such agreements may be obtained from
the Company or the Initial Purchaser.
RECAPITALIZATION
The consummation of the Initial Offering occurred shortly after, and was
conditioned upon, the effectiveness of the Recapitalization. The
Recapitalization was effected pursuant to the Merger Agreement between the
Company and MergerCo, a newly formed affiliate of Code Hennessy & Simmons. In
connection with the Merger and the Recapitalization: (i) the Company
transferred substantially all of its assets and liabilities to Globe
Manufacturing pursuant to the Asset Drop Down; (ii) Code Hennessy & Simmons
and certain other investors invested approximately $42.8 million in common
stock and preferred stock of MergerCo; (iii) CHS made the CHS Loan in the
amount of $25.0 million; and (iv) Globe Manufacturing consummated the Initial
Senior Subordinated Note Offering. Pursuant to the Merger Agreement: (i)
MergerCo merged with and into the Company, with the Company being the
surviving corporation; (ii) the common stock of MergerCo was converted into
common stock of the surviving corporation (the "New Common Stock") and the
preferred stock of MergerCo became preferred stock of the surviving
corporation (the "New Preferred Stock"); (iii) the CHS Loan became the
obligation of the surviving corporation; (iv) certain stock and all stock
options of the Company outstanding prior to the Merger converted into or
became exercisable for New Common Stock and New Preferred Stock; (v) holders
of the remaining stock of the Company outstanding prior to the Merger received
the Cash Merger Consideration (including the payment by the Company of fees
and expenses on their behalf) in an aggregate amount equal to $315.0 million
less (x) the amount of the Company's outstanding indebtedness as of the date
of the Merger and (y) the amount of the Retained Investment; and (vi) $15.0
million was deposited into escrow as the Escrow Amount. The proceeds to the
Company from the Initial Offering were used to repay the CHS Loan. Under the
Merger Agreement, the Cash Merger Consideration is subject to adjustment based
on consolidated net asset value as of the date of the Merger.
The Escrow Amount consists of (a) $5.0 million to secure the obligations of
the Pre-Merger Shareholders with respect to the post-closing adjustment of the
Cash Merger Consideration and (b) $10.0 million to satisfy any indemnification
obligations of the Pre-Merger Shareholders under the Merger Agreement. The
Adjustment Escrow Fund is required to be applied and/or released upon the
determination of the final closing date consolidated net asset value of the
Company and the balance of the Indemnification Escrow Fund is required to be
released promptly after December 31, 2001.
Pursuant to the Merger Agreement, the Pre-Merger Shareholders have agreed to
indemnify the Company and certain of its related parties for all liabilities
and other losses arising from, among other things, (i) any breach of
representations, warranties or pre-closing covenants of the Company contained
in or contemplated by the Merger Agreement, (ii) the failure of any Pre-Merger
Shareholders to have good, valid and marketable title to the shares of common
stock held by such Pre-Merger Shareholder, (iii) the environmental
investigation relating to the Company's facility in Fall River, Massachusetts
to the extent related to activities prior to the effective time of the Merger,
(iv) the antitrust claims and investigations relating to the alleged
conspiracy by the Joint Venture to restrain trade in, and fix prices of, latex
thread in the United States to the extent related to activities prior to the
effective time of the Merger and (v) certain other matters. With respect to
claims based on any misrepresentation or breach of any representation or
warranty made by the Company, the Pre-Merger Shareholders are not required to
indemnify the Company unless the aggregate of all amounts for which indemnity
would otherwise be payable exceeds $1.0 million and, in such event, the Pre-
Merger Shareholders will only be responsible for the amount in excess of $1.0
million. In addition, the indemnification obligations of the Pre-Merger
Shareholders are generally limited to the amount held in the Indemnification
Escrow Fund, other than with respect to claims based on fraud or on the
failure of a Pre-Merger Shareholder to have good, valid and marketable title
to his shares of common stock.
51
<PAGE>
The Merger Agreement contains representations and warranties typical of
agreements of like nature, including, without limitation, those relating to
corporate organization and capitalization, the valid authorization, execution,
delivery and enforceability of all transaction documents, the Company's
financial statements, the absence of material adverse changes in the business,
assets, financial condition and results of operations, the absence of material
undisclosed liabilities, tax matters, the quality and title of personal and
real property, material contracts, intellectual property, employee benefits
plans, environmental matters, compliance with laws, governmental
authorizations, permits and licenses and insurance matters. Generally, the
representations and warranties of the Company expire 18 months after the
closing date of the Merger except that (i) those relating to environmental
matters remain in full force and effect until the second anniversary of the
closing date of the Merger and (ii) those relating to tax matters survive
until the expiration of the applicable statute of limitations.
Prior to the Merger, Thomas A. Rodgers, Jr. and Thomas A. Rodgers, III
beneficially owned, directly or indirectly, an aggregate of approximately 39%
of the common stock of the Company on a fully-diluted basis. In addition,
Messrs. Bailey, Reis and Walsh beneficially owned, in the aggregate,
approximately 2% of the common stock of the Company on a fully-diluted basis.
In connection with the Merger, these individuals received a pro rata portion
of the aggregate merger consideration.
MANAGEMENT AGREEMENT
In connection with the Recapitalization, Globe Manufacturing entered into a
Management Agreement with CHS Management III, L.P. ("CHS Management"), an
affiliate of Code Hennessy & Simmons LLC, pursuant to which CHS Management
will provide financial and management consulting services to Globe
Manufacturing and receive a monthly fee of $83,333. In addition, pursuant to
the Management Agreement Globe Manufacturing paid to CHS Management $3.0
million at the closing of the Transactions as compensation for services
rendered by CHS Management to Globe Manufacturing in connection with the
Transactions. The Management Agreement also provides that when and as Globe
Manufacturing consummates the acquisition of other businesses, Globe
Manufacturing will pay to CHS Management a fee equal to the greater of
$250,000 and one percent of the acquisition price of each such business as
compensation for services rendered by CHS Management to Globe Manufacturing in
connection with the consummation of such acquisition. The Indenture provides
that no payments shall be made to CHS pursuant to the Management Agreement or
otherwise in respect of management, advisory or similar services if an Event
of Default exists under the Indenture. The term of the Management Agreement is
five years, subject to automatic renewal unless either CHS Management or Globe
Manufacturing elects to terminate. Globe Manufacturing believes that the fees
to be paid to CHS Management for the professional services to be rendered are
at least as favorable to Globe Manufacturing as those which could be
negotiated with an unrelated third party. Globe Manufacturing reimbursed CHS
Management for expenses related to the Transactions and will reimburse CHS
Management for expenses incurred in rendering services to the Company and
Globe Manufacturing under the Management Agreement.
SECURITYHOLDERS AGREEMENT
In connection with the Recapitalization, the Company's shareholders entered
into a Securityholders Agreement. This agreement provides, among other things,
for the nomination of and voting for at least five directors of the Company by
the Company's shareholders. The Securityholders Agreement also provides that
Code Hennessy & Simmons will be entitled to appoint all of the directors of
the Company. The following individuals have been initially designated by Code
Hennessy & Simmons to serve as directors: Thomas A. Rodgers, Jr., Thomas A.
Rodgers, III, Andrew W. Code, Peter M. Gotsch and Edward M. Lhee. See
"Management."
EXECUTIVE SECURITIES AGREEMENTS
In connection with the Recapitalization, each of Lawrence R. Walsh, Americo
Reis and Robert L. Bailey entered into an Executive Securities Agreement with
the Company and Code Hennessy & Simmons which provides for, among other
things, repurchase rights with respect to the the Company securities held by
them upon termination of employment (other than retirement) and restrictions
on transfer of such securities.
52
<PAGE>
REGISTRATION AGREEMENT
In connection with the Recapitalization, the Company's shareholders entered
into a Registration Agreement. The Registration Agreement grants certain
demand registration rights to Code Hennessy & Simmons. An unlimited number of
such demand registrations may be requested by Code Hennessy & Simmons. In the
event that Code Hennessy & Simmons makes such a demand registration request,
all other shareholders of the Company will be entitled to participate in such
registration on a pro rata basis (based on shares held). Code Hennessy &
Simmons may request, pursuant to its demand registration rights, and each
other shareholder may request, pursuant to his or its participation rights,
that up to all of such shareholder's shares of common stock be registered by
the Company. The Company is entitled to postpone such a demand registration
for up to 180 days under certain circumstances. In addition, the parties to
the Registration Agreement are granted certain rights to have shares included
in registrations initiated by the Company or its shareholders ("piggyback
registration rights"). Expenses incurred in connection with the exercise of
such demand or piggyback registration rights shall, subject to limited
exceptions, be borne by the Company.
EXECUTIVE LOAN
In December 1992, the Company made a loan to Thomas A. Rodgers, III to
assist him in paying taxes incurred in a previous recapitalization of the
Company. As of June 30, 1998, the balance of such loan, including accrued
interest, was $285,397. The loan was repaid prior to the Merger.
NON-COMPETITION AGREEMENT
In connection with the Merger and the Recapitalization, each of the Named
Executive Officers entered into a Non-Competition Agreement with the Company
pursuant to which the Named Executive Officers agreed not to engage anywhere
in the U.S. in any business that manufactures, distributes or sells polyester
or polyester spandex fiber, latex thread or other elastomeric fiber for a
period of three years (or, in the case of Mr. Bailey, until December 31,
2000). The Named Executive Officers also agreed not to solicit employees or
customers of the Company or its subsidiaries, or to hire any person who was an
employee of the Company or any of its subsidiaries within twelve months after
such person's employment with the Company or any subsidiary is terminated. The
Named Executive Officers also agreed to maintain the confidentiality of
information regarding the business and affairs of the Company and its
subsidiaries.
SALE BONUS
In February 1998, the Company instituted a management reward program
pursuant to which each of the Named Executive Officers was entitled to receive
a cash bonus upon consummation of the Merger. The amount of the bonus paid was
based on a percentage of the consideration paid in connection with the Merger.
Pursuant to the program, Thomas A. Rodgers, Jr. and Thomas A. Rodgers, III
received an aggregate of $825,000; and Messrs. Reis, Walsh and Bailey each
received $412,500. In addition, Messrs. Cardullo and Girrier each received a
bonus of $50,000 upon consummation of the Merger.
INVESTMENT BANKING FEES
Prior to the Merger, certain affiliates of Goldman, Sachs & Co. owned an
aggregate of approximately 46% of the common stock of the Company on a fully-
diluted basis prior to the consummation of the Merger, and three members of
the Board of Directors of the Company prior to the Merger were affiliates of
Goldman, Sachs & Co. Goldman, Sachs & Co. acted as financial advisor to the
Company in connection with the Transactions, for which it received a fee.
TAX SHARING AGREEMENT
The operations of Globe Manufacturing are included in the Federal income tax
returns filed by the Company. Prior to the closing of the Initial Offering,
Globe Manufacturing and the Company entered into a Tax
53
<PAGE>
Sharing Agreement ("Tax Sharing Agreement") pursuant to which the Company
agreed to advance to the Company so long as the Company files consolidated
income tax returns that include Globe Manufacturing (i) payments for Globe
Manufacturing's share of income taxes assuming Globe Manufacturing is a stand-
alone entity, which in no event may exceed the group's consolidated tax
liabilities for such year, and (ii) payments to or on behalf of the Company in
respect of franchise or similar taxes and governmental charges incurred by it
relating to the business, operations or finances of Globe Manufacturing.
CONSULTING AGREEMENT
In connection with the Merger and the Recapitalization, Thomas A. Rodgers,
Jr. entered into a consulting agreement with Globe Manufacturing, pursuant to
which he will be compensated at a rate of $100,000 per annum, and agreed to
perform special projects for Globe Manufacturing and such other matters as
Globe Manufacturing's Board of Directors or officers reasonably request.
CHS LOAN
In connection with the Recapitalization, Code Hennessy & Simmons extended
the CHS Loan to Globe Holdings in the principal amount of $25.0 million. The
CHS Loan was repaid with the proceeds to Globe Holdings from the Initial
Offering. The CHS Loan bore interest at a rate of 14% per annum and would have
matured on July 31, 2009.
54
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of September 15, 1998
regarding the beneficial ownership of the Company's capital stock by (i) each
shareholder who beneficially owns more than 5% of the common stock of Globe
Holdings, (ii) each director and Named Executive Officer of the Company and
(iii) all directors and executive officers of the Company as a group. Except
as otherwise indicated below, each of the persons named in the table has sole
voting and investment power with respect to the securities beneficially owned
by it or him as set forth opposite its or his name. Unless otherwise noted,
the address for each director and executive officer of the Company is c/o the
Company, 456 Bedford Street, Fall River, Massachusetts 02720.
<TABLE>
<CAPTION>
COMMON STOCK PREFERRED STOCK
--------------------- ---------------------
NAME OF BENEFICIAL OWNER NUMBER (1) PERCENT(1) NUMBER (1) PERCENT(1)
------------------------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Code, Hennessy & Simmons III,
L.P. (2).................... 1,647,437 75.6 21,999.6 75.6
Thomas A. Rodgers, Jr (3).... 166,244 7.6 2,220 7.6
Thomas A. Rodgers, III....... 89,862 4.1 1,200 4.1
Americo Reis (4)............. 22,465 1.0 300 1.0
Lawrence R. Walsh (4)........ 22,465 1.0 300 1.0
Robert L. Bailey (4)......... 22,465 1.0 300 1.0
William J. Girrier........... -- -- -- --
Kevin T. Cardullo............ -- -- -- --
Andrew W. Code (5)........... 1,647,437 75.6 21,999.6 75.6
Peter M. Gotsch (5).......... 1,647,437 75.6 21,999.6 75.6
Edward M. Lhee............... 1,977 * 26.4 *
Brinson Partners, Inc.
(6)(7)...................... 224,655 10.3 3,000 10.3
Virginia Retirement System
(7)......................... 179,724 8.2 2,400 8.2
All executive officers and
directors as a group (9
persons).................... 1,806,671 80.4 24,126 80.4
</TABLE>
- --------
* Less than 1%
(1) Includes shares of Common Stock and Preferred Stock subject to options
which are exercisable within 60 days of September 15, 1998.
(2) The business address of Code, Hennessy & Simmons III, L.P. is 10 South
Wacker Drive, Suite 3175, Chicago, Illinois 60606.
(3) All of such shares are held of record by the Thomas A. Rodgers, Jr.
Grantor Retained Annuity Trust, of which Thomas A. Rodgers, Jr. is the
sole beneficiary.
(4) All of the shares shown are issuable upon exercise of outstanding options.
(5) All of such shares are held of record by Code, Hennessy & Simmons III,
L.P. Messrs. Code and Gotsch are officers, directors and shareholders of
the sole general partner of Code, Hennessy & Simmons III, L.P. and share
investment and voting power with respect to the securities owned by Code,
Hennessy & Simmons III, L.P. Each of Messrs. Code and Gotsch disclaims
beneficial ownership of such shares except to the extent of his pecuniary
interest therein. The business address of Messrs. Code and Gotsch is c/o
Code, Hennessy & Simmons III, L.P., 10 South Wacker Drive, Suite 3175,
Chicago, Illinois 60606.
(6) Brinson Partners, Inc. ("BPI") has advised the Company that it is an
Investment Adviser registered under Section 203 of the Investment Advisers
Act of 1940. Of the shares shown: (i) 38,631 shares of Common Stock and
515.87 shares of Preferred Stock are held of record by Brinson Venture
Capital Fund III, L.P., of which BPI is the general partner and (ii) 6,300
shares of Common Stock and 84.13 shares of Preferred Stock are held of
record by Brinson MAP Venture Capital Fund III, a trust of which a wholly
owned subsidiary of BPI is the sole trustee. As a result, BPI has sole
voting and dispositive power with respect to such shares. The address of
BPI is 209 South LaSalle Street, Chicago, Illinois 60604-1295.
(7) BPI serves as an Investment Adviser to Virginia Retirement System and
shares voting and dispositive power with respect to the shares held of
record by Virginia Retirement System. The address of Virginia Retirement
System is 1200 East Main Street, Richmond, Virginia 23219.
55
<PAGE>
DESCRIPTION OF SENIOR CREDIT FACILITY
General. As part of the Transactions, Globe Manufacturing entered into the
Senior Credit Facility with Bank of America National Trust and Savings
Association, as a lender and as administrative agent, BancAmerica Robertson
Stephens, as arranger, Merrill, Lynch, Pierce, Fenner & Smith, Inc. as
syndication agent, and certain other financial institutions (the "Lenders").
The Senior Credit Facility provides for two term loans to Globe
Manufacturing for $60.0 million and $55.0 million ("Term Loan A" and "Term
Loan B," respectively, and collectively, the "Term Loans") and revolving loans
to Globe Manufacturing for up to $50.0 million (including letters of credit)
(the "Revolving Loan" and, together with the Term Loans, the "Loans"). Subject
to certain restrictions, the Senior Credit Facility may be used to finance the
Transactions and for working capital and general corporate purposes of Globe
Manufacturing and its subsidiaries.
Repayment. Term Loan A and the Revolving Loan must be repaid six and one-
half years following the date of the closing of the Senior Credit Facility.
Term Loan B must be repaid eight years following the date of the closing of
the Senior Credit Facility. Loans made pursuant to the Senior Credit Facility
may be borrowed, repaid and, in the case of the Revolving Loans, reborrowed,
without premium or penalty (other than prepayments of Eurodollar Loans (as
defined in the Senior Credit Facility) which may be subject to customary
breakage costs), from time to time until maturity, subject to the satisfaction
of certain conditions on the date of any such borrowing. In addition, the
Senior Credit Facility provides for mandatory repayments (with corresponding
permanent reductions on Revolving Loan commitments) of any outstanding
borrowings out of any proceeds received from a sale of assets (other than
sales of inventory in the ordinary course of business, sales of certain
obsolete assets, and certain other exceptions), net cash proceeds of permitted
debt and equity issuances (subject to certain exceptions), net cash proceeds
from insurance recovery and condemnation events (subject to certain
reinvestment rights) and 75% of annual excess cash flow, reducing to 50% when
the ratio of total debt to EBITDA is less than 3.75:1.
Security; Guaranty. The obligations of Globe Manufacturing under the Senior
Credit Facility are guaranteed by Globe Holdings and will be guaranteed by
each of Globe Manufacturing's future direct and indirect domestic subsidiaries
and, so long as there are no adverse tax consequences, foreign subsidiaries.
The obligations of Globe Manufacturing under the Senior Credit Facility and
each of the guarantors under its guarantee is or will be secured by
substantially all of the assets of such person and the capital stock of
subsidiaries owned by Globe Manufacturing and the guarantors.
Interest. At Globe Manufacturing's option, the interest rates per annum
applicable to the loans under the Senior Credit Facility will be a fluctuating
rate of interest measured by reference to one or a combination (at Globe
Manufacturing's election) of the following: (i) the Base Rate (as defined in
the Senior Credit Facility), plus the applicable borrowing margin, or (ii) the
relevant Eurodollar Rate (as defined in the Senior Credit Facility), plus the
applicable borrowing margin. The applicable borrowing margin under the Senior
Credit Facility for Base Rate-based borrowings is 1.25% for the Term Loan A
and the Revolving Loan and 1.75% for the Term Loan B; the applicable borrowing
margin under the Senior Credit Facility for Eurodollar Rate-based borrowings
is 2.25% for the Term Loan A and the Revolving Loan and 2.75% for the Term
Loan B, subject to adjustment in each case based on the Company's Leverage
Ratio (defined in the Senior Credit Facility as the ratio of Total Debt (as
defined in the Senior Credit Facility) to EBITDA (as defined in the Senior
Credit Facility)).
Fees. Globe Manufacturing has agreed to pay certain fees in connection with
the Senior Credit Facility, including: (i) letter of credit fees; (ii) agency
fees; and (iii) commitment fees. Commitment fees are payable at a rate per
annum of 0.5% on the undrawn amounts of the Senior Credit Facility, subject to
adjustment based on the Company's Leverage Ratio.
56
<PAGE>
Covenants. The Senior Credit Facility requires Globe Manufacturing to meet
certain financial tests, including a maximum leverage ratio, a minimum
interest coverage ratio and a minimum fixed charge coverage ratio. The Senior
Credit Facility also contains covenants which, among other things, restrict
the ability of Globe Manufacturing and its subsidiaries (subject to certain
exceptions) to incur liens, transact with affiliates, incur indebtedness,
declare dividends or redeem or repurchase capital stock, make loans and
investments, engage in mergers, acquisitions and asset sales, acquire assets,
stock, or debt securities of any person, have additional subsidiaries, amend
its articles of incorporation and bylaws, and make capital expenditures. The
Senior Credit Facility also requires Globe Manufacturing and its restricted
subsidiaries to satisfy certain customary affirmative covenants and to make
certain customary indemnifications to the Lenders and the administrative agent
under the Senior Credit Facility.
Events of Default. The Senior Credit Facility contains customary events of
default, including payment defaults, breach of representations and warranties,
covenant defaults, certain events of bankruptcy and insolvency, ERISA
violations, judgment defaults, cross-default to certain other indebtedness,
and a change in control of Globe Holdings or Globe Manufacturing.
57
<PAGE>
DESCRIPTION OF SENIOR SUBORDINATED NOTES
The Senior Subordinated Notes are limited in aggregate principal amount to
$300.0 million, of which $150.0 million was issued in the Initial Senior
Subordinated Note Offering, and will mature on August 1, 2008. The Senior
Subordinated Notes were issued pursuant to the Senior Subordinated Note
Indenture, and are general unsecured obligations of Globe Manufacturing,
subordinated in right of payment to all present and future Senior Debt (as
defined in the Senior Subordinated Note Indenture) of Globe Manufacturing. The
Senior Subordinated Notes are unconditionally guaranteed on a senior
subordinated basis by each of Globe Manufacturing's future Restricted Domestic
Subsidiaries (as defined in the Senior Subordinated Note Indenture). Interest
on the Senior Subordinated Notes accrues at the rate of 10% per annum from the
Issue Date and will be payable semi-annually in arrears on each February 1 and
August 1, commencing February 1, 1999, to the holders of record on the
immediately preceding January 15 and July 15, respectively. Additional Senior
Subordinated Notes may be issued from time to time after the Initial Senior
Subordinated Note Offering, subject to the provisions of the Senior
Subordinated Note Indenture.
The Senior Subordinated Notes are not redeemable at Globe Manufacturing's
option prior to August 1, 2003. Thereafter, the Senior Subordinated Notes are
subject to redemption at any time at the option of Globe Manufacturing, in
whole or in part, upon not less than 30 nor more than 60 days notice, at the
redemption prices (expressed as percentages of principal amount) set forth in
the Senior Subordinated Note Indenture plus accrued and unpaid interest
thereon to the applicable redemption date.
Notwithstanding the foregoing, at any time prior to August 1, 2001, Globe
Manufacturing may on any one or more occasions redeem from the net proceeds of
one or more Equity Offerings (as defined in the Senior Subordinated Note
Indenture) up to an aggregate of 35% of the aggregate principal amount of the
Senior Subordinated Notes at a redemption price of 110.0% of the principal
amount thereof, plus accrued and unpaid interest thereon to the redemption
date; provided that at least $97.5 million in aggregate principal amount of
the Senior Subordinated Notes issued remain outstanding immediately after the
occurrence of such redemption.
Upon the occurrence of a Change of Control (as defined in the Senior
Subordinated Note Indenture), each holder of Senior Subordinated Notes will
have the right to require Globe Manufacturing to repurchase all or any part
(equal to $1,000 or an integral multiple thereof) of such holder's Senior
Subordinated Notes at an offer price in cash equal to 101% of the aggregate
principal amount thereof, plus accrued and unpaid interest thereon to the date
of repurchase. In addition, upon the occurrence of certain asset sales,
holders of Senior Subordinated Notes may have the right to require Globe
Manufacturing to repurchase their Senior Subordinated Notes at an offer price
in cash equal to 100% of the aggregate principal amount thereof, plus accrued
and unpaid interest thereon to the date of repurchase.
The Senior Subordinated Note Indenture contains certain covenants that
limit, among other things, the ability of Globe Manufacturing and its
Restricted Subsidiaries to: (i) incur additional indebtedness; (ii) issue
Disqualified Stock; (iii) make certain restricted payments; (iv) grant liens
on assets; (v) merge, consolidate or transfer substantially all of their
assets; (vi) enter into transactions with Related Persons; (vii) impose
restrictions on any Restricted Subsidiary's ability to pay dividends or make
certain other payments to Globe Manufacturing and its Restricted Subsidiaries;
(viii) enter into certain guarantees; (ix) sell assets; and (x) issue capital
stock of Restricted Subsidiaries. The Senior Subordinated Note Indenture
contains certain customary events of default, which include the failure to pay
interest and principal, the failure to comply with certain covenants in the
Senior Subordinated Notes or the Senior Subordinated Note Indenture, a default
under certain indebtedness, the imposition of certain final judgements and
certain events occurring under bankruptcy laws.
Globe Manufacturing has agreed to file within 60 days after July 31 and to
cause to become effective within 150 days of July 31 (or later under certain
circumstances) a registration statement under the Securities Act with respect
to an offer to holders to exchange the Senior Subordinated Notes (and any
related guarantees) for registered notes (and any related guarantees). In the
event the registration requirements are not met, a registration default shall
be deemed to have occurred and additional interest (as defined in the Senior
Subordinated Note Indenture) will become payable with respect to the Senior
Subordinated Notes until such registration default has been cured.
Concurrent with this Exchange Offer, Globe Manufacturing is offering to
exchange $1,000 principal amount at maturity of its New Senior Subordinated
Notes for each $1,000 principal amount at maturity of its Old Senior
Subordinated Notes.
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<PAGE>
DESCRIPTION OF THE NEW NOTES
The New Notes offered hereby are to be issued as a separate series under an
Indenture dated as of August 6, 1998 (the "Indenture") between the Company and
Norwest Bank Minnesota, National Association, as trustee (the "Trustee"). 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 and a different CUSIP number than the Old Notes, (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 Liquidated Damages in
certain circumstances relating to the timing of the Exchange Offer, which
rights will terminate when the Exchange Offer is consummated. The Old Notes
issued in the Initial Offering and the New Notes offered hereby are referred
to collectively as the "Notes." The following summary of the material
provisions of the Indenture does not purport to be complete and is subject to,
and is qualified in its entirety by reference to, all provisions of the
Indenture, a copy of which can be obtained from the Trustee upon request. Upon
the issuance of the New Notes, if any, or the effectiveness of the Shelf
Registration Statement, the Indenture will be subject to and governed by the
provisions of the Trust Indenture Act of 1939 (the "Trust Indenture Act" ).
The definitions of certain terms used in the following summary are set forth
below under "--Certain Definitions." Wherever particular sections or defined
terms of the Indenture not otherwise defined herein are referred to, such
Sections or defined terms shall be incorporated herein by reference, and those
terms made a part of the Indenture by the Trust Indenture Act also are
incorporated herein by reference.
GENERAL
The Notes, which mature on August 1, 2009, will be limited to $49,086,000 in
aggregate principal amount at maturity, all of which will be issued on the
Issue Date. The Notes will not be entitled to any sinking fund. The Notes will
be redeemable at the option of the Company as described below under "--
Optional Redemption."
The Notes will be issued at a discount to their aggregate principal amount
at maturity. The Notes will accrete in value until August 1, 2003 at a rate of
14% per annum, compounded semi-annually on August 1 and February 1 of each
year to an aggregate principal amount of $49,086,000. Cash interest on the
Notes will not accrue prior to August 1, 2003. Thereafter, the Notes will bear
interest at a rate of 14% per annum payable semiannually in arrears on
February 1 and August 1 of each year commencing on February 1, 2004 until the
principal thereof is paid or made available for payment to the Holders of
record at the close of business on the immediately preceding January 15 or
July 15, respectively. Interest (and accretion in value prior to August 1,
2003) will be computed on the basis of a 360-day year comprised of twelve 30-
day months. Under certain circumstances, Liquidated Damages (as defined) may
be payable with respect to the Notes as described under "--Exchange Offer;
Registration Rights."
Principal, premium, if any, and interest on the Notes will be payable at the
office or agency of the Trustee maintained for such purpose within the City
and State of New York or, at the option of the Company, payment of interest
may be made by check mailed to the Holders of the Notes at their respective
addresses set forth in the register of Holders of Notes; provided that all
payments of principal, premium, if any, and interest with respect to Notes the
Holders of which have given wire transfer instructions to the Company will be
required to be made by wire transfer of immediately available funds to the
accounts specified by the Holders thereof. Until otherwise designated by the
Company, the Company's office or agency in New York will be the office of the
Trustee maintained for such purpose. The Notes will be issued in denominations
of $1,000 and integral multiples thereof.
All references herein to payments of principal, premium, if any, and
interest on the Notes shall be deemed to include any applicable Liquidated
Damages (as defined) that may become payable in respect of the Notes. See "--
Exchange Offer; Registration Rights."
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ORIGINAL ISSUE DISCOUNT
The Notes are being issued at a substantial discount from their principal
amount. Consequently, holders generally will be required to include amounts in
gross income for U.S. Federal income tax purposes in advance of receipt of any
cash payment on the Notes to which the income is attributable. In addition,
the Notes will be subject to the "applicable high yield discount obligation"
rules under the Internal Revenue Code of 1986, as amended, which will defer
and, in part, eliminate the Company's ability to deduct original issue
discount that accrues with respect to the Notes. Prospective investors should
consult their own tax advisors with respect to the application of the original
discount rules and the "applicable high yield discount obligation" rules
(including the limited availability of a dividends received deduction for a
corporate holder). See "Certain United States Federal Tax Considerations" for
a more detailed discussion of the U.S. Federal income tax considerations
relevant to holders with respect to the purchase, ownership and disposition of
the Notes.
If a bankruptcy case is commenced by or against the Company under the United
States Bankruptcy Code (the "Bankruptcy Code") after the issuance of the
Notes, the claim of a holder of Notes with respect to the principal amount
thereof will likely be limited to an amount equal to the sum of (i) the issue
price of the Notes and (ii) the original issue discount that is not deemed to
constitute "unmatured interest" for the purposes of the Bankruptcy Code. Any
original issue discount that was not amortized as of any such bankruptcy
filing would likely constitute "unmatured interest."
RANKING
The indebtedness evidenced by the Notes will represent general unsecured
obligations of the Company. The Notes will rank pari passu in right of payment
with all existing and future Senior Debt of the Company and will be senior in
right of payment to all existing and future Subordinated Debt of the Company.
The Notes will be effectively subordinated to any secured indebtedness of the
Company to the extent of the value of the assets securing such indebtedness.
The Company's only material asset is the capital stock of Globe Manufacturing,
all of which is pledged to secure obligations under the Senior Credit
Facility.
All of the operations of the Company are conducted through its Subsidiaries.
Claims of creditors of such Subsidiaries, including trade creditors, and
claims of preferred shareholders (if any) of such Subsidiaries generally will
have priority with respect to the assets and earnings of such Subsidiaries
over the claims of creditors of the Company, including the Holders of the
Notes. The Notes, therefore, will be effectively subordinated to creditors
(including trade creditors) and preferred shareholders (if any) of
Subsidiaries of the Company. As of June 30, 1998, on a pro forma basis after
giving effect to the Transactions, the Company's Subsidiaries would have had
Debt and other liabilities of $286.6 million (excluding unused commitments of
$43.2 million under the Senior Credit Facility). The Indenture permits the
Company and its Subsidiaries to incur additional debt, subject to certain
limitations.
As of June 30, 1998, on a pro forma basis after giving effect to the
Transactions, the Company would have had no outstanding Senior Debt (other
than the Notes and its guarantee under the Senior Credit Facility). Although
the Indenture contains limitations on the amount of additional indebtedness
that the Company may incur, under certain circumstances the amount of such
indebtedness could be substantial and, in any case, such indebtedness may
constitute Senior Debt. See "--Certain Covenants--Incurrence of Debt and
Issuance of Preferred Stock."
OPTIONAL REDEMPTION
The Notes will be redeemable at the option of the Company, in whole or in
part, at any time and from time to time on or after August 1, 2003 upon not
less than 30 nor more than 60 days notice, at the redemption prices
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(expressed as percentages of principal amount at final maturity) set forth
below plus accrued and unpaid interest thereon to the applicable redemption
date, if redeemed during the twelve-month period beginning on August 1 of the
years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2003.......................................................... 107.000%
2004.......................................................... 104.667%
2005.......................................................... 102.333%
2006 and thereafter........................................... 100.000%
</TABLE>
The Company is not required to make mandatory redemption or sinking fund
payments with respect to the Notes.
Optional Redemption with Net Proceeds of Equity Offerings
At any time prior to August 1, 2001, the Company may redeem up to 35% in
aggregate principal amount at maturity of the Notes at a redemption price of
114% of the Accreted Value thereof, together with Liquidated Damages, if any,
to the redemption date with the net cash proceeds of one or more Equity
Offerings, provided that not less than 65% of the aggregate principal amount
at maturity of the Notes remains outstanding immediately after the occurrence
of any such redemption.
Optional Redemption Following a Change of Control
At any time prior to August 1, 2003, the Notes may be redeemed, in whole but
not in part, at the option of the Company at any time within 180 days after a
Change of Control, at a redemption price equal to the sum of (i) 100% of the
Accreted Value thereof, together with Liquidated Damages, if any, to the
redemption date, plus (ii) the Applicable Premium.
If less than all of the Notes are to be redeemed at any time, selection of
Notes for redemption will be made by the Trustee on a pro rata basis, by lot
or by such method as the Trustee shall deem fair and appropriate; provided
that no Notes of $1,000 or less shall be redeemed in part. Notices of
redemption shall be mailed by first class mail at least 30 but not more than
60 days before the redemption date to each Holder of Notes to be redeemed at
its registered address. Notices of redemption may not be conditional. If any
Note is to be redeemed in part only, the notice of redemption that relates to
such Note shall state the portion of the principal amount thereof to be
redeemed. A new Note in principal amount equal to the unredeemed portion
thereof will be issued in the name of the Holder thereof upon cancellation of
the original Note. Notes called for redemption become due on the date fixed
for redemption. On and after the redemption date, interest ceases to accrue on
the Notes or portions of them called for redemption.
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each Holder of Notes will have
the right to require the Company to repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of such Holder's Notes pursuant to the
offer described below (the "Change of Control Offer") at an offer price in
cash, on or prior to August 1, 2003, equal to 101% of the Accreted Value
thereof, together with Liquidated Damages, if any, to the date of repurchase
and thereafter at a price in cash equal to 101% of the aggregate principal
amount thereof plus accrued and unpaid interest thereon, if any, to the date
of purchase (the "Change of Control Payment"). Within 30 days following any
Change of Control, the Company will mail a notice to each Holder describing
the transaction or transactions that constitute the Change of Control and
offering to repurchase Notes on the date specified in such notice, which date
shall be no earlier than 30 days and no later than 60 days from the date such
notice is mailed (the "Change of Control Payment Date"), pursuant to the
procedures required by the Indenture and described in such notice. The Company
will not be required to make a Change of Control Offer if all of the Notes
have been called for redemption pursuant to the provisions described under "--
Optional Redemption."
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On the Change of Control Payment Date, the Company will, to the extent
lawful, (i) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer, (ii) deposit with the Trustee an
amount equal to the Change of Control Payment in respect of all Notes or
portions thereof so tendered and (iii) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating
the aggregate principal amount of Notes or portions thereof being purchased by
the Company. The Trustee will promptly mail to each Holder of Notes so
tendered the Change of Control Payment for such Notes, and the Trustee will
promptly authenticate and mail (or cause to be transferred by book entry) to
each Holder a new Note equal in principal amount to any unpurchased portion of
the Notes surrendered, if any; provided, that each such new Note will be in a
principal amount of $1,000 or an integral multiple thereof. The Indenture
provides that, prior to complying with the provisions of this covenant
(including the mailing of the notice referred to above), but in any event
within 90 days following a Change of Control, the Company will either repay in
full in cash all outstanding Senior Debt or obtain the requisite consents, if
any, under all agreements governing outstanding Senior Debt to permit the
repurchase of Notes required by this covenant and the Company's failure to
comply with this covenant shall constitute an Event of Default under the
Indenture. The Company will publicly announce the results of the Change of
Control Offer on or as soon as practicable after the Change of Control Payment
Date.
The Change of Control provisions described above will be applicable whether
or not any other provisions of the Indenture are applicable. Except as
described above with respect to a Change of Control, the Indenture does not
contain provisions that permit the Holders of the Notes to require that the
Company repurchase or redeem the Notes in the event of a takeover,
recapitalization or similar transaction.
The Senior Credit Facility restricts the ability of the Company to purchase
any Notes and certain other indebtedness of the Company, and also provides
that certain change of control events with respect to the Company would
constitute a default thereunder. Any future credit agreements or other
agreements relating to Senior Debt to which the Company becomes a party may
contain similar restrictions and provisions. In the event any such
restrictions would prohibit the Company from purchasing Notes upon a Change of
Control, the Company could seek the consent of its lenders to the purchase of
Notes or could attempt to refinance the borrowings that contain such
restrictions. If the Company does not obtain such a consent or repay such
borrowings, the Company will remain prohibited from purchasing Notes. In such
case, the Company's failure to purchase tendered Notes would constitute an
Event of Default under the Indenture which would, in turn, constitute a
default under the Senior Credit Facility. The Senior Subordinated Note
Indenture also requires Globe Manufacturing to repurchase the Senior
Subordinated Notes upon the occurrence of certain change of control events.
See "Description of Senior Credit Facility" and "Description of the Senior
Subordinated Notes."
The Company will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set
forth in the Indenture applicable to a Change of Control Offer made by the
Company and purchases all Notes validly tendered and not withdrawn under such
Change of Control Offer.
The Change of Control provision of the Notes may in certain circumstances
make it more difficult or discourage a takeover of the Company and, as a
result, may make removal of incumbent management more difficult. The Change of
Control provision is a result of negotiations between the Company and the
Initial Purchaser.
The provisions of the Indenture would not necessarily afford Holders of the
Notes protection in the event of a highly leveraged transaction,
reorganization, restructuring, merger or similar transaction involving the
Company that may adversely affect Holders of the Notes.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of the Company and its Subsidiaries taken as a whole. Although
there is a developing body of case law interpreting the phrase "substantially
all," there is no precise established definition of the phrase under
applicable law. Accordingly, the ability of a Holder of Notes to require the
Company to repurchase such Notes as a result of a sale, lease, transfer,
conveyance or other disposition of less than all of the assets of the Company
and its Subsidiaries taken as a whole to another person or group may be
uncertain.
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The Company will comply with the applicable tender offer rules, including
the requirements of Rule 14e-1 under the Exchange Act, and all other
applicable securities laws and regulations in connection with any Change of
Control Offer. To the extent that the provisions of any securities laws or
regulations conflict with the "Change of Control" provisions of the Indenture,
the Company shall comply with the applicable securities laws and regulations
and shall not be deemed to have breached its obligations under the "Change of
Control" provisions of the Indenture by virtue thereof.
CERTAIN COVENANTS
Incurrence of Debt and Issuance of Preferred Stock.
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, create, incur, issue,
assume, guarantee or otherwise become directly or indirectly liable,
contingently or otherwise, with respect to (collectively, "incur") any Debt
(including Acquired Debt) and that the Company will not issue any Disqualified
Stock and will not permit any of its Restricted Subsidiaries to issue any
shares of preferred stock; provided, however, that if no Default or Event of
Default shall have occurred and be continuing at the time or as a consequence
thereof, the Company may incur Debt (including Acquired Debt) or issue shares
of Disqualified Stock and any Restricted Subsidiary may incur Debt (including
Acquired Debt) or issue preferred stock if the Consolidated Fixed Charge
Coverage Ratio for the Company's most recently ended four full fiscal quarters
for which financial statements are available immediately preceding the date on
which such additional Debt is incurred or such Disqualified Stock or preferred
stock is issued would have been at least 1.75 to 1.0, determined on a pro
forma basis (including a pro forma application of the net proceeds therefrom),
as if the additional Debt had been incurred, or the Disqualified Stock or
preferred stock had been issued, as the case may be, at the beginning of such
four-quarter period.
The provisions of the first paragraph of this covenant will not apply to the
incurrence of any of the following items of Debt (collectively, "Permitted
Debt"):
(i) the incurrence by the Company or any of the Restricted Subsidiaries
of Debt under the Senior Credit Facility (or if the Senior Credit Facility
has matured or been terminated or repaid in whole or in part, any other
Credit Facility) in an aggregate principal amount at any time outstanding
not to exceed $165.0 million, which amount shall be reduced by (A) any
required permanent repayments pursuant to the provisions of the covenant
described under the caption "--Asset Sales" (which are accompanied by a
corresponding permanent commitment reduction thereunder), (B) the aggregate
amount of any Debt constituting Limited Originator Recourse outstanding
pursuant to clause (xi) below and (C) the principal amount of Debt
outstanding pursuant to clause (x) below;
(ii) (A) the incurrence by the Company and its Restricted Subsidiaries of
Existing Debt and (B) the incurrence by Globe Manufacturing of Debt
represented by the Senior Subordinated Notes outstanding on the Issue Date
(and any notes issued in exchange therefor) and any Guarantee by any
Restricted Subsidiary of such notes;
(iii) the incurrence by the Company of Debt represented by the Notes;
(iv) the incurrence by the Company or any of its Restricted Subsidiaries
of Permitted Refinancing Debt in exchange for, or the net proceeds of which
are used to refund, refinance or replace, Debt that was permitted by the
Indenture to be incurred;
(v) the incurrence by the Company or any of its Restricted Subsidiaries
of intercompany Debt between or among the Company and any of its Restricted
Subsidiaries; provided, however, that (A) if the Company is the obligor on
such Debt, such Debt is expressly subordinated to the prior payment in full
in cash of all Obligations with respect to the Notes, and (B) (1) any
subsequent issuance or transfer (other than any bona fide pledge under the
Senior Credit Facility) of Equity Interests that results in any such Debt
being held by a Person other than the Company or a Restricted Subsidiary
and (2) any sale or other transfer (other than any bona fide pledge under
the Senior Credit Facility) of any such Debt to a Person that is not either
the
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Company or a Restricted Subsidiary shall be deemed, in each case, to
constitute an incurrence of such Debt by the Company or such Subsidiary, as
the case may be;
(vi) the incurrence by the Company or any of its Restricted Subsidiaries
of Hedging Obligations that are incurred for the purpose of fixing or
hedging interest rate risk with respect to any floating rate Debt that is
permitted by the terms of the Indenture to be outstanding or for the
purpose of fixing or hedging currency exchange risk with respect to any
currency exchanges;
(vii) Capitalized Lease Obligations and Purchase Money Obligations of the
Company and its Restricted Subsidiaries not to exceed $5.0 million in
aggregate principal amount (or accrued value, as applicable) at any time
outstanding;
(viii) guarantees by the Company of Debt of any Restricted Subsidiaries
otherwise permitted by this covenant and guarantees by any of the Company's
Restricted Subsidiaries of Debt of the Company or any of the Company's
Restricted Subsidiaries;
(ix) Debt of the Company or any Restricted Subsidiary in respect of
performance bonds, bankers' acceptances, trade letters of credit, workers'
compensation or self-insurance, surety bonds and guarantees provided by the
Company or any Restricted Subsidiary in the ordinary course of business;
(x) Debt of Foreign Restricted Subsidiaries incurred for working capital
purposes in an aggregate principal amount outstanding at any one time not
to exceed the sum of 85% of the net book value of such Subsidiaries'
accounts receivable determined in accordance with GAAP and 60% of the net
book value of their inventory determined in accordance with GAAP and
guarantees by Foreign Restricted Subsidiaries of such Debt (which Debt
shall reduce the aggregate Debt permitted pursuant to clause (i) above in
the manner contemplated thereby);
(xi) the incurrence by (A) a Securitization Entity of Debt in a Qualified
Securitization Transaction that is Non-Recourse Debt with respect to the
Company and its other Restricted Subsidiaries (except for Standard
Securitization Undertakings and Limited Originator Recourse) or (B) the
Company or any Restricted Subsidiary of Debt constituting Limited
Originator Recourse (which Debt shall reduce the aggregate Debt permitted
pursuant to clause (i) above in the manner contemplated thereby);
(xii) Debt arising from agreements of the Company or a Restricted
Subsidiary of the Company providing for indemnification, adjustment of
purchase price, earn-out or other similar obligations, in each case,
incurred or assumed in connection with the disposition of any business,
assets or a Restricted Subsidiary of the Company, other than guarantees of
Debt incurred by any Person acquiring all or any portion of such business,
assets or Restricted Subsidiary for the purpose of financing such
acquisition;
(xiii) the incurrence by the Company of Subordinated Debt to repurchase
Equity Interests in the Company from Persons who have ceased to be bona
fide officers or employees of the Company or one or more of its Restricted
Subsidiaries ("Employee Notes"), provided that the instrument governing any
such Employee Note shall expressly provide that any payments in respect of
such note may be made only to the extent permitted in accordance with the
covenant described under "--Restricted Payments"; and
(xiv) the incurrence by the Company or any of its Restricted Subsidiaries
of additional Debt in an aggregate principal amount (or accrued value, as
applicable) at any time outstanding, including all Permitted Refinancing
Debt incurred to refund, refinance or replace any other Debt incurred
pursuant to this clause (xiv), not to exceed $40.0 million (which amount
may, but need not, be incurred in whole or in part under the Senior Credit
Facility).
For purposes of determining compliance with this covenant, in the event that
an item of Debt meets the criteria of more than one of the categories of
Permitted Debt described in clauses (i) through (xiv) above or is entitled to
be incurred pursuant to the first paragraph of this covenant, the Company
shall, in its sole discretion, classify such item of Debt in any manner that
complies with this covenant and such item of Debt will be treated as having
been incurred pursuant to only one of such clauses or pursuant to the first
paragraph hereof. Accrual of interest, the accretion of accrued value and the
payment of interest in the form of additional Debt will not be deemed to be an
incurrence of Debt for purposes of this covenant.
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Restricted Payments.
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, make any Restricted
Payment, unless, at the time of and after giving effect to such Restricted
Payment:
(i) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof;
(ii) the Company would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made
at the beginning of the applicable four-quarter period, have been permitted
to incur at least $1.00 of additional Debt pursuant to the Consolidated
Fixed Charge Coverage Ratio test set forth in the first paragraph of the
covenant described above under the caption "--Incurrence of Debt and
Issuance of Preferred Stock"; and
(iii) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Restricted
Subsidiaries after the date of the Indenture (including Restricted Payments
permitted by clauses (i) and (v) of the next succeeding paragraph and
excluding the Restricted Payments permitted by the other clauses therein),
is less than or equal to the sum of (A) 50% of the Consolidated Net Income
of the Company (or if Consolidated Net Income shall be a loss, minus 100%
of such loss) earned during the period beginning on the first day of the
first fiscal quarter immediately following the Issue Date and ending on the
last day of the fiscal quarter immediately preceding the date the
Restricted Payment is made (the "Reference Date") (treating such period as
a single accounting period) plus (B) 100% of the aggregate net proceeds
(including the fair market value of property other than cash (determined in
good faith by the Board of Directors as evidenced by an Officers'
Certificate filed with the Trustee, except that in the event the value of
any non-cash consideration shall be $10.0 million or more, the value shall
be as determined based on an opinion or appraisal issued by an accounting,
appraisal or investment banking firm of national standing)) received by the
Company from any Person (other than a Subsidiary of the Company) from the
issuance and sale subsequent to the Issue Date of Equity Interests of the
Company (other than Disqualified Stock) or from the issue or sale of
Disqualified Stock or debt securities of the Company that have been
converted into such Equity Interests (other than Equity Interests (or
Disqualified Stock or convertible debt securities) sold to a Subsidiary of
the Company); plus (C) without duplication of any amounts included in
clause (B) above, 100% of the aggregate net cash proceeds of any equity
contribution received by the Company from a holder of the Company's Capital
Stock (excluding, in the case of clauses (B) and (C), any net cash proceeds
from an Equity Offering to the extent used to redeem the Notes and any net
cash proceeds received by the Company from the sale of Equity Interests of
the Company or equity contribution which has been financed, directly or
indirectly using funds (1) borrowed from the Company or any of its
Subsidiaries, unless and until and to the extent such borrowing is repaid
or (2) contributed, extended, guaranteed or advanced by the Company or by
any of its Subsidiaries), plus (D) to the extent that any Restricted
Investment that was made after the Issue Date is sold by Company or any
Restricted Subsidiary for cash or otherwise liquidated or repaid for cash,
the lesser of (1) the fair market value of such Restricted Investment as of
the date of such Restricted Investment or (2) the cash return of capital
with respect to such Restricted Investment (less the cost of disposition,
if any), to the extent any such amount was not otherwise included in
Consolidated Net Income, plus (E) 50% of any dividends received by the
Company or a Restricted Subsidiary after the Issue Date from an
Unrestricted Subsidiary of the Company, to the extent that such dividends
were not otherwise included in Consolidated Net Income of the Company for
such period, plus (F) to the extent that any Unrestricted Subsidiary is
redesignated as a Restricted Subsidiary after the Issue Date, the fair
market value of the Investment made by the Company or any of its Restricted
Subsidiaries in such Subsidiary as of the date of such redesignation, plus
(G) $2.0 million. For purposes of this paragraph, the fair market value of
property other than cash shall be determined in good faith by the Board of
Directors and evidenced by an Officers' Certificate filed with the Trustee,
except that in the event the value of any non-cash consideration shall be
$10.0 million or more, the value shall be determined based on an opinion or
appraisal issued by an accounting, appraisal or investment banking firm of
national standing.
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The foregoing provisions will not prohibit (i) the payment of any dividend
or the consummation of any irrevocable redemption within 60 days after the
date of declaration thereof or giving of irrevocable redemption notice, if at
said date of declaration or giving of notice such payment or redemption would
have complied with the provisions of the Indenture; (ii) if no Default or
Event of Default shall have occurred and be continuing, the redemption,
repurchase, retirement or other acquisition of any Equity Interests of the
Company or any Restricted Subsidiary of the Company or any Subordinated Debt
of the Company or any Restricted Subsidiary, in each case in exchange for, or
out of the net proceeds of, the substantially concurrent sale (other than to a
Restricted Subsidiary of the Company) of other Equity Interests of the Company
(other than any Disqualified Stock); provided, however, that the amount of any
such net proceeds that are utilized for any such redemption, repurchase,
retirement or other acquisition shall be excluded from clauses (iii) (B) and
(iii) (C) of the preceding paragraph; (iii) the redemption, repurchase,
refinancing or defeasance of Subordinated Debt in exchange for, or with the
net cash proceeds from, an incurrence of Permitted Refinancing Debt; (iv) if
no Default or Event of Default shall have occurred and be continuing, the
payment in an amount up to $1.0 million in any period of four consecutive
quarters to fund repurchases of Equity Interests therein or Debt of the
Company issued in connection with such Equity Interests (including, without
limitation, any payments of principal, premium or interest in respect of
Employee Notes) held by Persons who have ceased to be bona fide officers or
employees of the Company or one of its Restricted Subsidiaries, provided that
any unused amount thereof may be carried forward to subsequent periods so long
as the total amount of such Restricted Payments shall not exceed $5.0 million
in the aggregate (and shall be increased by the amount of any net cash
proceeds (after deducting any premiums) to the Company from (A) sales of
Equity Interests of the Company to management employees subsequent to the
Issue Date and (B) any "key-man" life insurance policies which are used to
make such redemptions and repurchases); (v) repurchases of Equity Interests
deemed to occur upon the exercise of stock options if such Equity Interests
represent a portion of the exercise price thereof; and (vi) payments by the
Company to fund the Transactions (as described under "Use of Proceeds").
The Board of Directors of the Company may designate any Restricted
Subsidiary to be an Unrestricted Subsidiary if such designation would not
cause a Default or an Event of Default. For purposes of making such
determination, all outstanding Investments by the Company and its Restricted
Subsidiaries (except to the extent repaid in cash) in the Subsidiary so
designated will be deemed to be Restricted Payments at the time of such
designation and will reduce the amount available for Restricted Payments under
the first paragraph of this covenant. All such outstanding Investments will be
deemed to constitute Investments in an amount equal to the greater of (i) the
net book value of such Investments at the time of such designation and (ii)
the fair market value of such Investments at the time of such designation.
Such designation will only be permitted if such Restricted Payment would be
permitted at such time and if such Restricted Subsidiary otherwise meets the
definition of an Unrestricted Subsidiary.
Liens.
The Indenture provides that the Company will not directly or indirectly
create, incur, assume or suffer to exist any Lien (other than Permitted Liens)
that secures Debt or trade payables unless (i) in the case of Liens securing
Subordinated Debt, the Notes are secured on a senior basis to the obligations
so secured until such time as such obligations are no longer secured by a Lien
and (ii) in the case of Liens securing obligations under Pari Passu Debt, the
Notes are equally and ratably secured with the obligations so secured until
such time as such obligations are no longer secured by a Lien.
Merger, Consolidation or Sale of Assets.
The Indenture provides that the Company may not consolidate or merge with or
into, or sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of its properties or assets in one or more related
transactions, to another corporation, Person or entity unless: (i) the Company
is the surviving corporation or the Person (if other than the Company) formed
by such consolidation or into which the Company is merged or the Person that
acquires by conveyance, transfer or lease substantially all of the properties
and assets of the
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Company (the "Surviving Entity") shall be a corporation organized and validly
existing under the laws of the United States or any State thereof or the
District of Columbia; (ii) if the Company is not the surviving corporation,
the Surviving Entity assumes all the obligations of the Company under the
Notes and the Indenture pursuant to a supplemental indenture in a form
reasonably satisfactory to the Trustee; (iii) immediately after such
transaction, no Default or Event of Default exists; (iv) except in the case of
a merger of the Company with or into a Wholly Owned Restricted Subsidiary of
the Company or a merger entered into solely for the purpose of reincorporating
the Company in another jurisdiction, the Company or the Surviving Entity, as
the case may be, (A) will have Consolidated Net Worth immediately after the
transaction equal to or greater than the Consolidated Net Worth of the Company
immediately preceding the transaction and (B) will, at the time of such
transaction and after giving pro forma effect thereto as if such transaction
had occurred at the beginning of the applicable four-quarter period, be
permitted to incur at least $1.00 of additional Debt pursuant to the
Consolidated Fixed Charge Coverage Ratio test set forth in the first paragraph
of the covenant described above under the caption "--Incurrence of Debt and
Issuance of Preferred Stock"; and (v) the Company or the Surviving Entity, as
the case may be, shall have delivered to the Trustee an Officers' Certificate
and an opinion of counsel, each stating that such consolidation, merger, sale,
assignment transfer, lease, conveyance or other disposition and, if a
supplemental indenture is required in connection with such transaction, such
supplemental indenture comply with the applicable provisions of the Indenture
and that all conditions precedent in the Indenture relating to such
transaction have been satisfied.
Transactions with Related Persons.
The Company will not, nor will it permit any of its Restricted Subsidiaries
to, directly or indirectly (i) sell, lease, transfer or otherwise dispose of
any of its property to, (ii) purchase any property from, (iii) make any
Investment in, or (iv) enter into or amend any contract, agreement or
understanding with, or for the benefit of, any of its Related Persons (each a
"Related Person Transaction"), other than Related Person Transactions that are
no less favorable to the Company or such Restricted Subsidiary than those that
could be obtained in a comparable arm's length transaction by the Company or
such Restricted Subsidiary from an unrelated party; provided that the Company
delivers to the Trustee (A) with respect to any Related Person Transaction (or
series of Related Person Transactions which are similar or part of a common
plan) involving aggregate payments in excess of $5.0 million, a resolution of
the Board of Directors set forth in an Officers' Certificate certifying that
such Related Person Transaction complies with the preceding sentence and such
Related Person Transaction was approved by a majority of the disinterested
members of the Board of Directors of the Company and (B) with respect to any
Related Person Transaction (or series of Related Person Transactions which are
similar or part of a common plan) involving aggregate payments in excess of
$10.0 million, an affirmative opinion as to the fairness to the Company or
such Restricted Subsidiary, as the case may be, from a financial point of view
issued by a nationally recognized accounting, appraisal, investment banking or
consulting firm that is, in the judgment of the Board of Directors of the
Company, independent and qualified to render such opinion. The foregoing
restrictions shall not apply to: (i) any transactions between Wholly Owned
Restricted Subsidiaries of the Company, or between the Company and any Wholly
Owned Restricted Subsidiary of the Company, if such transaction is not
otherwise prohibited by the terms of the Indenture; (ii) Restricted Payments
permitted under the covenant described above under the caption "--Restricted
Payments"; (iii) customary directors' fees, indemnification and similar
arrangements, employee salaries, bonuses or employment agreements,
compensation or employee benefit arrangements and incentive arrangements with
any officer, director or employee of the Company or any Restricted Subsidiary
entered into in the ordinary course of business (including customary benefits
thereunder); (iv) transactions undertaken pursuant to the Executive Securities
Agreement, Registration Agreement, Securityholders Agreement or any similar
agreement entered into after the date of the Indenture to the extent the terms
of any such new agreement are not disadvantageous to the Holders of the Notes
in any material respect; (v) the issue and sale by the Company to its
shareholders of Equity Interests other than Disqualified Stock; (vi) the
incurrence of intercompany Debt permitted pursuant to "--Incurrence of Debt
and Issuance of Preferred Stock" above; (vii) the pledge of Equity Interests
of Unrestricted Subsidiaries to support the Debt thereof; (viii) transactions
that are permitted by the provisions of the Indenture described above under
the caption "--Merger, Consolidation and Sale of Assets;" (ix) transactions
effected as a part of a Qualified
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Securitization Transaction; (x) transactions with customers, clients,
suppliers, joint venture partners or purchasers or sellers of goods and
services, in each case in the ordinary course of business (including, without
limitation, pursuant to joint venture agreements) and otherwise in compliance
with the terms of the Indenture which are on terms at least as favorable as
might reasonably have been obtained at such time from an unaffiliated party;
(xi) payments made pursuant to the Consulting Agreement and the Tax Sharing
Agreement; (xii) subject to the limitation set forth in the following
sentence, payments made pursuant to the Management Agreement; and (xiii)
transactions undertaken pursuant to the Asset Drop Down. Without limiting the
foregoing, after the occurrence and during the continuance of an Event of
Default, the Company will not, nor will it permit any of its Restricted
Subsidiaries to, directly or indirectly, make any payment to any Related
Person in respect of management, advisory or similar services, including
without limitation, any payment pursuant to the Management Agreement;
provided, that the foregoing shall not limit the ability of the Company or any
Restricted Subsidiary to enter into transactions described in clauses (iii),
(iv) and (xi) above.
Payment Restrictions Affecting Restricted Subsidiaries.
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, create or otherwise
cause or suffer to exist or become effective any encumbrance or restriction on
the ability of any Restricted Subsidiary to (i) (A) pay dividends or make any
other distributions to the Company or any of its Restricted Subsidiaries (1)
on its Capital Stock or (2) with respect to any other interest or
participation in, or measured by, its profits, or (B) pay any indebtedness
owed to the Company or any of its Restricted Subsidiaries, (ii) make loans or
advances to the Company or any of its Restricted Subsidiaries or (iii)
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 (A) Existing Debt, (B) the Senior Credit Facility as in
effect on the date of the Indenture, and any amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements or
refinancings thereof, provided that such amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacement or
refinancings are not materially more restrictive taken as a whole with respect
to such dividend and other payment restrictions than those contained in the
Senior Credit Facility as in effect on the date of the Indenture (as
determined by the Board of Directors of the Company in its reasonable and good
faith judgment), (C) (1) the Indenture and the Notes and (2) the Senior
Subordinated Note Indenture and the Senior Subordinated Notes, (D) applicable
law, (E) any instrument governing Debt or Capital Stock of a Person acquired
by the Company or any of its Restricted Subsidiaries as in effect at the time
of such acquisition (except to the extent such Debt was incurred or such
encumbrance or restriction was established in connection with or in
contemplation of such acquisition), which encumbrance or restriction is not
applicable to any Person, or the properties or assets of any Person, other
than the Person, or the property or assets of the Person, so acquired,
provided that, in the case of Debt, such Debt was permitted by the terms of
the Indenture to be incurred, (F) customary non-assignment provisions in
leases and other agreements entered into in the ordinary course of business
and consistent with past practices, restricting assignment or restricting
transfers of non-cash assets, (G) Purchase Money Obligations for property
acquired in the ordinary course of business and other Liens permitted by the
Indenture, in each case that impose restrictions of the nature described in
clause (iii) above on the property so acquired (or subject to such Liens), (H)
Debt permitted under clause (x) of the second paragraph under the covenant
described above under the caption "--Incurrence of Debt and Issuance of
Preferred Stock," (I) Permitted Refinancing Debt, provided that the
restrictions contained in the agreements governing such Permitted Refinancing
Debt are not materially more restrictive taken as a whole than those contained
in the agreements governing the Debt being refinanced (as determined by the
Board of Directors of the Company in its reasonable and good faith judgment),
(J) contracts for the sale of assets or Equity Interests to the extent that
any such contract imposes restrictions of the nature described in clause (iii)
above on the property to be sold, (K) any pledge by the Company or a
Restricted Subsidiary of the Equity Interests of an Unrestricted Subsidiary to
support the Debt thereof, (L) secured Debt otherwise permitted to be incurred,
or not otherwise restricted, pursuant to the provisions of the covenant
described above under the caption "--Liens" that limits the right of the
debtor to dispose of the assets securing such Debt, (M) provisions with
respect to the disposition or distribution of assets or property in joint
venture agreements and other similar agreements entered
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into in the ordinary course of business, (N) restrictions on cash or other
deposits or net worth imposed by customers under contracts entered into in the
ordinary course of business, (O) any Debt or other contractual requirements of
a Securitization Entity in connection with a Qualified Securitization
Transaction; provided that such restrictions apply only to such Securitization
Entity, (P) other Debt of a Restricted Subsidiary that is permitted to be
incurred subsequent to the date of the Indenture pursuant to the provisions of
the covenants described above under the caption "--Incurrence of Debt and
Issuance of Preferred Stock"; provided that any such restrictions are ordinary
and customary with respect to the type of Debt or preferred stock being
incurred or issued (under the relevant circumstances), or (Q) any encumbrances
or restrictions imposed by any amendments, modifications, restatements,
renewals, increases, supplements, refundings, replacements or refinancings of
the contracts, instruments or obligations referred to in clauses (A) through
(P) above, provided that such amendments, modifications, restatements,
renewals, increases, supplements, refundings, replacements or refinancings
are, in the good faith judgment of the Board of Directors, not materially more
restrictive with respect to such dividend and other payment restrictions than
those contained in the dividend or other payment restrictions prior to such
amendment, modification, restatement, renewal, increase, supplement,
refunding, replacement or refinancing.
Asset Sales.
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, consummate an Asset Sale unless (i) the
Company (or the Restricted Subsidiary, as the case may be) receives
consideration at the time of such Asset Sale at least equal to the fair market
value (evidenced by a resolution of the Board of Directors set forth in an
Officers' Certificate delivered to the Trustee) of the assets or Equity
Interests issued or sold or otherwise disposed of and (ii) at least 75% of the
consideration therefor received by the Company or such Restricted Subsidiary
is in the form of cash, Cash Equivalents or properties and assets to be used
in the Company's business or Equity Interests in a Person that becomes a
Restricted Subsidiary and is received at the time of such disposition;
provided that the amount of any Senior Debt (as shown on the most recent
consolidated balance sheet of the Company) of the Company or any Restricted
Subsidiary that is assumed by the transferee of any such assets pursuant to a
customary novation agreement or other agreement that releases or indemnifies
the Company or such Restricted Subsidiary from further liability shall be
deemed to be cash for purposes of this provision.
Within 365 days after the receipt of any Net Proceeds from an Asset Sale,
the Company or such Restricted Subsidiary may apply such Net Proceeds at its
option, (i) to permanently repay, reduce, or secure letters of credit in
respect of, indebtedness under the Senior Credit Facility or Senior Debt of
the Company or any Wholly Owned Restricted Subsidiary (and to correspondingly
reduce commitments with respect thereto in the case of revolving borrowings),
and/or (ii) to the acquisition of a controlling interest in another business,
the making of a capital expenditure or Permitted Investment or the acquisition
of other assets, in each case, for use in the same or a similar line of
business as the Company or any Restricted Subsidiary was engaged in on the
date of such Asset Sale or reasonable extensions thereof. Pending the final
application of any such Net Proceeds, the Company or such Restricted
Subsidiary may temporarily reduce indebtedness under the Senior Credit
Facility (or any alternative or subsequent revolving credit agreement where
borrowings thereunder constitute Senior Debt) or otherwise invest such Net
Proceeds in any manner that is not prohibited by the Indenture. Any Net
Proceeds from Asset Sales that are not applied or invested as provided in the
first sentence of this paragraph will be deemed to constitute "Excess
Proceeds."
When the aggregate amount of Excess Proceeds exceeds $10.0 million, the
Company will be required to make an offer (an "Asset Sale Offer") to all
Holders of Notes and holders of any other Pari Passu Debt outstanding with
provisions requiring the Company to make an offer to purchase or redeem such
indebtedness with the proceeds from any Asset Sale as follows: (i) the Company
will make an offer to purchase from all holders of the Notes in accordance
with the procedures set forth in the Indenture in the maximum principal amount
(expressed as a multiple of $1,000) of Notes that may be purchased out of an
amount (the "Note Amount") equal to the product of such Excess Proceeds
multiplied by a fraction, the numerator of which is the
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outstanding principal amount of the Notes, and the denominator of which is the
sum of the outstanding principal amount of the Notes and such Pari Passu Debt
(subject to proration in the event such amount is less than the aggregate
Asset Sale Offered Price (as defined herein) of all Notes tendered), and (ii)
to the extent required by such Pari Passu Debt to permanently reduce the
principal amount of such Pari Passu Debt, the Company will make an offer to
purchase or otherwise repurchase or redeem Pari Passu Debt (an "Asset Sale
Pari Passu Offer") in an amount (the "Pari Passu Debt Amount") equal to the
excess of the Excess Proceeds over the Note Amount; provided that in no event
will the Company be required to make an Asset Sale Pari Passu Offer in a Pari
Passu Debt Amount exceeding the principal amount of such Pari Passu Debt plus
the amount of any premium required to be paid to repurchase such Pari Passu
Debt. The offer price for the Notes will be payable in cash in an amount equal
to (a) 100% of the Accreted Value thereof, together with Liquidated Damages,
if any, at the date such Asset Sale is consummated, if consummated on or prior
to August 1, 2003 and (b) 100% of the principal amount of the Notes, plus
accrued and unpaid interest, if any, to the date such Asset Sale Offer is
consummated, if consummated after August 1, 2003, in each case, in accordance
with the procedures set forth in the Indenture. The date on which any Asset
Sale Offer is consummated is herein referred to as the "Asset Sale Offer Date"
and the offer price applicable to any Asset Sale Offer is herein referred to
as the "Asset Sale Offer Price." To the extent that the aggregate Asset Sale
Offered Price of the Notes tendered pursuant to the Asset Sale Offer is less
than the Note Amount relating thereto or the aggregate amount of Pari Passu
Debt that is purchased in an Asset Sale Pari Passu Offer is less than the Pari
Passu Debt Amount, the Company may use any remaining Excess Proceeds for any
purpose not otherwise prohibited by the Indenture. If the aggregate principal
amount of Notes and Pari Passu Debt surrendered by holders thereof exceeds the
amount of Excess Proceeds, the Trustee shall select the Notes to be purchased
on a pro rata basis. Upon the completion of the purchase of all the Notes
tendered pursuant to an Asset Sale Offer and the completion of a Pari Passu
Offer, the amount of Excess Proceeds, if any, shall be reset at zero.
The Indenture provides that, if the Company becomes obligated to make an
Asset Sale Offer pursuant to the immediately preceding paragraph, the Notes
and the Pari Passu Debt shall be purchased by the Company, at the option of
the holders thereof, in whole or in part in integral multiples of $1,000, on a
date that is not earlier than 30 days and not later than 60 days from the date
the notice of the Asset Sale Offer is given to holders, or such later date as
may be necessary for the Company to comply with the requirements under the
Exchange Act.
The Indenture provides that the Company will comply with the applicable
tender offer rules, including Rule 14e-1 under the Exchange Act, and any other
applicable securities laws or regulations in connection with an Asset Sale
Offer. To the extent that the provisions of any securities laws or regulations
conflict with the "Asset Sale" provisions of the Indenture, the Company shall
comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations under such provisions of the Indenture
by virtue thereof.
Issuance and Sale of Capital Stock of Restricted Subsidiaries.
The Indenture provides that the Company (i) will not, and will not permit
any Restricted Subsidiary of the Company to, transfer, convey, sell, lease or
otherwise dispose of any Capital Stock of any Restricted Subsidiary to any
Person (other than to the Company or a Wholly Owned Restricted Subsidiary) and
(ii) will not permit any Restricted Subsidiary to issue any of its Capital
Stock to any Person other than to the Company or a Wholly Owned Restricted
Subsidiary, in each case unless the Net Proceeds from such transfer, sale or
other disposition are applied in accordance with "--Asset Sales."
Conduct of Business.
The Company and its Restricted Subsidiaries will not engage in any
businesses which are not the same, similar or related to the businesses in
which the Company and its Restricted Subsidiaries are engaged as of the Issue
Date (or any reasonable extension or expansion thereof), except to such extent
as would not be material to the Company and its Restricted Subsidiaries taken
as a whole.
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Limitation on Sale and Lease-Back Transactions.
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, enter into any Sale and Lease-Back
Transaction; provided that the Company or any Restricted Subsidiary may enter
into a Sale and Lease-Back Transaction if: (i) the Company, or such Restricted
Subsidiary, if applicable, could have (A) incurred Debt in an amount equal to
the Attributable Debt relating to such Sale and Lease-Back Transaction
pursuant to the Consolidated Fixed Charge Coverage Ratio test set forth in the
first paragraph of the covenant described above under the caption "--
Incurrence of Debt and Issuance of Preferred Stock" and (B) incurred a Lien to
secure such Debt pursuant to the covenant described above under the caption
"--Liens;" (ii) the gross cash proceeds of such Sale and Lease-Back
Transaction are at least equal to the fair market value (as determined in good
faith by the Board of Directors pursuant to a Board Resolution) of the
property that is the subject of such Sale and Lease-Back Transaction; and
(iii) the transfer of assets in such Sale and Lease-Back Transaction is
permitted by, and the Company applies the proceeds of such transaction in
compliance with, the covenant described above under the caption "--Asset
Sales."
Rule 144A Information Requirement.
The Company will furnish to the Holders or beneficial holders of the Notes
and prospective purchasers of Notes designated by the Holders, upon their
request, the information required to be delivered pursuant to Rule 144A(d)(4)
under the Securities Act for so long as is required for an offer or sale of
the Notes to qualify for an exemption under Rule 144A.
Reports.
The Company will deliver to the Trustee within 15 days after the filing of
the same with the Commission, copies of the quarterly and annual reports and
of the information, documents and other reports, if any, which the Company is
required to file with the Commission pursuant to Section 13 or 15(d) of the
Exchange Act. Notwithstanding that the Company may not be subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company
will file with the Commission, to the extent permitted, and provide the
Trustee and the Holders with such quarterly and annual reports and such
information, documents and other reports specified in Sections 13 and 15(d) of
the Exchange Act. The Company will also comply with the other provisions of
Section 314(a) of the Trust Indenture Act.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as
any other capitalized terms used herein for which no definition is provided.
"Accounts Receivable Subsidiary" means any Subsidiary of the Company that
is, directly or indirectly, wholly owned by the Company (other than director
qualifying shares) and organized solely for the purpose of and engaged in (i)
purchasing, financing and collecting accounts receivable obligations of
customers of the Company or its Subsidiaries, (ii) the sale or financing or
such accounts receivable or interest therein and (iii) other activities
incident thereto.
"Accreted Value" means for each $1,000 face amount of Notes, as of any date
of determination prior to August 1, 2003, the sum of (i) the initial offering
price of each Note ($509.31) and (ii) that portion of the excess of the
principal amount at maturity of each Note over such initial offering price
which shall have been accreted thereon through such date, such amount to be so
accreted on a daily basis and compounded semi-annually on each August 1 and
February 1 at the rate of 14% per annum from the date of issuance of the Notes
through the date of determination.
"Acquired Debt" means, with respect to any specified Person, (i) Debt of any
other Person existing at the time such other Person is merged with or into or
became a Restricted Subsidiary of such specified Person,
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including, without limitation, Debt incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Restricted Subsidiary of such specified Person, and (ii) Debt secured by a
Lien encumbering any asset acquired by such specified Person which, in each
case, is not repaid at or within five days following the date of such
acquisition.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For 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,
shall mean 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.
Notwithstanding the foregoing, no Person (other than the Company or any
Subsidiary of the Company) in whom a Securitization Entity makes an Investment
in connection with a Qualified Securitization Transaction shall be deemed to
be an Affiliate of the Company or any of its Subsidiaries solely by reason of
such Investment.
"Applicable Premium" means, with respect to a Note at any redemption date,
the greater of (i) 1.0% of the Accreted Value of such Note to the date of
redemption and (ii) the excess of (A) the present value at such time of the
redemption price of such Note at August 1, 2003 (such redemption price being
set forth in the table set forth under "--Optional Redemption") computed using
a discount rate equal to the Treasury Rate plus 50 basis points, over (B) the
Accreted Value of such Note as of the date of redemption.
"Asset Sale" means (i) the sale, lease (other than operating leases entered
into in the ordinary course of business), conveyance or other disposition of
any assets or rights (including, without limitation, by way of a Sale and
Lease-Back Transaction) other than in the ordinary course of business
(provided that the sale, lease, conveyance or other disposition of all or
substantially all of the assets of the Company and its Restricted Subsidiaries
taken as a whole will be governed by the provisions of the Indenture described
above under the caption "Repurchase at the Option of Holders Upon Change of
Control" and/or the provisions described above under the caption "--Certain
Covenants--Merger, Consolidation or Sale of Assets" and not by the provisions
of the Asset Sale covenant), and (ii) the issue or sale by the Company or any
of its Restricted Subsidiaries of Equity Interests of any of the Company's
Restricted Subsidiaries (to the extent such Equity Interests are held by the
Company or another Restricted Subsidiary of the Company), in the case of
either clause (i) or (ii), whether in a single transaction or a series of
related transactions that (x) have a fair market value in excess of $1.0
million or (y) generate net proceeds in excess of $1.0 million.
Notwithstanding the foregoing, the following shall not be deemed to constitute
Asset Sales: (i) sales of accounts receivable, equipment and related assets
(including contract rights) of the type specified in the definition of
"Qualified Securitization Transaction" to a Securitization Entity for the fair
market value thereof, including cash in an amount at least equal to 75% of the
fair market value thereof as determined in accordance with GAAP; (ii)
transfers of accounts receivable, equipment and related assets (including
contract rights) of the type specified in the definition of "Qualified
Securitization Transaction" (or a fractional undivided interest therein) by a
Securitization Entity in a Qualified Securitization Transaction (for the
purposes of this clause (ii), Purchase Money Notes shall be deemed to be
cash); (iii) a transfer of assets by the Company to a Restricted Subsidiary or
by a Restricted Subsidiary to the Company or to another Restricted Subsidiary;
(iv) a disposition of inventory held for sale in the ordinary course of
business or obsolete, worn out or damaged property or equipment in the
ordinary course of business; (v) an issuance of Equity Interests by a
Restricted Subsidiary to the Company or to another Restricted Subsidiary; (vi)
a Restricted Payment or Permitted Investment that is permitted by the covenant
described above under the caption "--Certain Covenants-- Restricted Payments";
(vii) the sale or discount, in each case without recourse, of accounts
receivable arising in the ordinary course of business, but only in connection
with the compromise or collection thereof; (viii) the grant in the ordinary
course of business of any non-exclusive license of patents, trademarks,
registrations therefor and other similar intellectual property and (ix) sales
of accounts receivable for cash at fair market value, and any sale, conveyance
or transfer of accounts receivable in the ordinary course of business to an
Accounts Receivable Subsidiary or to third parties that are not Affiliates of
the Company or any Subsidiary of the Company.
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"Asset Sale Offer" shall have the definition set forth under "--Certain
Covenants--Asset Sales."
"Asset Sale Offer Date" shall have the definition set forth under "--Certain
Covenants--Asset Sales."
"Asset Sale Offered Price" shall have the definition set forth under "--
Certain Covenants--Asset Sales."
"Asset Sale Pari Passu Offer" shall have the definition set forth under "--
Certain Covenants--Asset Sales."
"Attributable Debt" in respect of a Sale and Lease-Back Transaction means,
at the time of determination, the present value (discounted at the rate of
interest implicit in such transaction, determined in accordance with GAAP) of
the obligation of the lessee for net rental payments during the remaining term
of the lease included in such Sale and Lease-Back Transaction (including any
period for which such lease has been extended or may, at the option of the
lessor, be extended).
"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 or a Restricted Subsidiary of the Company, as appropriate, and to
be in full force and effect, and delivered to the Trustee.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that
would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or limited) and
(iv) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of,
the issuing Person.
"Cash Equivalents" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof having maturities of not more than one
year from the date of acquisition, (iii) certificates of deposit and
Eurodollar time deposits with maturities of one year or less from the date of
acquisition, bankers' acceptances with maturities not exceeding one year and
overnight bank deposits, in each case with any lender party to the Senior
Credit Facility or with any domestic commercial bank having capital and
surplus in excess of $500.0 million and a Keefe Bank Watch Rating of "B" or
better, (iv) repurchase obligations with a term of not more than seven days
for underlying securities of the types described in clauses (ii) and (iii)
above entered into with any financial institution meeting the qualifications
specified in clause (iii) above, (v) commercial paper having the highest
rating obtainable from Moody's Investors Service, Inc. or Standard & Poor's
Corporation and in each case maturing within one year after the date of
acquisition, (vi) marketable direct obligations issued by any state of the
United States or any political subdivision, or public instrumentality of such
state, in each case having maturities of not more than one year from the date
of acquisition and, at the time of acquisition thereof, having one of the two
highest ratings obtainable from either Moody's Investors Service, Inc. or
Standard & Poor's Corporation, and (vii) money market, mutual or similar funds
which invest substantially all of their assets in securities of the type
described in clauses (i) through (vi) above.
"Change of Control" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all
or substantially all of the assets of the Company and its Subsidiaries taken
as a whole to any "person" (as such term is used in Section 13(d)(3) of the
Exchange Act), or group of related persons, together with any Affiliates
thereof (other than Permitted Holders); (ii) the adoption by the Company of a
plan relating to the liquidation or dissolution of the Company; (iii) the
first day on which a majority of the members of the Board of Directors of the
Company are not Continuing Directors; or (iv) the consummation of any
transaction (including,
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without limitation, any merger or consolidation) the result of which is that
any "person" (as defined above) or group of related persons, together with any
Affiliates thereof (other than Permitted Holders) becomes the "beneficial
owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under the
Exchange Act), directly or indirectly, of more than 50% (measured by voting
power rather than number of shares) of the Voting Stock of the Company.
"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus, without
duplication, (i) an amount equal to any extraordinary loss plus any net loss
realized in connection with an Asset Sale (to the extent such losses were
deducted in computing such Consolidated Net Income and without regard to the
$1.0 million threshold in the definition thereof), plus (ii) provision for
taxes based on income or profits of such Person and its Subsidiaries for such
period, to the extent that such provision for taxes was included in computing
such Consolidated Net Income, plus (iii) consolidated interest expense of such
Person and its Restricted Subsidiaries for such period (including, without
limitation, amortization of debt issuance costs and original issue discount,
non-cash interest payments, the interest component of any deferred payment
obligations, the interest component of all payments associated with Capital
Lease Obligations, imputed interest with respect to Attributable Debt,
commissions, discounts and other fees and charges incurred in respect of
letter of credit or bankers' acceptance financings, and net payments (if any)
pursuant to Hedging Obligations) to the extent that any such expense was
deducted in computing such Consolidated Net Income, plus (iv) the consolidated
net interest expense of such Person and its Restricted Subsidiaries that was
capitalized during such period to the extent that any such expense was
deducted in computing such Consolidated Net Income, plus (v) depreciation,
amortization (including amortization of goodwill and other intangibles) and
other non-cash expenses (excluding any such non-cash expense to the extent
that it represents an accrual of or reserve for cash expenses in any future
period or amortization of a prepaid cash expense that was paid in a prior
period) of such Person and its Restricted Subsidiaries for such period to the
extent that such depreciation, amortization and other non-cash expenses were
deducted in computing such Consolidated Net Income, minus (vi) other non-
recurring non-cash items increasing such Consolidated Net Income for such
period (which will be added back to Consolidated Cash Flow in any subsequent
period to the extent cash is received in respect of such item in such
subsequent period), in each case, on a consolidated basis and determined in
accordance with GAAP. Notwithstanding the foregoing, "Consolidated Cash Flow"
shall be calculated without giving effect to amortization or depreciation of
any amounts required or permitted by Accounting Principles Board Opinion Nos.
16 (including non-cash write-ups and non-cash charges relating to inventory
and fixed assets, in each case arising in connection with any acquisition
permitted under the Indenture) and 17 (including non-cash charges relating to
intangibles and goodwill arising in connection with any such acquisition).
"Consolidated Fixed Charge Coverage Ratio" means with respect to any Person
for any period, the ratio of the Consolidated Cash Flow of such Person for
such period to the Consolidated Fixed Charges of such Person for such period.
In the event that the Company or any of its Restricted Subsidiaries incurs,
assumes, guarantees, repays or redeems any Debt (other than revolving credit
borrowings) or issues or redeems preferred stock subsequent to the
commencement of the period for which the Consolidated Fixed Charge Coverage
Ratio is being calculated but prior to the date on which the event for which
the calculation of the Consolidated Fixed Charge Coverage Ratio is made (the
"Calculation Date"), then the Consolidated Fixed Charge Coverage Ratio shall
be calculated giving pro forma effect to such incurrence, assumption,
guarantee, repayment or redemption of Debt, or such issuance or redemption of
preferred stock, as if the same had occurred at the beginning of the
applicable four-quarter reference period. In addition, for purposes of making
the computation referred to above, (i) acquisitions or Asset Sales that have
been made by the Company or any of its Restricted Subsidiaries, including
through mergers or consolidations and including any related financing
transactions, during the four-quarter reference period or subsequent to such
reference period and on or prior to the Calculation Date shall be deemed to
have occurred on the first day of the four-quarter reference period and
Consolidated Cash Flow for such reference period shall be calculated without
giving effect to clause (iii) of the proviso set forth in the definition of
Consolidated Net Income, and (ii) the Consolidated Cash Flow attributable to
discontinued operations, as determined in accordance with GAAP, and operations
or businesses disposed of prior to the Calculation Date,
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shall be excluded, and (iii) the Consolidated Fixed Charges attributable to
discontinued operations, as determined in accordance with GAAP, and operations
or businesses disposed of prior to the Calculation Date, shall be excluded,
but only to the extent that the obligations giving rise to such Consolidated
Fixed Charges will not be obligations of the referent Person or any of its
Restricted Subsidiaries following the Calculation Date. In calculating
"Consolidated Fixed Charges" for purposes of determining the denominator (but
not the numerator) of this "Consolidated Fixed Charge Coverage Ratio," (i)
interest on Debt determined on a fluctuating basis as of the Calculation Date
and which will continue to be so determined thereafter shall be deemed to have
accrued at a fixed rate per annum equal to the rate of interest on such Debt
in effect on the Calculation Date, (ii) if interest on any Debt actually
incurred on the Calculation Date may be optionally determined at an interest
rate based upon a factor of a prime or similar rate, a eurocurrency interbank
offered rate or other rates, then the interest rate in effect on the
Calculation Date will be deemed to have been in effect during the relevant
four-quarter period reference and (iii) notwithstanding the foregoing,
interest on Debt determined on a fluctuating basis, to the extent such
interest is covered by agreements relating to Interest Swap Obligations, shall
be deemed to accrue at the rate per annum resulting after giving effect to the
operation of such agreements.
"Consolidated Fixed Charges" means, with respect to any Person for any
period, the sum, without duplication, of (i) the consolidated interest expense
of such Person and its Restricted Subsidiaries for such period, whether paid
or accrued (including, without limitation, amortization of debt issuance costs
(other than those debt issuance costs incurred on the Issue Date in connection
with the Transactions) and original issue discount, non-cash interest
payments, the interest component of any deferred payment obligations, the
interest component of all payments associated with Capital Lease Obligations,
imputed interest with respect to Attributable Debt, commissions, discounts and
other fees and charges incurred in respect of letter of credit or bankers'
acceptance financings, and net payments (if any) pursuant to Hedging
Obligations), and (ii) the consolidated interest expense of such Person and
its Restricted Subsidiaries that was capitalized during such period, and (iii)
any interest expense on Debt of another Person that is guaranteed by such
Person or one of its Restricted Subsidiaries or secured by a Lien on assets of
such Person or one of its Subsidiaries (whether or not such guarantee or Lien
is called upon), and (iv) all dividend payments, whether or not in cash, on
any series of preferred stock of such Person or any of its Restricted
Subsidiaries (other than dividend payments on Equity Interests payable solely
in Equity Interests (other than Disqualified Stock) of the Company) paid or
accrued during such period.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP;
provided that (i) the Net Income (but not loss) of any Person that is not a
Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Wholly Owned Restricted
Subsidiary thereof, (ii) the Net Income of any Restricted Subsidiary shall be
excluded to the extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that Net Income is not at the
date of determination permitted without any prior governmental approval (that
has not been obtained) or, directly or indirectly, by operation of the terms
of its charter or any agreement, instrument, judgment, decree, order, statute,
rule or governmental regulation applicable to that Restricted Subsidiary or
its shareholders, provided that such Net Income shall not be so excluded in
calculating Consolidated Net Income (A) as a component of Consolidated Cash
Flow for purposes of calculating the Consolidated Fixed Charge Coverage Ratio
in determining whether (1) a Restricted Subsidiary can incur additional Debt
or issue preferred stock pursuant to the Consolidated Fixed Charge Coverage
Ratio test set forth in the first paragraph of the covenant described under
the caption "--Incurrence of Debt and Issuance of Preferred Stock" or (2) the
Company can incur $1.00 of additional Debt pursuant to the Consolidated Fixed
Charge Coverage Ratio test set forth in the first paragraph of the covenant
described under the caption "--Incurrence of Debt and Issuance of Preferred
Stock" for purposes of (x) clause (ii) of the first paragraph of the covenant
described under the caption "Restricted Payments", (y) clause (iv) of the
covenant described under the caption "--Merger, Consolidation and Sale of
Assets" or (z) the definition of "Unrestricted Subsidiary" or (B) for purposes
of clause (iii) of the first paragraph of the covenant described under the
caption "Restricted Payments" in determining whether a Restricted Subsidiary
may make a Restricted Investment, (iii) the Net Income (or loss) of any Person
acquired in a pooling of interests transaction for any
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period prior to the date of such acquisition shall be excluded, (iv) the
cumulative effect of a change in accounting principles adopted after the Issue
Date shall be excluded, (v) any restoration to Net Income of any contingency
reserve of an extraordinary, nonrecurring or unusual nature, except to the
extent that provision for such reserve was made out of Consolidated Net Income
accrued at any time following the Issue Date, shall be excluded, (vi) in the
case of a successor to the referent Person by consolidation or merger or as a
transferee of the referent Person's assets, any earnings of the successor
corporation prior to such consolidation, merger or transfer of assets shall be
excluded, (vii) non-cash compensation charges arising upon the issuance or
exercise of employee stock options or Capital Stock (other than Disqualified
Stock) shall be excluded and (viii) all extraordinary gains and extraordinary
losses and any unusual or non-recurring charges recorded or accrued in
connection with the Transactions shall be excluded.
"Consolidated Net Worth" means, with respect to any Person as of any date,
the sum of (i) the consolidated equity of the ordinary shareholders of such
Person and its consolidated Subsidiaries as of such date and (ii) the
respective amounts reported on such Person's balance sheet as of such date
with respect to any series of preferred stock (other than Disqualified Stock)
that by its terms is not entitled to the payment of dividends unless such
dividends may be declared and paid only out of net earnings in respect of the
year of such declaration and payment, but only to the extent of any cash
received by such Person upon issuance of such preferred stock, less (A) all
write-ups (other than write-ups resulting from foreign currency translations
and write-ups of tangible assets of a going concern business made within 12
months after the acquisition of such business) subsequent to the date of the
Indenture in the book value of any asset owned by such Person or a
consolidated Subsidiary of such Person, (B) all investments as of such date in
unconsolidated Subsidiaries and in Persons that are not Subsidiaries (except,
in each case, Permitted Investments) and (C) all unamortized debt discount and
expense and unamortized deferred charges as of such date, all of the foregoing
determined in accordance with GAAP.
"Consulting Agreement" means the Consulting Agreement between the Company
and Thomas Rodgers, Jr. as in effect on the date of the Indenture or as
thereafter amended in a manner that is not adverse to the Company or the
Holders of Notes.
"Continuing Director" means, as of any date of determination, any member of
the Board of Directors of the Company who (i) was a member of such Board of
Directors on the date of the Indenture, (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election or (iii) was nominated for election or elected to such
Board of Directors by or with the approval of the Permitted Holders.
"Credit Facilities" means, with respect to the Company or any Subsidiary,
one or more debt facilities (including, without limitation, the Senior Credit
Facility) or commercial paper facilities with banks or other lenders providing
for revolving credit loans, term loans, receivables financing (including
through the sale of receivables to such lenders or to special purpose entities
formed to borrow from such lenders against such receivables), bankers
acceptance or letters of credit, in each case, as amended, restated, modified,
renewed, refunded, replaced or refinanced in whole or in part from time to
time. Debt under Credit Facilities outstanding on the date on which Notes are
first issued and authenticated under the Indenture shall be deemed to have
been incurred on such date in reliance on the exception provided by clause (i)
of the definition of Permitted Debt.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Company or any Restricted Subsidiary of the Company against fluctuations in
currency values.
"Debt" means, with respect to any Person, any indebtedness of such Person,
whether or not contingent, in respect of borrowed money or evidenced by bonds,
notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of
the purchase price of any property or representing any Hedging Obligations,
except any such balance that constitutes an accrued expense or trade payable,
if and to the extent any of the foregoing indebtedness (other than letters of
credit and Hedging Obligations) would appear as a
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liability upon a balance sheet of such Person prepared in accordance with
GAAP, as well as all Debt of others secured by a Lien on any asset of such
Person (whether or not such Debt is assumed by such Person) and, to the extent
not otherwise included, the guarantee by such Person of any Debt of any other
Person (but excluding, with respect to Debt of a Securitization Entity, any
Standard Securitization Undertakings that might be deemed to constitute
guarantees). The amount of any Debt outstanding as of any date shall be (i)
the accrued or accreted value thereof, in the case of any Debt that does not
require current payments of interest, and (ii) the principal amount thereof,
together with any interest thereon that is more than 30 days past due, in the
case of any other Debt. For purposes of calculating the amount of Debt of a
Securitization Entity outstanding as of any date, the face or notional amount
of any interest in receivables or equipment that is outstanding as of such
date shall be deemed to be Debt but any such interests held by Affiliates of
such Securitization Entity shall be excluded for purposes of such calculation.
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable
at the option of the holder thereof, in whole or in part, on or prior to the
first anniversary of the Stated Maturity of the Notes; provided, however, that
any Capital Stock that would constitute Disqualified Stock solely because the
holders thereof have the right to require the Company to repurchase such
Capital Stock upon the occurrence of a Change of Control or an Asset Sale
shall not constitute Disqualified Stock if the terms of such Capital Stock
provide that the Company may not repurchase or redeem any such Capital Stock
pursuant to such provisions unless such repurchase or redemption complies with
the covenant described above under the caption "--Certain Covenants--
Restricted Payments."
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Equity Offering" means a bona fide underwritten sale to the public of
Equity Interests (other than Disqualified Stock) of the Company pursuant to a
registration statement (other than on Form S-8 or any other form relating to
securities issuable under any benefit plan of the Company) that is declared
effective by the Commission.
"Executive Securities Agreement" means each of the Executive Securities
Agreements between the Company and the other signatory thereto as in effect on
the date of the Indenture or as thereafter amended in a manner that is not
adverse to the Holders of Notes in any material respect.
"Existing Debt" means up to $500,000 in aggregate principal amount of Debt
of the Company and its Restricted Subsidiaries (other than Debt under the
Senior Credit Facility or Debt evidenced by the Senior Subordinated Notes) in
existence on the date of the Indenture, until such amounts are repaid.
"Foreign Subsidiary" means any Subsidiary not organized or validly existing
under the laws of the United States or any state thereof or the District of
Columbia.
"Foreign Restricted Subsidiary" means any Foreign Subsidiary that is a
Restricted Subsidiary.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the Issue Date.
"Globe Manufacturing" means Globe Manufacturing Corp., an Alabama
corporation, and its successors and assigns.
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"guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any Debt.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under Interest Swap Agreements and Currency Agreements.
"Interest Swap Agreements" means any interest rate swap agreement, interest
rate cap agreement, interest rate floor agreement, interest rate collar
agreement, treasury rate-lock agreement or other similar agreement or
arrangement designed to protect the Company or any Restricted Subsidiary of
the Company from fluctuations in interest rates.
"Interest Swap Obligations" means the obligations of any Person pursuant to
any Interest Swap Agreement with any other Person.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Debt or other obligations), advances
or capital contributions (excluding commission, travel and similar advances to
officers and employees and extensions of trade credit made in the ordinary
course of business), purchases or other acquisitions for consideration of
Debt, Equity Interests or other securities, together with all items that are
or would be classified as investments on a balance sheet prepared in
accordance with GAAP.
"Issue Date" means August 6, 1998, the date of original issuance of the
Notes.
"Lien" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law (including
any conditional sale or other title retention agreement, any lease in the
nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement
under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction).
"Limited Originator Recourse" means a reimbursement obligation of the
Company or a Restricted Subsidiary in connection with a drawing on a letter of
credit, revolving loan commitment, cash collateral account or other such
credit enhancement issue to support Debt of a Securitization Entity under a
facility for the financing of trade receivables and the warehousing of
equipment loans and leases; provided that the available amount of any such
form of credit enhancement at any time shall not exceed 10.0% of the principal
amount of such Debt at such time.
"Management Agreement" means the Management Agreement between Globe
Manufacturing and CHS Management III, L.P., dated as of July 31, 1998, as in
effect on the date of the Indenture or as thereafter amended in a manner that
is not adverse to the Company or the Holders of the Notes.
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but
not loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to Sale and Lease-Back Transactions) or (b)
the disposition of any securities by such Person or any of its Restricted
Subsidiaries or the extinguishment of any Debt of such Person or any of its
Restricted Subsidiaries and (ii) any extraordinary or nonrecurring gain (but
not loss), together with any related provision for taxes on such extraordinary
or nonrecurring gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by the Company or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash and Cash Equivalents received upon the sale or
other disposition of any non-cash consideration received in any Asset Sale),
net of (i) the direct costs relating to such Asset Sale (including, without
limitation, legal, accounting and investment banking fees,
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and sales commissions) and any relocation expenses incurred as a result
thereof, (ii) taxes paid or payable as a result thereof (after taking into
account any available tax credits or deductions and any tax sharing
arrangements), (iii) any reserve for adjustment in respect of the sale price
of such asset or assets established in accordance with GAAP, or against any
liabilities associated with the Asset Sale, or the assets subject thereto, and
retained by the Company or any Restricted Subsidiary, and (iv) amounts
required to be applied to the repayment of Debt secured by a Lien on the asset
or assets that were the subject of such Asset Sale, or to the satisfaction of
contractual obligations either existing at the date of the Indenture, or
entered into after the date of the Indenture in connection with the payment of
deferred purchase price of the properties or assets that were the subject of
such Asset Sale.
"Non-Recourse Debt" means Debt (i) as to which neither the Company nor any
of its Restricted Subsidiaries (A) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Debt), (B) is directly or indirectly liable (as guarantor or otherwise), or
(C) constitutes the lender and (ii) no default with respect to which
(including any rights that the holders thereof may have to take enforcement
action against an Unrestricted Subsidiary) would permit (upon notice, lapse of
time or both) any holder of any other Debt (other than the Notes being offered
hereby) of the Company or any of its Restricted Subsidiaries to declare a
default on such other Debt or cause the payment thereof to be accelerated or
payable prior to its Stated Maturity.
"Obligations" means any principal, premium, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Debt.
"Officers' Certificate" means with respect to any Person, a certificate
signed by the Chairman, Vice Chairman, Chief Executive Officer, the President
or any Vice President and the Chief Financial Officer, Controller or the
Treasurer of such Person that shall comply with applicable provisions of the
Indenture.
"Pari Passu Debt" shall mean any Debt of the Company that is pari passu in
right of payment to the Notes.
"Pari Passu Debt Amount" shall have the definition set forth under "--
Certain Covenants--Asset Sales."
"Permitted Holders" means (i) Code, Hennessy & Simmons, Inc., (ii) Code
Hennessy & Simmons LLC, (iii) Code, Hennessy & Simmons III, L.P. and (iv)
their respective affiliates.
"Permitted Investments" means: (i) any Investment in the Company or in a
Restricted Subsidiary of the Company that is engaged in the same or a similar
line of business as the Company and its Restricted Subsidiaries (or reasonable
extensions or expansions thereof); (ii) any Investment in Cash Equivalents;
(iii) any Investment by the Company or any Restricted Subsidiary of the
Company in a Person, if as a result of such Investment (A) such Person becomes
a Restricted Subsidiary of the Company that is engaged in the same or a
similar line of business as the Company and its Restricted Subsidiaries (or
reasonable extensions or expansions thereof) 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 of the Company that is engaged in the same or a similar
line of business as the Company and its Restricted Subsidiaries (or reasonable
extensions or expansions thereof); (iv) any Investment made as a result of the
receipt of non-cash consideration from an Asset Sale that was made pursuant to
and in compliance with the covenant described above under the caption "--
Certain Covenants--Asset Sales"; (v) any acquisition of assets solely in
exchange for the issuance of Equity Interests (other than Disqualified Stock)
of the Company; (vi) Investments made in exchange for accounts receivable
arising in the ordinary course of business which have not been collected for
180 days and which are, in the good faith of the Company, substantially
uncollectible; provided that any such Investments in excess of $500,000 shall
be approved by the Board of Directors (evidenced by a Board Resolution set
forth in an Officers' Certificate delivered to the Trustee); (vii) loans and
advances to employees of the Company and its Restricted Subsidiaries in the
ordinary course of business for bona fide business purposes not to exceed $1.0
million in the aggregate at any one time outstanding; (viii) Investments in
Permitted Joint Ventures and Investments in suppliers to the Company and its
Restricted Subsidiaries in an aggregate amount when taken together with all
other Investments pursuant to this clause (viii) does not exceed the greater
of $10.0 million or 10% of Total
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Assets at any one time outstanding; (ix) Hedging Obligations entered into in
the ordinary course of business and otherwise in compliance with the
Indenture; (x) other Investments in any Person having an aggregate fair market
value (measured on the date each such Investment was made and without giving
effect to subsequent changes in value), when taken together with all other
Investments made pursuant to this clause (x) that are at the time outstanding,
not to exceed $10.0 million; (xi) Investments in securities of trade creditors
or customers received pursuant to any plan of reorganization or similar
arrangement upon the bankruptcy or insolvency of such trade creditors or
customers; (xii) guarantees by the Company or any Restricted Subsidiary of
Debt otherwise permitted to be incurred under the Indenture; (xiii) any
Investment by the Company or a Wholly Owned Subsidiary of the Company in a
Securitization Entity or any Investment by a Securitization Entity in any
other Person in connection with a Qualified Securitization Transaction;
provided that any Investment in a Securitization Entity is in the form of a
Purchase Money Note or an Equity Interest; and (xiv) Investments received by
the Company or its Restricted Subsidiaries as consideration for asset sales,
including Asset Sales; provided that in the case of an Asset Sale, such Asset
Sale is effected in compliance with the "Limitations on Asset Sales" covenant;
and (xv) Investments by Foreign Subsidiaries of the Company in currencies of
countries in which such subsidiaries conduct business, provided that such
currencies are freely convertible into United States dollars. For purposes of
calculating the aggregate amount of Permitted Investments permitted to be
outstanding at any one time pursuant to clauses (viii) and (x) of the
preceding sentence, (i) to the extent the consideration for any such
Investment consists of Equity Interests (other than Disqualified Stock) of the
Company, the value of the Equity Interests so issued will be ignored in
determining the amount of such Investment and (ii) the aggregate amount of
such Investments made by the Company and its Restricted Subsidiaries on or
after the date of the Indenture will be decreased (but not below zero) by an
amount equal to the lesser of (A) the cash return of capital to the Company or
a Restricted Subsidiary with respect to such Investment that is sold for cash
or otherwise liquidated or repaid for cash (less the cost of disposition,
including applicable taxes, if any) and (B) the initial amount of such
Investment.
"Permitted Joint Venture" means any Person which is, directly or indirectly
through its Subsidiaries or otherwise, engaged principally in the principal
business of the Company, or a reasonably related business, and the Capital
Stock of which is owned by the Company and one or more Persons other than the
Company or any Affiliate of the Company.
"Permitted Liens" means (i) Liens to secure obligations in respect of
workers compensation, unemployment, social security, statutory obligations,
surety or appeal bonds or other obligations of a like nature incurred in the
ordinary course of business, (ii) Liens for taxes, assessments or governmental
charges or claims that are not yet delinquent or that are being contested in
good faith by appropriate proceedings promptly instituted and diligently
conducted, (iii) Liens in favor of the Company, (iv) carriers',
warehousemen's, mechanics', landlords', materialmen's, repairmen's or other
like Liens arising in the ordinary course of business in respect of
obligations not overdue for a period in excess of 30 days or which are being
contested in good faith by appropriate proceedings promptly instituted and
diligently prosecuted; provided that any reserve or other appropriate
provision as shall be required to conform with GAAP shall have been made
therefor, (v) Liens securing the Senior Credit Facility, (vi) Liens on
property of a Person existing at the time such Person is merged into or
consolidated with the Company; provided that such Liens were in existence
prior to the contemplation of such merger or consolidation and do not extend
to any assets other than those of the Person merged into or consolidated with
the Company (vii) Liens on property existing at the time of acquisition
thereof by the Company; provided that such liens were in existence prior to
the contemplation of such acquisition, (viii) purchase money Liens to finance
property or assets of the Company acquired in the ordinary course of business;
provided, however, that (A) the related Purchase Money Obligations shall not
exceed the cost of such property or assets and shall not be secured by any
property or assets of the Company other than the property or assets so
acquired and (B) the Lien securing such Debt shall be created within 90 days
of such acquisition, (ix) Liens existing on the date of the Indenture, (x)
judgment Liens not giving rise to an Event of Default, (xi) easements, rights-
of-way, zoning and similar restrictions and other similar encumbrances or
title defects incurred or imposed, as applicable, in the ordinary course of
business and consistent with industry practices which, in the aggregate, are
not substantial in amount, and which do not in any case materially detract
from the value of the
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property subject thereto (as such property is used by the Company) or
interfere with the ordinary conduct of business of the Company; provided,
however, that any such Liens are not incurred in connection with any borrowing
of money or commitment to loan any money to or to extend any credit, (xii)
Liens on assets transferred to a Securitization Entity or on assets of a
Securitization Entity, in either case incurred in connection with a Qualified
Securitization Transaction, (xiii) Liens incurred in the ordinary course of
business of the Company with respect to obligations that do not exceed $5.0
million at any one time outstanding and that (A) are not incurred in
connection with the borrowing of money or the obtaining of advances or credit
(other than trade credit in the ordinary course of business) and (B) do not in
the aggregate materially detract from the value of property or materially
impair the use thereof in the operation of business by the Company, (xiv) any
interest or title of a lessor under any Capital Lease Obligation, (xv) Liens
upon specific items of inventory or other goods and proceeds of any Person
securing such Person's obligations in respect of bankers' acceptances issued
or created for the account of such Person to facilitate the purchase, shipment
or storage of such inventory or other goods, (xvi) Liens securing
reimbursement obligations with respect to commercial letters of credit which
encumber documents and other property relating to such letters of credit and
products and proceeds thereof, (xvii) Liens encumbering deposits made to
secure obligations arising from statutory, regulatory, contractual or warranty
requirements of the Company, including rights of offset and set-off, (xviii)
Liens securing Hedging Obligations, (xix) leases or subleases granted to
others that do not materially interfere with the ordinary course of business
of the Company, (xx) Liens arising from filing Uniform Commercial Code
financing statements regarding operating leases entered into in the ordinary
course of business and (xxi) Liens in favor of customs and revenue authorities
arising as a matter of law to secure payments of customer duties in connection
with the importation of goods.
"Permitted Refinancing Debt" means any Debt of the Company or any of its
Restricted Subsidiaries or any Disqualified Stock issued in exchange for, or
the net proceeds of which are used to extend, refinance, renew, replace,
defease or refund other Debt of the Company or any of its Restricted
Subsidiaries; provided that: (i) the principal amount (or accrued value, if
applicable) of such Permitted Refinancing Debt does not exceed the principal
amount of (or accrued value, if applicable), plus accrued interest on, the
Debt so extended, refinanced, renewed, replaced, defeased or refunded (plus
the amount of reasonable fees and expenses incurred in connection therewith);
(ii) such Permitted Refinancing Debt has a final maturity date later than the
final maturity date of, and has a Weighted Average Life to Maturity equal to
or greater than the Weighted Average Life to Maturity of, the Debt being
extended, refinanced, renewed, replaced, defeased or refunded; (iii) if the
Debt being extended, refinanced, renewed, replaced, defeased or refunded is
subordinated in right of payment to the Notes, such Permitted Refinancing Debt
has a final maturity date later than the final maturity date of, and is
subordinated in right of payment to the Notes on terms at least as favorable
to the Holders of Notes, as applicable, as those contained in the
documentation governing the Debt being extended, refinanced, renewed,
replaced, defeased or refunded; and (iv) such Debt is incurred either by the
Company or by the Restricted Subsidiary who is the obligor on the Debt being
extended, refinanced, renewed, replaced, defeased or refunded or is
Disqualified Stock.
"Purchase Money Notes" means a promissory note of a Securitization Entity
evidencing a line of credit, which may be irrevocable, from the Company or any
Subsidiary of the Company in connection with a Qualified Securitization
Transaction to a Securitization Entity which note shall be repaid from cash
available to the Securitization Entity, other than amounts required to be
established as reserves pursuant to agreements, amounts paid to investors in
respect of interest, principal and other amounts owing to such investors and
amounts paid in connection with the purchase of newly generated receivables or
newly acquired equipment.
"Purchase Money Obligations" of a Person means Debt of such Person incurred
in connection with the purchase, construction or improvement of property,
plant or equipment used in the business of such Person (whether through the
direct purchase of the assets or the Equity Interests of any Person owning
such assets).
"Qualified Securitization Transaction" means any transaction or series of
transactions pursuant to which the Company or any of its Restricted
Subsidiaries may sell, convey or otherwise transfer to (i) a Securitization
Entity (in the case of a transfer by the Company or any of its Restricted
Subsidiaries) and (ii) any other Person (in the case of a transfer by a
Securitization Entity), or may grant a security interest in, any receivables
or
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equipment loans (whether now existing or arising or acquired in the future) of
the Company or any of its Restricted Subsidiaries, and any assets related
thereto including, without limitation, all collateral securing such
receivables and equipment loans, all contracts and contract rights and all
guarantees or other obligations in respect of such receivables and equipment
loans, proceeds of such receivables and equipment loans and other assets
(including contract rights) which are customarily transferred or in respect of
which security interests are customarily granted in connection with asset
securitization transaction involving receivables and equipment (collectively,
"transferred assets"); provided that in the case of any such transfer by the
Company or any of its Restricted Subsidiaries, the transferor receives cash or
Purchase Money Notes in an amount which (when aggregated with the cash and
Purchase Money Notes received by the Company and its Restricted Subsidiaries
upon all other such transfers of transferred assets during the ninety days
preceding such transfer) is at least equal to 75.0% of the aggregate face
amount of all receivables so transferred during such day and the ninety
preceding days.
"Registration Agreement" means the Registration Agreement among the Company
and the other signatories thereto as in effect on the date of the Indenture or
as thereafter amended in a manner that is not disadvantageous to the Holders
of Notes in any material respect.
"Related Person" means with respect to any Person (i) any Affiliate of such
Person, (ii) any individual or other Person who directly or indirectly is the
registered or beneficial owner of 5% or more of any class of Capital Stock of
such Person or warrants, rights, options or other rights to acquire more than
5% of any class of Capital Stock of such Person, (iii) any relative of such
individual by blood, marriage or adoption not more remote than first cousin
and (iv) any officer or director of such Person.
"Restricted Domestic Subsidiary" means a Restricted Subsidiary organized and
validly existing under the laws of the United States or any state thereof or
the District of Columbia.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Payment" means: (i) any dividend or any other payment or
distribution on account of the Company's or any of its Restricted
Subsidiaries' Equity Interests or to the direct or indirect holders of the
Company's or any of its Restricted Subsidiaries' Equity Interests in their
capacity as such (other than (A) dividends or distributions payable in Equity
Interests (other than Disqualified Stock) of the Company or such Restricted
Subsidiary or (B) dividends or distributions payable to the Company or any
Wholly Owned Restricted Subsidiary); (ii) any payment to purchase, redeem or
otherwise acquire or retire for value any Equity Interests of the Company, any
direct or indirect parent of the Company or any Restricted Subsidiary of the
Company (other than any Equity Interests owned by the Company or any Wholly
Owned Restricted Subsidiary); (iii) any payment to purchase, redeem, defease
or otherwise acquire or retire for value any Subordinated Debt of the Company
or a Restricted Subsidiary, except a payment of interest or principal at
Stated Maturity; (iv) any payment in respect of Employee Notes other than
payments in the form of additional Employee Notes or Equity Interests (other
than Disqualified Stock) of the Company; and (v) any Restricted Investment.
"Restricted Subsidiary" of any Person means any Subsidiary of such Person
which at the time of determination is not an Unrestricted Subsidiary.
"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.
"Securitization Entity" means a Wholly Owned Subsidiary of the Company (or
another Person in which the Company or any Restricted Subsidiary of the
Company makes an Investment and to which the Company or any Restricted
Subsidiary of the Company transfers receivables or equipment and related
assets) that engages in no activities other than in connection with the
financing of receivables or equipment and that is designated by
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the Board of Directors of the Company (as provided below) as a Securitization
Entity (i) no portion of the Debt or any other Obligations (contingent or
otherwise) of which (A) is guaranteed by the Company or any Restricted
Subsidiary of the Company (other than the Securitization Entity) in any way
other than pursuant to Standard Securitization Undertakings or Limited
Originator Recourse, (B) is recourse to or obligates the Company or any
Restricted Subsidiary of the Company (other than the Securitization Entity) in
any way other than pursuant to Standard Securitization Undertakings or Limited
Originator Recourse or (C) subjects any property or asset of the Company or
any Restricted Subsidiary of the Company (other than the Securitization
Entity), directly or indirectly, contingently or otherwise, to the
satisfaction thereof, other than pursuant to Standard Securitization
Undertakings or Limited Originator Recourse, (ii) with which neither the
Company nor any Restricted Subsidiary of the Company has any material
contract, agreement, arrangement or understanding other than on terms no less
favorable to the Company or such Restricted Subsidiary than those that might
be obtained at the time from Persons that are not Affiliates of the Company,
other than fees payable in the ordinary course of business in connection with
servicing receivables of such entity and (iii) to which neither the Company
nor any Restricted Subsidiary of the Company has any obligation to maintain or
preserve such entity's financial condition or cause such entity to achieve
certain levels of operating results. Any such designation by the Board of
Directors of the Company shall be evidenced by the filing with the Trustee a
Board Resolution of the Company giving effect to such designation and an
Officer's Certificate certifying that such designation complied with the
foregoing conditions.
"Securityholders Agreement" means the Securityholders Agreement among the
Company and the other signatories thereto as in effect on the date of the
Indenture or as thereafter amended in a manner that is not disadvantageous to
the Holders of Notes in a material respect.
"Senior Credit Facility" means, the Credit Agreement dated as of July 31,
1998, among the Company, Globe Manufacturing, the lenders party thereto in
their capacity as such, Bank of America National Trust and Savings
Association, as administrative agent, Merrill Lynch, Pierce, Fenner & Smith,
Inc., as syndication agent, and BancAmerica Robertson Stephens, as arranger,
together with the related documents thereto (including, without limitation,
any guarantee agreements and security documents), in each case as such
agreements may be amended (including any amendment and restatement thereof),
supplemented or otherwise modified from time to time, including any agreement
extending the maturity of, refinancing, replacing or otherwise restructuring
(including, without limitation, increasing the amount of available borrowings
thereunder or adding Subsidiaries of the Company as additional borrowers or
guarantors thereunder) all or any portion of the indebtedness under such
agreement or any successor or replacement agreement, whether by the same or
any other agent, lender or group of lenders, whether contained in one or more
agreements.
"Senior Debt" means, with respect to any Person, the principal of, premium
(if any) and accrued and unpaid interest (including interest accruing on or
after the filing of any petition in bankruptcy or for reorganization of such
Person, regardless of whether or not a claim for post-filing interest is
allowed in such proceedings) on, and fees and other amounts owning in respect
of, Debt of such Person, whether outstanding on the Issue Date or thereafter
incurred, unless in the instrument creating or evidencing the same or pursuant
to which the same is outstanding it is provided that such obligations are
subordinated in right of payment to the Notes; provided, however, that Senior
Debt shall not include (i) any obligation of the Company to any Subsidiary,
(ii) any liability for Federal, state, local or other taxes owed or owing by
the Company, (iii) any accounts payable or other liability to trade creditors
arising in the ordinary course of business (including guarantees thereof or
instruments evidencing such liabilities), (iv) any Debt or obligation of the
Company (and any accrued and unpaid interest in respect thereof) that by its
terms is subordinate or junior in any respect to any other Debt or obligation
of the Company, including any Subordinated Debt, (v) any payment obligations
with respect to any Equity Interests, or (vi) any Debt incurred in violation
of the Indenture.
"Significant Subsidiary" means any Restricted Subsidiary of the Company that
would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of
Regulation S-X, promulgated pursuant to the Act, as such Regulation is in
effect on the Issue Date.
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"Standard Securitization Undertakings" means representations, warranties,
covenants and indemnitees entered into by the Company or any Subsidiary of the
Company that are reasonably customary in receivables or equipment loan
transactions.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Debt, the date on which such payment of interest or
principal was scheduled to be paid in the original documentation governing
such Debt, and shall not include any contingent obligations to repay, redeem
or repurchase any such interest or principal prior to the date originally
scheduled for the payment thereof.
"Subordinated Debt" means any Debt of the Company (whether outstanding on
the Issue Date or thereafter incurred) which is by its terms subordinated in
right of payment to the Notes.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total
voting power of shares of Capital Stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers
or trustees thereof is at the time owned or controlled, directly or
indirectly, by such Person or one or more of the other Subsidiaries of that
Person (or a combination thereof) and (ii) any partnership (A) the sole
general partner or the managing general partner of which is such Person or a
Subsidiary of such Person or (B) the only general partners of which are such
Person or one or more Subsidiaries of such Person (or any combination
thereof).
"Tax Sharing Agreement" means the Tax Sharing Agreement between the Company
and Globe Manufacturing as in effect on the date of the Indenture or as
thereafter amended in a manner that is not adverse to the Company or the
Holders of Notes.
"Total Assets" means, with respect to any date of determination, the total
assets of the Company and its Restricted Subsidiaries shown on the Company's
consolidated balance sheet prepared in accordance with GAAP on the last day of
the fiscal quarter prior to the date of determination.
"Treasury Rate" means the yield to maturity at the time of computation of
United States Treasury securities with a constant maturity (as compiled by,
and published in, the most recent Federal Reserve Statistical Release H.15
(519) which has become publicly available at least two Business Days prior to
the date fixed for redemption of the Notes following a Change of Control (or,
if such Statistical Release is no longer published, any publicly available
source of similar market data)) most nearly equal to the period from the
redemption date to August 1, 2003; provided, however, that if the period from
the redemption date to August 1, 2003 is not equal to the constant maturity of
a United States Treasury security for which a weekly average yield is given,
the Treasury Rate shall be obtained by linear interpolation (calculated to the
nearest one-twelfth of a year) from the weekly average yields of United States
Treasury securities for which such yields are given, except that if the period
from the redemption date to August 1, 2003 is less than one year, the weekly
average yield on actually traded United States Treasury securities adjusted to
a constant maturity of one year shall be used.
"Unrestricted Subsidiary" of any Person means (i) any Subsidiary of such
Person that as of the time of determination shall be or continue to be
designated an Unrestricted Subsidiary in the manner provided below and (ii)
any Subsidiary of an Unrestricted Subsidiary. The Board of Directors may
designate any Subsidiary (including any newly acquired or newly formed
Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary owns any
Capital Stock of the Company or any Restricted Subsidiary or holds any Lien on
any property of the Company or any other Subsidiary of the Company that is not
a Subsidiary of the Subsidiary to be so designated; provided that (i) the
Company certifies to the Trustee that such designation complies with the
provisions of the covenant described under the caption "--Certain Covenants--
Restricted Payments" and (ii) each Subsidiary to be so designated and each of
its Subsidiaries has not at the time of designation, and does not thereafter,
create, incur, issue, assume, guarantee or otherwise become directly or
indirectly liable with respect to, any indebtedness pursuant to which the
lender has recourse to any of the assets of the Company or any of its
Restricted Subsidiaries. The Board of Directors may designate any Unrestricted
Subsidiary to be a Restricted Subsidiary only if (i) immediately after giving
effect to such designation, the Company is able to incur at least
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$1.00 of additional Debt pursuant to the Consolidated Fixed Charge Coverage
Ratio set forth in the first paragraph of the covenant described under the
caption "--Incurrence of Debt and Issuance of Preferred Stock" and (ii)
immediately before and immediately after giving effect to such designation, no
Default or Event of Default shall have occurred and be continuing. Any such
designation by the Board of Directors shall be evidenced to the Trustee by
promptly filing with the Trustee a copy of the Board Resolution giving effect
to such designation and an Officers' Certificate certifying that such
designation complied with the foregoing provisions.
"Voting Stock" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors, managers, trustees or other governing body, as applicable, of such
Person.
"Weighted Average Life to Maturity" means, when applied to any Debt at any
date, the number of years obtained by dividing (i) the sum of the products
obtained by multiplying (A) the amount of each then remaining installment,
sinking fund, serial maturity or other required payments of principal
including payment at final maturity, in respect thereof, by (B) the number of
years (calculated to the nearest one-twelfth) that will elapse between such
date and the making of such payment, by (ii) the then outstanding principal
amount of such Debt.
"Wholly Owned Restricted Subsidiary" of any Person means any Restricted
Subsidiary of such Person that is a Wholly Owned Subsidiary of such Person.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such Person
all of the outstanding Capital Stock or other ownership interests of which
(other than directors' qualifying shares) shall at the time be owned by such
Person, by one or more Wholly Owned Subsidiaries of such Person or by such
Person and one or more Wholly Owned Subsidiaries of such Person.
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default: (i) default for 30 days in the payment when due of interest on the
Notes; (ii) default in payment when due of the principal of or premium, if
any, on the Notes; (iii) failure by the Company or any of its Restricted
Subsidiaries for 30 days after notice from either the Trustee or the Holders
of at least 25% in principal amount of the then outstanding Notes to comply
with the provisions described under the captions "--Repurchase at the Option
of Holders Upon Change of Control", "--Certain Covenants--Asset Sales", or "--
Certain Covenants--Merger, Consolidation or Sale of Assets"; (iv) failure by
the Company or any of its Restricted Subsidiaries for 60 days after notice
from either the Trustee or the Holders of at least 25% in principal amount at
maturity of the then-outstanding Notes to comply with any of its other
agreements or covenants in the Indenture or the Notes; (v) a default under any
mortgage, indenture, agreement or instrument under which there may be issued
or by which there may be secured or evidenced any Debt for money borrowed by
the Company or any of its Restricted Subsidiaries (other than a Securitization
Entity) (or the payment of which is guaranteed by the Company or any of its
Restricted Subsidiaries (other than a Securitization Entity)) whether such
Debt or guarantee now exists, or is created after the date of the Indenture,
which default (A) is caused by a failure to pay at final Stated Maturity
(giving effect to any applicable grace periods and any extensions thereof) the
principal amount of such Debt (a "Payment Default") or (B) results in the
acceleration of such Debt prior to its final Stated Maturity and, in the case
of either clause (A) or (B), the principal amount of any such Debt, together
with the principal amount of any other such Debt under which there has been a
Payment Default or the maturity of which has been so accelerated, aggregates
$7.5 million or more; (vi) failure by the Company or any of its Significant
Subsidiaries to pay final judgments aggregating in excess of $7.5 million (to
the extent not covered by third party insurance as to which the insurance
company has acknowledged coverage), which judgments are not paid, discharged
or stayed for a period of 60 days; and (vii) certain events of bankruptcy or
insolvency with respect to the Company or any of its Significant Subsidiaries.
If any Event of Default occurs and is continuing, the Trustee or the Holders
of at least 25% in principal amount at maturity of the then outstanding Notes
may declare (a) the Accreted Value of all the Notes, together
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with Liquidated Damages, if any, if on or prior to August 1, 2003 or (b) the
principal of and accrued but unpaid interest on all the Notes if after August
1, 2003, to be due and payable by notice in writing to the Company and the
Trustee specifying the respective Event of Default and that it is a "notice of
acceleration" (the "Acceleration Notice") and the same shall become
immediately due and payable. In the event of a declaration of acceleration
because an Event of Default set forth in clause (v) of the preceding paragraph
has occurred and is continuing, such declaration of acceleration shall be
automatically annulled if (i) the missed payments in respect of the applicable
Debt have been paid or if the holders of the Debt that is subject to
acceleration have rescinded their declaration of acceleration, in each case
within 30 days thereof and (ii) all existing Events of Default, except non-
payment of principal or interest which have become due solely because of the
acceleration of the Notes, have been cured or waived. Notwithstanding the
foregoing, in the case of an Event of Default arising from certain events of
bankruptcy or insolvency, with respect to the Company, any Significant
Subsidiary or any group of Restricted Subsidiaries that, taken together, would
constitute a Significant Subsidiary, (a) the Accreted Value of all the Notes,
together with Liquidated Damages, if any, if on or prior to August 1, 2003 or
(b) the principal of and accrued but unpaid interest on all the Notes if after
August 1, 2003, will become due and payable without further action or notice.
Holders of the Notes may not enforce the Indenture or the Notes except as
provided in the Indenture. 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.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have
had to pay if the Company then had elected to redeem the Notes pursuant to the
optional redemption provisions of the Indenture, an equivalent premium shall
also become and be immediately due and payable to the extent permitted by law
upon the acceleration of the Notes. If an Event of Default occurs by reason of
any willful action (or inaction) taken (or not taken) by or on behalf of the
Company with the intention of avoiding the prohibition on redemption of the
Notes, then the premium specified in the Indenture shall also become
immediately due and payable to the extent permitted by law upon the
acceleration of the Notes. If an Event of Default occurs prior to August 1,
2003, by reason of any willful action (or inaction) taken (or not taken) by or
on behalf of the Company with the intention of avoiding the prohibition on
redemption of the Notes prior to such date, then the amount payable for
purposes of this paragraph shall be the amount that would otherwise be due but
for the provisions of this sentence, plus the Applicable Premium determined as
of the date of payment.
The Holders of a majority in aggregate principal amount at maturity of the
Notes then outstanding by notice to the Trustee may on behalf of the Holders
of all of the Notes waive any existing Default or Event of Default and its
consequences under the Indenture except a continuing Default or Event of
Default in the payment of interest on, or the principal of, the Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
All references herein to payments of principal, premium, if any, and
interest on the Notes shall be deemed to include any applicable Liquidated
Damages that may become payable in respect of the Notes.
MODIFICATION OF THE INDENTURE
Except as provided in the two succeeding paragraphs, the Indenture or the
Notes may be amended or supplemented with the consent of the Holders of at
least a majority in principal amount at maturity of the Notes then outstanding
(including, without limitation, consents obtained in connection with a
purchase of, or tender offer or exchange offer for, Notes), and any existing
default or compliance with any provision of the Indenture or the Notes may be
waived with the consent of the Holders of a majority in principal amount of
the then outstanding Notes (including consents obtained in connection with a
tender offer or exchange offer for Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting Holder): (i) reduce the
principal amount at maturity of Notes whose Holders must
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consent to an amendment, supplement or waiver, (ii) reduce the principal or
Accreted Value of or change the fixed maturity of any Note or alter the
provisions with respect to the redemption of the Notes, (iii) reduce the rate
of or change the time for payment of interest on any Note, (iv) waive a
Default or Event of Default in the payment of principal, premium, if any, or
interest on the Notes (except a rescission of acceleration of the Notes by the
Holders of at least a majority in aggregate principal amount of the Notes and
a waiver of the payment default that resulted from such acceleration), (v)
make any Note payable in money other than that stated in the Notes, (vi) make
any change in the provisions of the Indenture relating to waivers of past
Defaults or the rights of Holders of Notes to receive payments of principal of
or premium, if any, or interest on the Notes, (vii) waive a redemption payment
with respect to any Note (other than a payment required by the covenant
described above under the caption "--Change of Control"), (viii) modify or
change any provision of the Indenture or the related definitions, affecting
the subordination or ranking of the Notes in any manner that adversely affects
the Holders, or (ix) make any change in the foregoing amendment and waiver
provisions.
Notwithstanding the foregoing, without the consent of any Holder of Notes,
the Company and the Trustee may amend or supplement the Indenture or the Notes
to cure any ambiguity, defect or inconsistency, to provide for uncertificated
Notes in addition to or in place of certificated Notes, to provide for the
assumption of the Company's obligations to Holders of Notes in the case of a
merger or consolidation, to make any change that would provide any additional
rights or benefits to the Holders of Notes or that does not adversely affect
the legal rights under the Indenture of any such Holder, or to comply with
requirements of the Commission in order to effect or maintain the
qualification of the Indenture under the Trust Indenture Act.
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, 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 that consent, waive or agree to
amend in the time frame set forth in the solicitation documents relating to
such consent, waiver or agreement, which solicitation documents must be mailed
to all Holders of the Notes a reasonable length of time prior to the
expiration of the solicitation.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND SHAREHOLDERS
No director, officer, employee, incorporator or shareholder of the Company,
as such, shall have any liability for any obligations of the Company under the
Notes, the Indenture or for any claim based on, in respect of, or by reason
of, such obligations or their creation. Each Holder of Notes by accepting a
Note waives and releases all such liability. The waiver and release are part
of the consideration for issuance of the Notes. Such waiver may not be
effective to waive liabilities under the federal securities laws and it is the
view of the Commission that such a waiver is against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding Notes ("Legal
Defeasance") except for (i) the rights of Holders of outstanding Notes to
receive payments in respect of the principal, premium, if any, and interest on
such Notes when such payments are due from the trust referred to below, (ii)
the Company's obligations with respect to the Notes concerning issuing
temporary Notes, registration of Notes, mutilated, destroyed, lost or stolen
Notes and the maintenance of an office or agency for payment and money for
security payments held in trust, (iii) the rights, powers, trusts, duties and
immunities of the Trustee, and the Company's obligations in connection
therewith and (iv) the Legal Defeasance provisions of the Indenture. In
addition, the Company may, at its option and at any time, elect to have the
obligations of the Company released with respect to certain covenants that are
described in the Indenture ("Covenant Defeasance") and thereafter any omission
to comply with such obligations shall not constitute a Default or Event of
Default with respect to the Notes. In the event Covenant Defeasance occurs,
certain events (not including non-payment, bankruptcy, receivership,
rehabilitation and insolvency events) described under "Events of Default" will
no longer constitute an Event of Default with respect to the Notes.
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In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit
of the Holders of the Notes, cash in U.S. dollars, non-callable Government
Securities, or a combination thereof, in such amounts as will be sufficient,
in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal, premium, if any, and interest on the
outstanding Notes at their Stated Maturity or on the applicable redemption
date, as the case may be, and the Company must specify whether the Notes are
being defeased to maturity or to a particular redemption date; (ii) in the
case of Legal Defeasance, the Company shall have delivered to the Trustee an
opinion of counsel in the United States reasonably acceptable to the Trustee
confirming that (A) the Company has received from, or there has been published
by, the Internal Revenue Service a ruling or (B) since the date of the
Indenture, there has been a change in the applicable federal income tax law,
in either case to the effect that, and based thereon such opinion of counsel
shall confirm that, the Holders of the outstanding Notes will not recognize
income, gain or loss for federal income tax purposes as a result of such Legal
Defeasance and will be subject to federal income tax on the same amounts, in
the same manner and at the same times as would have been the case if such
Legal Defeasance had not occurred; (iii) in the case of Covenant Defeasance,
the Company shall have delivered to the Trustee an opinion of counsel in the
United States reasonably acceptable to the Trustee confirming that the Holders
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; (iv) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of
Default resulting from the borrowing of funds to be applied to such deposit)
or insofar as Events of Default from bankruptcy or insolvency events are
concerned, at any time in the period ending on the 91st day after the date of
deposit; (v) such Legal Defeasance or Covenant Defeasance will not result in a
breach or violation of, or constitute a default under any material agreement
or instrument (other than the Indenture) to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries is
bound; (vi) the Company must have delivered to the Trustee an opinion of
counsel to the effect that after the 91st day following the deposit, the trust
funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally; (vii) the Company must deliver to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the
intent of preferring the Holders of Notes over the other creditors of the
Company with the intent of defeating, hindering, delaying or defrauding
creditors of the Company or others; and (viii) the Company must deliver to the
Trustee an Officers' Certificate and an opinion of counsel, each stating that
all conditions precedent provided for relating to the Legal Defeasance or the
Covenant Defeasance have been complied with.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar and the Trustee may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and the Company may
require a Holder to pay any taxes and fees required by law or permitted by the
Indenture. The Company is not required to transfer or exchange any Note
selected for redemption. Also, the Company is not required to transfer or
exchange any Note for a period of 15 days before a selection of Notes to be
redeemed.
The registered Holder of a Note will be treated as the owner of it for all
purposes.
GOVERNING LAW
The Indenture, the Notes and the Registration Rights Agreement are governed
by, and construed in accordance with, the laws of the State of New York,
without giving effect to the conflicts of law principles thereof.
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CONCERNING THE TRUSTEE
Norwest Bank Minnesota, National Association is the Trustee under the
Indenture. Its address is Norwest Center, 6th and Marquette, Minneapolis,
Minnesota. The Company has also approved the Trustee as the initial Registrar,
Transfer Agent and Paying Agent under the Indenture. The Trustee is also the
trustee under the Senior Subordinated Note Indenture.
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any
such claim as security or otherwise. The Trustee will be permitted to engage
in other transactions; however, if it acquires any conflicting interest it
must eliminate such conflict within 90 days, apply to the Commission for
permission to continue or resign.
The Holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur (which shall not be cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the
conduct of his own affairs. Subject to such provisions, the Trustee will be
under no obligation to exercise any of its rights or powers under the
Indenture at the request of any Holder of Notes, unless such Holder shall have
offered to the Trustee security and indemnity satisfactory to it against any
loss, liability or expense.
EXCHANGE OFFER; REGISTRATION RIGHTS
The Company and the Initial Purchaser entered into a registration rights
agreement (the "Registration Rights Agreement") on August 6, 1998 pursuant to
which the Company agreed, for the benefit of Holders of the Notes, that it
will, at its expense for the benefit of the Holders, (i) within 60 days after
the Issue Date, file the Exchange Offer Registration Statement with the
Commission with respect to the Exchange Offer and (ii) use its best effort to
cause the Exchange Offer Registration Statement to be declared effective under
the Securities Act within 150 days after the Issue Date. Upon the Exchange
Offer Registration Statement being declared effective, the Company will offer
to all holders of the Notes an opportunity to exchange their securities for a
like principal amount of the New Notes. The Company will keep the Exchange
Offer open for acceptance for not less than 20 business days (or longer if
required by applicable law) after the date notice of the Exchange Offer is
mailed to the Holders. For each Note surrendered to the Company for exchange
pursuant to the Exchange Offer, the Holder of such Note will receive a New
Note having a principal amount at maturity equal to that of the surrendered
Note. Interest on each New Note will accrue (i) from the last interest payment
date on which interest was paid on the Note surrendered in exchange therefor
or (ii) if no interest has been paid on such Note, from the Issue Date.
Under existing interpretations of the Commission contained in several no-
action letters to third parties, the New Notes will be freely transferable by
holders thereof (other than affiliates of the Company) after the Exchange
Offer without further registration under the Securities Act; provided,
however, that each Holder that wishes to exchange its Notes for New Notes will
be required to represent (i) that any New Notes to be received by it will be
acquired in the ordinary course of its business, (ii) that at the time of the
consummation of the Exchange Offer it has no arrangement or understanding with
any person to participate in the distribution (within the meaning of
Securities Act) of the New Notes in violation of the Securities Act, (iii)
that it is not an "affiliate" (as defined in Rule 405 promulgated under the
Securities Act) of the Company, (iv) if such Holder is not a broker-dealer,
that it is not engaged in, and does not intend to engage in, the distribution
of New Notes and (v) if such Holder is a broker-dealer (a "Participating
Broker-Dealer") that will receive New Notes for its own account in exchange
for Notes that were acquired as a result of market-making or other trading
activities, that it will deliver a prospectus in connection with any resale of
such New Notes. The Commission has taken the position that Participating
Broker-Dealers may fulfill their prospectus delivery requirements with respect
to the New Notes (other than a resale of an unsold allotment from the original
sale of the Notes) with the prospectus contained in the Exchange Offer
Registration Statement. The Company will agree to make available, during the
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period required by the Securities Act, a prospectus meeting the requirements
of the Securities Act for use by Participating Broker-Dealers and other
persons, if any, with similar prospectus delivery requirements for use in
connection with any resale of New Notes.
If, (i) because of any change in law or in currently prevailing
interpretations of the staff of the Commission, the Company is not permitted
to effect an Exchange Offer, (ii) the Exchange Offer is not consummated within
180 days of the Issue Date, (iii) in certain circumstances, certain holders of
unregistered New Notes so request, or (iv) in the case of any Holder that
participates in the Exchange Offer, such Holder does not receive New Notes on
the date of the exchange that may be sold without restriction under state and
federal securities laws (other than due solely to the status of such Holder as
an affiliate of the Company within the meaning of the Securities Act), then in
each case, the Company will (x) promptly deliver to the Holders and the
Trustee written notice thereof and (y) at their sole expense, (1) as promptly
as practicable, file a shelf registration statement covering resales of the
Notes (the "Shelf Registration Statement"), (2) use their best efforts to
cause the Shelf Registration Statement to be declared effective under the
Securities Act and (3) use their best efforts to keep effective the Shelf
Registration Statement until the earlier of two years after the date such
Shelf Registration Statement is declared effective or such time as all of the
applicable Notes have been sold thereunder. The Company will, in the event
that a Shelf Registration Statement is filed, provide to each Holder copies of
the prospectus that is a part of the Shelf Registration Statement, notify each
such Holder when the Shelf Registration Statement for the Notes has become
effective and take certain other actions as are required to permit
unrestricted resales of the Notes. A Holder that sells Old Notes pursuant to
the Shelf Registration Statement will 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 that are applicable to such
Holder (including certain indemnification rights and obligations).
If the Company fails to comply with the above provision or if the Exchange
Offer Registration Statement or the Shelf Registration Statement fails to
become effective, then liquidated damages ("Liquidated Damages") shall become
payable in respect of the Notes as follows:
(i) if the Exchange Offer Registration Statement or any Shelf
Registration Statement is not filed with the Commission on or prior to the
applicable Filing Date, Liquidated Damages shall accrue on the principal
amount at maturity of the Notes at a rate of .50% per annum for the first
90 days immediately following such Filing Date, such Liquidated Damages
increasing by an additional .25% per annum at the beginning of each
subsequent 90-day period; or
(ii) if the Exchange Offer Registration Statement is not declared
effective by the Commission within 150 days following the Issue Date or,
whether or not the Company and the Guarantors have consummated or will
consummate an Exchange Offer, the Company and the Guarantors are required
to file a Shelf Registration Statement and such Shelf Registration
Statement is not declared effective by the Commission on or prior to the
90th day following the applicable Filing Date with respect to such Shelf
Registration Statement, then, commencing on the day after either such
required effective date, Liquidated Damages shall accrue on the principal
amount at maturity of the Notes at a rate of .50% per annum for the first
90 days immediately following such date, such Liquidated Damages increasing
by an additional .25% per annum at the beginning of each subsequent 90-day
period; or
(iii) if (A) the Company has not exchanged New Notes for all Notes
validly tendered in accordance with the terms of the Exchange Offer on or
prior to the 180th day after the Issue Date, (B) the Exchange Offer
Registration Statement ceases to be effective 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 or (C) if applicable, the Shelf
Registration Statement has been declared effective and such Shelf
Registration Statement ceases to be effective at any time prior to the
second anniversary of the date such Shelf Registration Statement was
declared effective (other than after such time as all Notes have been
disposed of thereunder), the Liquidated Damages shall accrue on the
principal amount at maturity of the Notes at a rate of .50% per annum for
the
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first 90 days commencing on (x) the 181st day after the Issue Date, in the
case of (A) above, (y) the day the Exchange Offer Registration Statement
ceases to be effective in the case of (B) above or (z) the day such Shelf
Registration Statement ceases to be effective in the case of (C) above,
such Liquidated Damages increasing by an additional .25% at the beginning
of each subsequent 90-day period;
provided, however, that the Liquidated Damages as a result of the provisions
of clauses (i), (ii) and (iii) above may not exceed in the aggregate 2.0% per
annum; provided, further, however, that (x) upon the filing of the Exchange
Offer Registration Statement or a Shelf Registration Statement (in the case of
clause (i) above), (y) upon the effectiveness of the Exchange Offer
Registration or a Shelf Registration Statement (in the case of clause (ii)
above), or (z) upon the exchange of New Notes for all Notes tendered (in the
case of clause (iii) (A) above), upon the effectiveness of the Exchange Offer
Registration Statement which had ceased to remain effective (in the case of
clause (iii) (B) above) or upon the effectiveness of the Shelf Registration
Statement which had ceased to remain effective (in the case of clause (iii)
(C) above), Liquidated Damages on the Notes as a result of such clause (or the
relevant subclause thereof), as the case may be, shall cease to accrue.
As used herein, "Filing Date" means (i) in the case of an Exchange Offer
Registration Statement, the 60th day after the Issue Date; or (ii) in the case
of a Shelf Registration Statement (which may be applicable notwithstanding the
consummation of the Exchange Offer), the 60th day after a notice regarding the
obligation to file a Shelf Registration Statement is required to be delivered.
Any amounts of Liquidated Damages due pursuant to clauses (i), (ii) or (iii)
above will be payable in cash, on February 1 and August 1 in each year. The
amount of Liquidated Damages will be determined by multiplying the applicable
rate of Liquidated Damages by the principal amount at maturity of the Notes,
multiplied by a fraction, the numerator of which is the number of days such
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.
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 will be available upon request to the Company.
ADDITIONAL INFORMATION
Anyone who receives this Prospectus may obtain a copy of the Indenture and
the Registration Rights Agreement without charge by writing to the Trustee.
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Old Notes were originally sold by the Company on August 6, 1998 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, the Company and the Initial Purchaser entered into the Registration
Rights Agreement on the date of the Initial Offering (the "Issue Date").
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.
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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 at maturity of
outstanding 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 liquidated damages in certain
circumstances relating to the timing of the Exchange Offer, all of which
rights will terminate when the Exchange Offer is consummated. 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, $49,086,000 aggregate principal amount at
maturity of Old Notes were outstanding. The Company has fixed the close of
business on , 1998 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 Massachusetts, 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."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
1998, 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, (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
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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 Old Notes will continue to accrete at the rate of 14% per annum to, but
excluding the date of issuance of the New Notes and will cease to accrete upon
cancellation of the Old Notes and issuance of the New Notes. Any Old Notes not
tendered or accepted for exchange will continue to accrete at the rate of 14%
per annum in accordance with their terms. From and after the date of issuance
of the New Notes, the New Notes shall accrete at the rate of 14% per annum,
but no cash interest will be payable in respect of the New Notes prior to
August 1, 2003. Thereafter, cash interest on the New Notes will accrue at a
rate of 14% per annum and will be payable semi-annually in arrears on February
1 and August 1 of each year, commencing February 1, 2004.
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 or submit an Agent's
Message (as defined below) in connection with a book-entry transfer, and mail
or otherwise deliver such Letter of Transmittal or such facsimile, or Agent's
Message, 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 Agent's
Message 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, which states that such book-entry transfer
facility has received an express acknowledgment from the participant in such
book-entry transfer facility tendering the Old Notes that such participant has
received and agrees: (i) to participate in the Automated Tender Option Program
("ATOP"); (ii) to be bound by the terms of the Letter of Transmittal; and
(iii) that the Company may enforce such agreement against such participant.
By executing the Letter of Transmittal (or transmitting an Agent's Message
in lieu thereof), each holder will make to the Company 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 or Agent's Message.
THE METHOD OF DELIVERY OF OLD NOTES AND THE LETTER OF TRANSMITTAL OR AGENT'S
MESSAGE 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 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, DEALERS,
COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS
FOR SUCH HOLDERS.
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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 below)
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 the book-entry transfer facility, The Depository Trust Company
(the "Book-Entry Transfer Facility"), for the purpose of facilitating the
Exchange Offer, and subject to the establishment thereof, any financial
institution that is a participant in the Book-Entry Transfer Facility's system
may make book-entry delivery of Old Notes by causing such Book-Entry Transfer
Facility to transfer such Old Notes into the Exchange Agent's account with
respect to the Old Notes in accordance with the Book-Entry Transfer Facility'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 the
Book-Entry Transfer Facility, an appropriate Letter of Transmittal properly
completed and duly executed with any required signature guarantee (or, in the
case of book-entry transfer, an Agent's Message in lieu thereof) 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 the Book-Entry Transfer Facility 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 properly tendered or any Old Notes
the Company's acceptance of which would, in the opinion of counsel for the
Company, be unlawful. The Company also reserves the right in their 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 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.
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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, in the case of book-entry transfer, an Agent's Message) 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 properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder, 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 certificate(s)
representing the Old Notes (or a confirmation of book-entry transfer of
such Notes into the Exchange Agent's account at the Book-Entry Transfer
Facility), and any other documents required by the Letter of Transmittal
will be deposited by the Eligible Institution with the Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal or
facsimile thereof (or, in the case of book-entry transfer, an Agent's
Message), as well as the certificate(s) 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 the Book-Entry Transfer
Facility), 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 the Book-Entry Transfer Facility 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 before the
acceptance of such Old Notes, 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 sole 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 sole 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 sole discretion, deem necessary for the consummation
of the Exchange Offer as contemplated hereby.
If the Company determines in its sole discretion that any of the 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 properly tendered
Old Notes which have not been withdrawn.
EXCHANGE AGENT
Norwest Bank Minnesota, National Association 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:
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
By Registered or Certified Mail: Overnight Courier:
Norwest Bank Minnesota, National Norwest Bank Minnesota, National
Association Association
P.O. Box 1517 Norwest Center
Minneapolis, Minnesota 55480-1517 6th and Marquette Avenue
Attention: Corporate Trust Services Minneapolis, Minnesota 55479-0113
Attention: Corporate Trust Services
By Hand: Facsimile Transmission:
Norwest Bank Minnesota, National (For Eligible Institutions Only)
Association (612) 667-4927
NorthStar East, 12th Floor Confirm by Telephone:
608 Second Avenue South, North Star (612) 667-9764
East
Minneapolis, Minnesota 55479-0113
DELIVERY TO AN ADDRESS OTHER THAN SET FORTH ABOVE OR TRANSMISSION OF
INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONE 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, 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, 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), (iii)
outside the United States to a foreign person in a transaction meeting the
requirements of Rule 904 under the Securities Act, or (iv) pursuant to an
effective registration statement 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 enunciated 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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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 broker-dealer 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 New Notes 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 WARRANTS
On August 6, 1998 the Company issued the Warrants pursuant to the Warrant
Agreement between the Company and Norwest Bank Minnesota, National
Association, as warrant agent (the "Warrant Agent"), in a private transaction
that is not subject to the registration requirements of the Securities Act.
The following summary of certain provisions of the Warrant Agreement and the
Warrant Registration Rights Agreement does not purport to be complete and is
qualified in its entirety by reference to the Warrant Agreement, the Warrants
and the Warrant Registration Rights Agreement, including the definitions
therein of certain terms.
GENERAL
The Warrants will become separately transferable from the Notes on the
earliest to occur of (i) the date that is six months following the Issue Date,
(ii) the commencement of the Exchange Offer, (iii) the date a Shelf
Registration Statement with respect to the Notes is declared effective, (iv) a
Change of Control and (v) such date as the Initial Purchaser may in its sole
discretion deem appropriate. See "Description of the Notes--Exchange Offer;
Registration Rights." The date on which the Notes and the Warrants become
separable is the "Separation Date." Prior to the Separation Date, the Notes
and the Warrants will bear legends restricting the separate transfer thereof.
On and after the Separation Date, the Notes and Warrants will be separably
transferrable and the registered holders thereof may exchange such securities
for separate certificates evidencing the Notes and the Warrants without such
legends.
Each Warrant, when exercised, will entitle the holder thereof to purchase
1.4155 shares of Common Stock of the Company at an Exercise Price of $0.01 per
share. The Exercise Price and the number of Warrant Shares issuable on
exercise of a Warrant are both subject to adjustment in certain cases referred
to below. The Warrants are exercisable at any time on or after the Separation
Date. Unless exercised, the Warrants will automatically expire on August 1,
2009 (the "Expiration Date"). The Warrants will entitle the holders thereof to
purchase in the aggregate approximately 3.0% of the outstanding Common Stock
of the Company on a fully diluted basis as of the Issue Date after giving
effect to the (i) consummation of the Transactions and (ii) exercise as of the
Issue Date of all outstanding options issued by the Company. The Company will
give notice of expiration not less than 90 nor more than 120 days prior to the
Expiration Date to the registered holders of the then outstanding Warrants. If
the Company fails to give this notice, the Warrants will not expire until 90
days after the Company gives such notice. In no event will holders be entitled
to any damages or other remedy for the Company's failure to give such notice
other than any such extension.
The Warrants may be exercised by surrendering to the Company the Warrant
certificates evidencing such Warrants, if any, with the accompanying form of
election to purchase, properly completed and executed together with payment of
the Exercise Price. Payment of the Exercise Price may be made in the form of
cash or a certified
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or official bank check, payable to the order of the Company, or by surrender
of additional Warrants. Upon surrender of the Warrant certificate and payment
of the Exercise Price, the Warrant Agent will deliver or cause to be
delivered, to or upon the written order of such holder, stock certificates
representing the number of whole Warrant Shares or other securities or
property to which such holder is entitled under the Warrants and Warrant
Agreement, including without limitation any cash payment to adjust for
fractional interests in Warrant Shares issuable upon such exercise. If less
than all of the Warrants evidenced by a Warrant certificate are exercised, a
new Warrant certificate will be issued for the remaining number of Warrants.
No fractional Warrant Share will be issued upon exercise of the Warrants. If
any fraction of a Warrant Share would, except for the foregoing provision, be
issuable on the exercise of any Warrants (or specified portion thereof), the
Company must pay to the holder an amount in cash equal to the current market
price per Warrant Share, as determined on the day immediately preceding the
date the Warrant is presented for exercise, multiplied by such fraction,
computed to the nearest whole cent.
Certificates for Warrants will be issued in registered form only, and no
service charge will be made for registration or transfer or exchange upon
surrender of any Warrant certificate at the office of the Warrant Agent
maintained for that purpose. The Company may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed
in connection with any registration or transfer or exchange of Warrant
certificates.
The holders of the Warrants have no right to vote on matters submitted to
the shareholders of the Company and have no right to receive dividends, except
as provided below. The holders of the Warrants are not entitled to share in
the assets of the Company in the event of the liquidation, dissolution or
winding up of the Company's affairs.
ADJUSTMENTS
Both the number of Warrant Shares purchasable upon the exercise of the
Warrants and the Exercise Price will be subject to adjustment in certain
events including (i) the payment by the Company of dividends (or other
distributions) on Common Stock payable in Common Stock or other shares of the
Company's capital stock, (ii) subdivisions, combinations and reclassifications
of Common Stock, (iii) the issuance to all holders of Common Stock of rights,
options or warrants entitling them to subscribe for Common Stock, or for
securities convertible into or exchangeable for shares of Common Stock, in
either case for a consideration per share of Common Stock which is less than
the current market price per share (as defined in the Warrant Agreement) of
Common Stock, and (iv) the distribution to all holders of Common Stock of any
of the Company's assets, debt securities or any rights or warrants to purchase
securities (excluding those rights and warrants referred to in clause (iii)
above and excluding cash dividends or other cash distributions).
No adjustment in the Exercise Price will be required unless such adjustment
would require an increase or decrease of at least one percent (1%) in the
Exercise Price; provided, however, that any adjustment which is not made will
be carried forward and taken into account in any subsequent adjustment.
In case of certain consolidations or mergers of the Company, or the sale of
all or substantially all of the assets of the Company to another corporation,
each Warrant shall thereafter be exercisable for the right to receive the kind
and amount of shares of stock or other securities or property to which such
holder would have been entitled as a result of such consolidation, merger or
sale had the Warrant been exercised immediately prior thereto.
RESERVATION OF SHARES
The Company has authorized and reserved for issuance such number of shares
of Common Stock as will be issuable upon the exercise of all outstanding
Warrants. Such shares of Common Stock, when paid for and issued,
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will be duly and validly issued, fully paid and non-assessable, free of
preemptive rights and free from all taxes, liens, charges and security
interests with respect to the issue thereof.
AMENDMENT
From time to time, the Company and the Warrant Agent, without consent of the
holders of the Warrants, may amend or supplement the Warrant Agreement for
certain purposes, including curing defects or inconsistencies or making
changes that do not materially and adversely affect the rights of any holder.
Any amendment or supplement to the Warrant Agreement that has a material
adverse effect on the interests of the holders of the Warrants requires the
written consent of the holders of a majority of the then outstanding Warrants.
The consent of each holder of the Warrants affected is required for any
amendment pursuant to which the Exercise Price would be increased or the
number of Warrant Shares purchasable upon exercise of Warrants would be
decreased (other than pursuant to adjustments provided for in the Warrant
Agreement as generally described above).
REPORTS
Whether or not required by the rules and regulations of the Commission, so
long as any of the Warrants remain outstanding, the Company shall cause copies
of the annual and quarterly reports and the other information, documents and
reports filed with the Commission, as described under "Description of the
Notes--Certain Covenants--Reports," to be filed with the Warrant Agent and
mailed to the holders at their addresses appearing in the register of Warrants
maintained by the Warrant Agent.
REGISTRATION RIGHTS
Under the terms of the Warrant Registration Rights Agreement, the holders of
the Warrants will be entitled to piggy-back registration rights for the Common
Stock (or other securities) issuable upon exercise of the Warrants in
connection with (i) an initial public offering of the Common Stock (or other
securities) issuable upon exercise of the Warrants, if any shareholder of the
issuer participates in such public offering, or (ii) certain public offerings
of shares of Common Stock (or other securities) issuable upon exercise of the
Warrants conducted subsequent to the initial public offering of such stock. If
only the Company sells shares in the initial public offering or all of the
Warrant Shares (or other securities issuable upon exercise of the Warrants)
are not sold in the initial public offering or any subsequent offering, the
Company will be required to use its best efforts to cause to be declared
effective, no later than 180 days after the closing date of the initial public
offering (but in no event prior to the first anniversary of the Issue Date),
the Warrant Registration Statement with respect to the issuance of the Common
Stock (or other securities) issuable upon exercise of the Warrants. The
Company is required to use reasonable efforts to maintain the effectiveness of
the Warrant Registration Statement until the Expiration Date, or if earlier,
such time as all Warrants have been exercised. During any consecutive 365-day
period while the Warrants are exercisable, the Company will have the ability
to suspend the availability of such registration statement for (a) up to two
30-consecutive-day periods (except during the 30 days immediately prior to the
expiration of the Warrants) if the Company's Board of Directors determines in
good faith that there is a valid purpose for the suspension and provides
notice of such determination to the holders at their addresses appearing in
the register of Warrants maintained by the Warrant Agent and (b) five
additional, non-consecutive three-day periods, except during the 30-day period
immediately prior to the Expiration Date, if the Company's Board of Directors
determines in good faith that the Company cannot provide adequate disclosure
during such period due to circumstances beyond its control. Holders of
Warrants will not be named as selling securityholders in the Warrant
Registration Statement. The Warrant Agreement requires the Company to pay the
expenses associated with such registration.
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DESCRIPTION OF CAPITAL STOCK
The following summary of the terms of the Company's capital stock does not
purport to be complete and it is qualified in its entirety by reference to the
actual terms of the capital stock contained in the Company's Articles of
Organization and Bylaws and by the provisions of applicable law.
The Company's authorized capital stock consists of 5,000,000 shares of Class
A Common Stock, par value $0.01 per share (the "Class A Common"), 35,000
shares of Class B Common, par value $0.01 per share (the "Class B Common"),
600,000 shares of Class C Common, par value $0.01 per share (the "Class C
Common") and 40,000 shares of Class A Preferred Stock, par value $0.01 per
share (the "Preferred Stock"). The Class A Common, Class B Common and Class C
Common are collectively referred to in this "Description of Capital Stock" as
the "Company Common Stock." On June 30, 1998, on a pro forma basis after
giving effect to the Transactions, there were 2,179,150 shares of Class A
Common and 29,100 shares of Preferred Stock outstanding, and options
outstanding exercisable for 67,395 shares of Class A Common and 900 shares of
Preferred Stock.
COMMON STOCK
The issued and outstanding shares of Class A Common are validly issued,
fully paid and nonassessable. Subject to the prior rights of the holders of
Preferred Stock, the holders of outstanding shares of Company Common Stock are
entitled to receive dividends out of assets legally available therefor at such
time and in such amounts as the Board of Directors may from time to time
determine. The Indenture restricts the ability of the Company to pay dividends
on the Company Common Stock. The shares of Company Common Stock are not
subject to mandatory redemption, and the holders thereof have no preemptive or
subscription rights to purchase any securities of the Company. Each holder of
Class A Common is entitled at any time to convert any or all of such shares
into an equal number of shares of Class C Common. Each share of Class B Common
converts automatically into a share of Class A Common upon any public offering
of Common Stock registered under the Securities Act. Each share of Class C
Common may be converted into Class A Common upon the occurrence of certain
events. Upon liquidation, dissolution or winding up of the Company, the
holders of Company Common Stock are entitled to receive pro rata the assets of
the Company which are legally available for distribution, after payment of all
debts and other liabilities and subject to the prior rights of any holders of
Preferred Stock then outstanding. Each outstanding share of Class A Common is
entitled to vote on all matters submitted to a vote of shareholders. The Class
B Common and Class C Common have no voting rights; except that the holders of
Class C Common have a right to vote as a separate class if they would be
treated differently from Class A Common shareholders in any merger,
consolidation, recapitalization or reorganization. At present, there is no
established trading market for the Company Common Stock.
PREFERRED STOCK
Upon any liquidation, dissolution or winding up of the Company (whether
voluntary or involuntary), each holder of Preferred Stock is entitled to be
paid before any distribution or payment is made with respect to any other
class of the Company's capital stock, an amount in cash equal to the aggregate
Liquidation Value of all shares held by such holder. "Liquidation Value" of
any share of Preferred Stock is $1,000, subject to adjustment for stock
splits, stock dividends and similar transactions. The Preferred Stock accrues
dividends at a rate of 14% per annum, compounded annually, on the sum of the
Liquidation Value plus accumulated and unpaid dividends, is not currently
subject to mandatory or optional redemption, and is not convertible into any
other class of capital stock of the Company.
LIMITATIONS ON LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Company's Articles of Organization will limit the liability of directors
to the fullest extent permitted by Massachusetts law. This provision of the
Company's Articles of Organization has no effect on the availability of
equitable remedies such as injunction or rescission. Additionally, this
provision will not limit liability under state or federal securities laws. The
Articles of Organization also provide that the Company shall indemnify
directors and officers of the Company unless finally adjudicated not to have
acted in good faith in the reasonable belief that his action was in the best
interests of the Company. The Company believes that the indemnification
provisions in the Company's Articles of Organization will assist the Company
in attracting and retaining qualified individuals to serve as directors.
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CERTAIN UNITED STATES
FEDERAL TAX CONSIDERATIONS
The following is a discussion of certain material U.S. Federal income and
estate tax consequences of an exchange of Old Notes for New Notes and the
ownership and disposition of the New Notes. Unless otherwise stated, this
discussion is limited to the tax consequences to those persons who are
original owners of the Notes, who acquired such Notes at their issue price (as
described below) and who hold such Notes as capital assets ("Holders"). The
discussion does not purport to address specific tax consequences that may be
relevant to particular persons (including, for example, financial
institutions, broker-dealers, insurance companies, tax-exempt organizations,
and persons in special situations, such as those who hold Notes as part of a
straddle, hedge, conversion transaction, or other integrated investment). In
addition, this discussion does not address U.S. Federal alternative minimum
tax consequences or any aspect of state, local or foreign taxation. This
discussion is based upon the Internal Revenue Code of 1986, as amended (the
"Code"), the Treasury Department regulations promulgated thereunder (the
"Treasury Regulations"), and administrative and judicial interpretations
thereof, all of which are subject to change, possibly with retroactive effect.
The Company will treat the Notes as indebtedness for Federal income tax
purposes, and the following discussion assumes that such treatment is correct.
For purposes of this discussion, a "U.S. Holder" is a Holder of a Note or
Warrant who is a United States citizen or resident, a corporation or
partnership or other entity created or organized in or under the laws of the
United States or any political subdivision thereof, an estate the income of
which is subject to U.S. Federal income taxation regardless of its source, or
a trust if a United States court exercises primary jurisdiction over its
administration and one or more United States persons have the authority to
control all of its substantial decisions. A "Non-U.S. Holder" is a Holder of a
Note or Warrant who is not a U.S. Holder.
EXCHANGE OF NOTES
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.
PROSPECTIVE PURCHASERS OF THE NOTES ARE URGED TO CONSULT THEIR TAX ADVISORS
CONCERNING THE UNITED STATES FEDERAL INCOME AND ESTATE TAX CONSEQUENCES TO
THEM OF ACQUIRING, OWNING AND DISPOSING OF THE NOTES, AS WELL AS THE
APPLICATION OF STATE, LOCAL AND FOREIGN INCOME AND OTHER TAX LAWS.
ALLOCATION OF PURCHASE PRICE BETWEEN OLD NOTES AND WARRANTS
For U.S. federal income tax purposes, an Old Note and the accompanying
Warrant will be treated as an investment unit. The issue price of a Unit for
U.S. federal income tax purposes will be the first price at which a
substantial amount of Units is sold for money (excluding sales to bond
holders, brokers or similar persons acting as underwriters, placement agents
or wholesalers). The issue price of a Unit must be allocated between the Old
Note and the Warrant based on the relative fair market values of each such
component of the Unit on the issue date. For this purpose, the Company intends
to allocate $496.72 to each Old Note and $12.59 to each Warrant. Pursuant to
Treasury Regulations issued under provisions of the Code relating to original
issued discount (the "OID Regulations"), each holder will be bound by such
allocation for U.S. federal income tax purposes unless such holder discloses,
on a statement attached to its tax return for the taxable year that includes
the acquisition date of such Unit, that its allocation differs from that of
the Company. No assurance can be given that the Internal Revenue Service (the
"Service") will accept the Company's allocation. If the Company's allocation
were
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successfully challenged by the Service, the issue price, original issue
discount accrual on the Old Note and gain or loss on the sale or disposition
of an Old Note or Warrant would be different from that resulting under the
allocation determined by the Company.
TAX CONSEQUENCES TO U.S. HOLDERS
THE NOTES
Original Issue Discount
The Old Notes and New Notes (which for tax purposes are treated as a
continuation of the Old Notes) will have original issue discount ("OID") for
U.S. Federal income tax purposes. A U.S. Holder will be required to include
OID in income as it accrues, regardless of such Holder's regular method of
accounting for Federal income tax purposes, and in advance of the receipt of
cash to which such income is attributable. OID generally will be treated as
interest income to the U.S. Holder and will accrue on a yield-to-maturity
basis over the life of the Note, as discussed below.
The amount of OID with respect to a New Note will be equal to the excess of
the "stated redemption price at maturity" of such New Note over its "issue
price." The stated redemption price at maturity of each New Note will include
all cash payments required to be made under the New Note through maturity,
whether denominated as principal or interest. The issue price of a New Note
will be as described for an Old Note above under "--Allocation of Purchase
Price between Old Notes and Warrants." The New Notes will be issued at a
substantial discount.
The amount of OID accruing to a Holder with respect to a Note will be the
sum of the "daily portions" of OID with respect to such Note for each day
during the taxable year (or portion thereof) on which such Holder owns such
Note ("accrued OID"). A daily portion is determined by allocating to each day
in an "accrual period" a pro rata portion of the OID allocable to that accrual
period. An accrual period of a Note may be of any length and may vary in
length over the term of a Note, provided that each accrual period is no longer
than one year and each scheduled payment of principal or interest occurs
either on the final day or on the first day of
an accrual period. The amount of OID accruing during any full accrual period
with respect to a Note will be equal to (i) the "adjusted issue price" of such
Note at the beginning of that accrual period, multiplied by (ii) the "yield-
to-maturity" of such Note (taking into account the length of the accrual
period). The adjusted issue price of a Note at the beginning of its first
accrual period will be equal to its issue price. The adjusted issue price at
the beginning of any subsequent accrual period will be equal to (i) the
adjusted issue price at the beginning of the preceding accrual period, plus
(ii) the amount of OID accrued during the preceding accrual period, minus
(iii) any payments on the Note during the preceding accrual period and on the
first day of such subsequent accrual period.
Under these rules, a Holder generally will have to include in income
increasingly greater amounts of OID in successive accrual periods. The yield-
to-maturity of a Note is the discount rate that, when used in computing the
present value of all payments to be made on a Note, produces an amount equal
to the issue price of the Note.
The Company does not intend to treat the possibility of an optional
redemption or repurchase of the Notes as giving rise to any additional accrual
of OID or recognition of ordinary income upon the redemption, sale or exchange
of a Note, and intends to report OID consistent with such treatment. Holders
may wish to consult their tax advisors with respect to Treasury Regulations
regarding the treatment of certain contingencies.
In certain cases, in the event the Company does not comply with certain
covenants set forth in the Registration Rights Agreement, the Company will be
obligated to pay specified Liquidated Damages to the Holders of the Notes. The
Company believes the contingency that the Company will pay such additional
amounts is "remote" or "incidental" within the meaning of applicable Treasury
Regulations. On that basis, the Company believes that the possibility that
such additional amounts may be paid should not be taken into account in
computing OID and intends to report OID consistent with such belief.
103
<PAGE>
The Company will report to Holders and to the Service each year the amount
of OID that accrued on the Notes for that year.
Applicable High Yield Discount Obligations
The Notes will be "applicable high yield discount obligations" ("AHYDOs")
for U.S. Federal income tax purposes. An AHYDO is a debt instrument that has a
yield-to-maturity, computed as of its issue date, that equals or exceeds the
sum of (i) the "applicable federal rate" (the "AFR") in effect for the month
in which the Notes are issued (for August 1998, the AFR is 5.64%, assuming
semi-annual compounding) and (ii) five percentage points, and that bears
"significant" OID (as determined under a formula prescribed in the Code).
Because the Notes are AHYDOs, the Company will not be entitled to claim a
deduction for OID that accrues with respect to such Notes, until amounts
attributable to such OID are actually paid. In addition, to the extent that
the yield-to-maturity of the Notes exceeds the sum of the AFR plus six
percentage points (the "non-deductible portion"), any deduction that is
attributable to the non-deductible portion will be permanently disallowed. To
the extent the non-deductible portion of OID would have been treated as a
dividend if it had been distributed with respect to stock of the Company, it
will be treated as a dividend for purposes of the rules relating to the
dividends received deduction for corporate Holders. U.S. Holders that are
corporations should consult their own tax advisors as to the applicability of
the dividends received deduction.
Sale, Exchange or Retirement of the Notes
Upon the sale, exchange or retirement of a Note, a U.S. Holder will
recognize gain or loss equal to the difference between the amount realized
upon such sale, exchange or retirement (except to the extent such amount is
attributable to accrued but unpaid interest which will be taxable as ordinary
income) and the U.S. Holder's adjusted tax basis in the Note. A U.S. Holder's
adjusted tax basis in a Note generally will be the U.S. Holder's cost
therefor, increased by the amount of OID previously included in income with
respect to such Note and decreased by all prior payments received on the Note.
In general, gain or loss recognized by a U.S. Holder on the sale, exchange
or retirement of the Notes will be capital gain or loss. The gain or loss will
be long-term capital gain or loss if the Notes have been held by the U.S.
Holder for more than 12 months. The deductibility of capital losses by U.S.
Holders is subject to limitation.
Liquidated Damages
The Company intends to take the position that any Liquidated Damages
described above under "Description of the Notes--Exchange Offer; Registration
Rights" will be taxable to a Holder of a Note as ordinary income at the time
such amounts are received or accrued in accordance with the Holder's usual
method of accounting for U.S. Federal income tax purposes. The Service may
take a different position, however, which could affect the timing of the
Holder's income with respect to Liquidated Damages.
TAX CONSEQUENCES TO NON-U.S. HOLDERS
Taxation of Interest
A Non-U.S. Holder generally will not be subject to U.S. Federal income or
withholding tax on interest (including OID) paid on the Notes so long as such
interest is not effectively connected with the Non-U.S. Holder's conduct of a
trade or business within the United States, and the Non-U.S. Holder (i) does
not actually or constructively own 10% or more of the total combined voting
power of all classes of stock of the Company, (ii) is not a "controlled
foreign corporation" with respect to which the Company is a "related person"
within the meaning of the Code, and (iii) satisfies the requirements of
Sections 871(h) or 881(c) of the Code, as set forth below under "Owner
Statement Requirement." If the foregoing conditions are not satisfied, then
interest paid on the Notes will be subject to U.S. withholding tax at a rate
of 30%, unless such rate is reduced or eliminated pursuant to an applicable
tax treaty.
104
<PAGE>
Sale, Exchange or Retirement of the Notes
Any capital gain a Non-U.S. Holder realizes on the sale, exchange,
retirement or other taxable disposition of a Note generally will be exempt
from U.S. Federal income and withholding tax, provided that (i) the gain is
not effectively connected with the Non-U.S. Holder's conduct of a trade or
business within the United States or (ii) in the case of a Non-U.S. Holder
that is an individual, the Non-U.S. Holder is not present in the United States
for 183 days or more during the taxable year.
Effectively Connected Income
If the interest, gain or other income a Non-U.S. Holder recognizes on a Note
is effectively connected with the Non-U.S. Holder's conduct of a trade or
business within the United States, the Non-U.S. Holder (although exempt from
the withholding tax previously discussed if an appropriate statement is
furnished) generally will be subject to U.S. Federal income tax on the
interest, gain or other income at regular Federal income tax rates. In
addition, if the Non-U.S. Holder is a corporation, it may be subject to a
branch profits tax equal to 30% of its "effectively connected earnings and
profits," as adjusted for certain items, unless it qualifies for a lower rate
under an applicable tax treaty.
Federal Estate Taxes
A Note held by an individual who at the time of death is not a citizen or
resident of the United States will not be subject to United States Federal
estate tax as a result of such individual's death, provided that the
individual does not actually or constructively own 10% or more of the total
combined voting power of all classes of stock of the Company entitled to vote
and that the interest accrued on such Note was not effectively connected with
a United States trade or business.
Owner Statement Requirement
Sections 871(h) and 881(c) of the Code require that either the beneficial
owner of a Note or a securities clearing organization, bank or other financial
institution that holds customers' securities in the ordinary course of its
trade or business (a "Financial Institution") and that holds a Note on behalf
of such owner files a statement with the Company or its agent to the effect
that the beneficial owner is not a United States person in order to avoid
withholding of United States Federal income tax. Under current regulations,
this requirement will be satisfied if the Company or its agent receives (i) a
statement (an "Owner Statement") from the beneficial owner of a Note in which
such owner certifies, under penalties of perjury, that such owner is not a
United States person and provides such owner's name and address, or (ii) a
statement from the Financial Institution holding the Note on behalf of the
beneficial owner in which the Financial Institution certifies, under penalties
of perjury, that it has received the Owner Statement together with a copy of
the Owner Statement. The beneficial owner must inform the Company or its agent
(or, in the case of a statement described in clause (ii) of the immediately
preceding sentence, the Financial Institution) within 30 days of any change in
information on the Owner Statement. The Service has amended the transition
period relating to recently issued Treasury Regulations governing backup
withholding and information reporting requirements. Withholding certificates
or statements that are valid on December 31, 1999, may be treated as valid
until the earlier of its expiration or December 31, 2000. All existing
certificates or statements will fail to be effective after December 31, 2000.
INFORMATION REPORTING AND BACKUP WITHHOLDING
The Company will, where required, report to the Holders of Notes and to the
Service the amount of certain payments made in respect of the Notes in each
calendar year and the amounts of tax withheld, if any, with respect to such
payments. A non-corporate U.S. Holder may be subject to information reporting
and to backup withholding at a rate of 31% with respect to payments of
principal and interest made on a Note, or on proceeds of the disposition of a
Note before maturity, unless such U.S. Holder provides a correct taxpayer
identification number or proof of an applicable exemption, and otherwise
complies with applicable requirements of the information reporting and backup
withholding rules.
105
<PAGE>
In the case of payments of interest to Non-U.S. Holders, current Treasury
Regulations provide that the 31% backup withholding tax and certain
information reporting requirements will not apply to such payments with
respect to which either the requisite certification, as described above, has
been received or an exemption has otherwise been established, provided that
neither the Company nor its payment agent has actual knowledge that the Holder
is a United States person or that the conditions of any other exemption are
not in fact satisfied. Under current Treasury Regulations, these information
reporting and backup withholding requirements will apply, however, to the
gross proceeds paid to a Non-U.S. Holder on the disposition of the Notes by or
through a United States office of a United States or foreign broker, unless
the Non-U.S. Holder otherwise establishes an exemption. Information reporting
requirements, but not backup withholding, will also apply to payment of the
proceeds of a disposition of the Notes by or through a foreign office of a
United States broker or foreign brokers with certain types of relationships to
the United States unless such broker has documentary evidence in its file that
the Holder of the Notes is not a United States person and such broker has no
actual knowledge to the contrary, or the Holder establishes an exception.
Neither information reporting nor backup withholding generally will apply to
payment of the proceeds of a disposition of the Notes by or through a foreign
office of a foreign broker not subject to the preceding sentence.
The Treasury Department has released new Treasury Regulations governing the
backup withholding and information reporting requirements. The new regulations
would not generally alter the treatment of a Non-U.S. Holder who furnishes an
Owner Statement to the payor. The new regulations may change certain
procedures applicable to the foreign office of a United States broker or
foreign brokers with certain types of relationships to the United States. The
new regulations are generally effective for payments made after December 31,
1999. Non-U.S. Holders should consult their own tax advisors with respect to
the impact, if any, of the new final regulations.
Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules may be refunded or credited against the Holder's
United States Federal income tax liability, provided that the required
information is furnished to the Service.
106
<PAGE>
BOOK-ENTRY PROCEDURES AND TRANSFER
GENERAL
Except as set forth in the next paragraph, the Notes to be resold as set
forth herein will each be issued in the form of one or more Global Notes
(each, a "Global Note"). The Global Note will be deposited on the Issue Date
with, or on behalf of, The Depository Trust Company, New York, New York, as
depositary (the "Depository"), and registered in the name of Cede & Co., as
nominee of the Depository (such nominee being referred to herein as the
"Global Note Holder").
Notes that are issued as described below under "--Certificated Securities"
will be issued in the form of registered definitive certificates (the
"Certificated Securities"). Upon the transfer of Certificated Securities, such
Certificated Securities may, unless the Global Note has previously been
exchanged for Certificated Securities, be exchanged for an interest in the
Global Note representing the Notes being transferred.
The Depository is a limited-purpose trust company that was created to hold
securities for its participating organizations (collectively, the
"Participants" or the "Depository's Participants") and to facilitate the
clearance and settlement of transactions in such securities between
Participants through electronic book-entry changes in accounts of its
Participants. The Depository's Participants include securities brokers and
dealers (including the Initial Purchaser), banks and trust companies, clearing
corporations and certain other organizations. Access to the Depository's
system is also available to other entities such as banks, brokers, dealers and
trust companies (collectively, the "Indirect Participants" or the
"Depository's Indirect Participants") that clear through or maintain a
custodial relationship with a Participant, either directly or indirectly.
Persons who are not Participants may beneficially own securities held by or on
behalf of the Depository only through the Depository's Participants or the
Depository's Indirect Participants.
The Company expects that pursuant to procedures established by the
Depository ownership of the Notes will be shown on, and the transfer of
ownership thereof will be effected only through, records maintained by the
Depository or its nominee (with respect to interests of Participants) and the
records of Participants (with respect to interests of persons other than
Participants).
So long as the Depository, or its nominee, is the registered owner or holder
of the Notes, the Depository or such nominee will be considered the sole owner
or holder of the Notes represented by the Global Note for all purposes under
the Indenture. No beneficial owner of an interest in the Global Note will be
able to transfer such interest except in accordance with the Depository's
applicable procedures, in addition to those provided for under the Indenture.
Payments of the principal of, and interest on the Global Note will be made
to the Depository or its nominee, as the case may be, as the registered owner
thereof. None of the Company, the Trustee nor any Paying Agent (as defined)
will have any responsibility or liability for any aspect of the records
relating to or payments made on account of beneficial ownership interests in
the Global Note or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interest.
The Company expects that the Depository or its nominee, upon receipt of any
payment of the principal and interest on the Global Note will credit
Participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of such Global Note as
shown on the records of the Depository or its nominee. The Company also
expects that payments by Participants to owners of beneficial interests in any
such Global Notes held through such Participants will be governed by standing
instructions and customary practice, as is now the case with securities held
for the accounts of customers registered to the names of nominees for such
customers. Such payments will be the responsibility of such Participants.
Transfers between Participants in the Depository will be effected in the
ordinary way in accordance with Depository rules. If a holder requires
physical delivery of a Certificated Security for any reason, including to sell
Notes to persons in jurisdictions that require physical delivery of such
securities or to pledge such securities,
107
<PAGE>
such holder must transfer its interest in the applicable Global Note in
accordance with the normal procedures of the Depository and the provisions of
the Indenture.
The Depository 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 interests in the applicable Global Note is
credited and only in respect of such portion of the Global Note as to which
such Participant or Participants has or have given such direction.
Although the Depository has agreed to the foregoing procedures in order to
facilitate transfers of interests in the Global Notes among Participants of
the Depository, it is under no obligation to perform such procedures, and such
procedures may be discontinued at any time. Neither the Company nor the
Trustee will have any responsibility for the performance by the Depository or
its Participants or Indirect Participants of their respective obligations
under the rules and procedures governing their operations.
Certificated Securities.
Subject to certain conditions, any person having a beneficial interest in a
Global Security may, upon request to the Trustee exchange such beneficial
interest for Notes in the form of Certificated Securities. Upon any such
issuance, the Trustee is required to register such Certificated Securities in
the name of, and cause the same to be delivered to, such person or persons (or
the nominee of any thereof). In addition, if (i) the Company notifies the
Trustee in writing that the Depository is no longer willing or able to act as
a depository and the Company is unable to locate a qualified successor within
90 days or (ii) the Company, at its option, notifies the Trustee in writing
that it elects to cause the issuance of Notes in the form of Certificated
Securities, then, upon surrender by the Global Note Holder of its Global Note,
Notes in such form will be issued to each person that the Global Note Holder
and the Depository identify as being the beneficial owner of the related
Notes.
Neither the Company nor the Trustee will be liable for any delay by the
Global Note Holder or the Depository 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 the Global Note Holder or the
Depository for all purposes.
Next Day Settlement and Payment.
The Indenture will require that payments in respect of the Notes represented
by the Global Note (including principal and interest) be made by wire transfer
of immediately available next day funds to the accounts specified by the
Global Note Holder. With respect to Certificated Securities, the Company will
make all payments of principal and interest, by wire transfer of immediately
available next day funds to the accounts specified by the holders thereof or,
if no such account is specified, by mailing a check to each such holder's
registered address. The Company expects that secondary trading in the
Certificated Securities will also be settled in immediately available funds.
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 ,
1998 (90 days after the commencement of the Exchange Offer), all dealers
effecting transactions in the New Notes may be required to deliver a
prospectus.
108
<PAGE>
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 Broker-Dealer 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.
For a period of 180 days after the Expiration Date the Company will promptly
send additional copies of this Prospectus and any amendment or supplement to
this Prospectus to any Participating Broker-Dealer that requests such
documents in the Letter of Transmittal.
LEGAL MATTERS
The validity of the New Notes offered hereby and certain other legal matters
will be passed upon on behalf of the Company by Kirkland & Ellis, Chicago,
Illinois.
EXPERTS
The consolidated financial statements of the Company at December 31, 1996
and 1997 and for each of the three years in the period ended December 31, 1997
appearing in this Prospectus and Registration Statement have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report thereon
appearing elsewhere herein are included in reliance upon such report given
upon the authority of such firms as experts in accounting and auditing.
AVAILABLE INFORMATION
The Company is not currently subject to the periodic reporting and other
informational requirements of the Exchange Act. 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, copies of
the financial and other information that would be contained in the annual
reports and quarterly reports that the Company would be required to file with
the Commission if it were subject to such requirements of the Exchange Act.
The Company will also make such reports available to prospective purchasers of
the Old Notes and the New Notes, as applicable, and to securities analysts and
broker-dealers upon their request. In addition, the Company has agreed to
furnish to holders of the Notes, and prospective purchasers of the Notes, upon
their request, the information required to be delivered pursuant to Rule
144A(d)(4) under the Securities Act until such time as the Company has
exchanged the Notes for the New Notes and which have been registered under the
Securities Act or the Shelf Registration Statement has been declared effective
by the Commission.
109
<PAGE>
GLOBE MANUFACTURING CO.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Auditors............................................. F-2
Consolidated Balance Sheets at December 31, 1996 and 1997 and Unaudited
June 30, 1998............................................................. F-3
Consolidated Statements of Income for the Years Ended December 31, 1995,
1996 and 1997 and the Unaudited Six Months Ended June 30, 1997 and 1998... F-4
Consolidated Statements of Changes in Shareholders' Equity for the Years
Ended December 31, 1995, 1996 and 1997 and the Unaudited Six Months Ended
June 30, 1998............................................................. F-5
Consolidated Statements of Cash Flows for the Years Ended December 31,
1995, 1996 and 1997 and the Unaudited Six Months Ended June 30, 1997 and
1998...................................................................... F-6
Notes to Consolidated Financial Statements................................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Globe Manufacturing Co.
We have audited the accompanying consolidated balance sheets of Globe
Manufacturing Co. as of December 31, 1996 and 1997, and the related
consolidated statements of income, changes in shareholders' equity, and cash
flows for each of the three years in the period ended December 31, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Globe
Manufacturing Co. at December 31, 1996 and 1997, and the consolidated results
of its operations and its cash flows for each of the three years in the period
ended December 31, 1997, in conformity with generally accepted accounting
principles.
Ernst & Young LLP
Providence, Rhode Island
March 24, 1998
except for Note 12, as to which
the date is August 6, 1998
F-2
<PAGE>
GLOBE MANUFACTURING CO.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
DECEMBER 31,
------------------ JUNE 30,
ASSETS 1996 1997 1998
------ -------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents..................... $ 3,101 $ 1,947 $ 2,466
Accounts receivable, net...................... 20,517 23,953 29,659
Receivable from joint venture................. -- 213 210
Inventories................................... 11,812 13,764 11,825
Prepaid expenses and other assets............. 445 484 1,207
Deferred income taxes......................... 1,395 2,449 2,449
-------- -------- --------
Total current assets........................ 37,270 42,810 47,816
Property, plant and equipment:
Land and land improvements.................... 942 942 942
Building and building improvements............ 31,575 33,122 33,122
Manufacturing equipment....................... 66,359 79,202 79,265
Furniture and equipment....................... 1,826 2,087 2,087
Autos and trucks.............................. 319 319 319
Construction in progress...................... 3,460 5,959 23,086
-------- -------- --------
104,481 121,631 138,821
Less accumulated depreciation................. (54,359) (63,681) (69,007)
-------- -------- --------
Net property, plant and equipment........... 50,122 57,950 69,814
Deferred income taxes.......................... 1,421 2,822 2,694
Cash surrender value of life insurance, net of
loans......................................... 1,523 927 927
Intangible assets.............................. 214 -- --
Investment in joint venture.................... -- -- --
Notes receivable from officers................. 264 278 286
Other Assets................................... -- -- 10
Deferred financing costs, net of amortization.. 515 346 306
-------- -------- --------
Total assets................................ $ 91,329 $105,133 $121,853
======== ======== ========
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
<S> <C> <C> <C>
Current liabilities:
Accounts payable.............................. $ 7,177 $ 7,440 $ 8,883
Accrued expenses.............................. 5,183 4,827 5,900
Payable to joint venture...................... 1,481 -- --
Dividend payable.............................. 872 50 --
Note payable.................................. 2,750 2,475 10,000
Taxes payable................................. 2,206 1,028 --
Long-term lease obligations due within one
year......................................... 88 37 31
Long-term debt obligations due within one
year......................................... 13,250 7,500 8,125
-------- -------- --------
Total current liabilities................... 33,007 23,357 32,939
Long-term debt................................. 34,500 46,875 42,500
Long-term lease obligation..................... 27 30 60
Other long-term postretirement liability....... 3,521 3,762 4,205
Minimum pension liability...................... 214 -- --
Commitments and contingencies (Note 7)......... -- -- --
Redeemable cumulative preferred stock, Series
A, redeemable at $8,000; 30,000 shares
authorized, 8,000 issued and outstanding at
December 31, 1996............................. 6,466 -- --
Shareholders' equity...........................
Common stock, Class A, voting, $.01 par
value........................................ 2 2 2
Common stock, Class B, nonvoting, $.01 par
value........................................ 16 16 16
Paid in capital............................... 5,700 10,785 10,785
Retained earnings............................. 41,744 56,468 67,508
-------- -------- --------
47,462 67,271 78,311
Less treasury stock, at cost:
Common, Class A, 99,000 shares................ (4,187) (4,187) (4,187)
Common, Class B, 683,314 shares............... (28,657) (28,657) (28,657)
-------- -------- --------
(32,844) (32,844) (32,844)
Unearned compensation.......................... (1,024) (3,318) (3,318)
-------- -------- --------
Total shareholders' equity.................. 13,594 31,109 42,149
-------- -------- --------
Total liabilities & shareholders' equity.... $ 91,329 $105,133 $121,853
======== ======== ========
</TABLE>
See accompanying notes.
F-3
<PAGE>
GLOBE MANUFACTURING CO.
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER SIX MONTHS
31, ENDED JUNE 30,
---------------------------- ----------------
1995 1996 1997 1997 1998
-------- -------- -------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales...................... $128,319 $152,603 $170,941 $84,283 $92,490
Cost of sales.................. 97,182 110,609 115,099 56,450 59,556
-------- -------- -------- ------- -------
Gross margin............... 31,137 41,994 55,842 27,833 32,934
Selling, general and
administrative expenses....... 18,515 21,705 24,381 10,616 12,083
Research and development costs. 2,260 2,533 2,633 1,190 2,040
-------- -------- -------- ------- -------
Operating income........... 10,362 17,756 28,828 16,027 18,811
Other Income/(Expense)
Interest..................... (6,030) (5,285) (3,968) (2,097) (1,788)
Loss in investment in joint
venture..................... (643) -- -- -- --
Other income, net............ 438 875 372 86 655
-------- -------- -------- ------- -------
Income before income taxes
and extraordinary items... 4,127 13,346 25,232 14,016 17,678
Provision for income taxes..... 1,718 4,784 8,383 5,255 6,638
-------- -------- -------- ------- -------
Income before extraordinary
item...................... 2,409 8,562 16,849 8,761 11,040
Loss from write-off of deferred
financing costs, net of
applicable income taxes of
$822 in 1995 and $176 in 1997. 1,294 -- 301 301 --
-------- -------- -------- ------- -------
Net income................. $ 1,115 $ 8,562 $ 16,548 $ 8,460 $11,040
======== ======== ======== ======= =======
</TABLE>
See accompanying notes.
F-4
<PAGE>
GLOBE MANUFACTURING CO.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SHARES
OUTSTANDING TREASURY STOCK
--------------- -----------------
COMMON STOCK COMMON STOCK COMMON STOCK TOTAL
--------------- --------------- PAID-IN RETAINED ----------------- UNEARNED SHAREHOLDERS'
CLASS A CLASS B CLASS A CLASS B CAPITAL EARNINGS CLASS A CLASS B COMPENSATION EQUITY
------- ------- ------- ------- ------- -------- ------- -------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balances, December 31,
1994................... 100,000 931,404 $ 2 $16 $ 4,965 $33,789 $(4,187) $(28,657) $ (630) $ 5,298
Dividends............. -- -- -- -- -- (850) -- -- -- (850)
Net income............ -- -- -- -- -- 1,115 -- -- -- 1,115
------- ------- --- --- ------- ------- ------- -------- ------- -------
Balances, December 31,
1995................... 100,000 931,404 2 16 4,965 34,054 (4,187) (28,657) (630) 5,563
Dividends............. -- -- -- -- -- (872) -- -- -- (872)
Unearned compensation
relating to the grant
of stock options...... -- -- -- -- 735 -- -- -- (735) 0
Amortization of
unearned compensation. -- -- -- -- -- -- -- -- 341 341
Net income............ -- -- -- -- -- 8,562 -- -- -- 8,562
------- ------- --- --- ------- ------- ------- -------- ------- -------
Balances, December 31,
1996................... 100,000 931,404 2 16 5,700 41,744 (4,187) (28,657) (1,024) 13,594
Dividends............. -- -- -- -- -- (290) -- -- -- (290)
Redemption of
Preferred Stock....... -- -- -- -- -- (1,534) -- -- -- (1,534)
Unearned compensation
relating to the grant
of stock options...... -- -- -- -- 5,085 -- -- -- (5,085) 0
Amortization of
unearned compensation. -- -- -- -- -- -- -- -- 2,791 2,791
Net income............ -- -- -- -- -- 16,548 -- -- -- 16,548
------- ------- --- --- ------- ------- ------- -------- ------- -------
Balances, December 31,
1997................... 100,000 931,404 2 16 10,785 56,468 (4,187) (28,657) (3,318) 31,109
Net income
(unaudited)........... -- -- -- -- -- 11,040 -- -- -- 11,040
------- ------- --- --- ------- ------- ------- -------- ------- -------
Balances, June 30, 1998
(unaudited)............ 100,000 931,404 $ 2 $16 $10,785 $67,508 $(4,187) $(28,657) $(3,318) $42,149
======= ======= === === ======= ======= ======= ======== ======= =======
</TABLE>
See accompanying notes.
F-5
<PAGE>
GLOBE MANUFACTURING CO.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SIX MONTHS
DECEMBER 31, ENDED JUNE 30,
--------------------------- ----------------
1995 1996 1997 1997 1998
-------- -------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Operating Activities
Net Income.................... $ 1,115 $ 8,562 $16,548 $ 8,460 $11,040
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and
amortization............... 10,688 9,335 9,417 4,562 5,366
Amortization of unearned
compensation............... -- 341 2,791 -- --
Extraordinary charge--write-
off of deferred finance
cost....................... 1,801 -- 478 478 --
Provision for losses on
accounts receivable........ 336 1,093 691 185 879
Loss in joint venture....... 643 -- -- -- --
Deferred income tax
provision (benefit)........ (606) (958) (2,455) 128 128
Other post-retirement
benefits charge............ 992 652 515 395 442
Increase (decrease) in cash
from changes in assets and
liabilities:
Accounts receivable....... (1,296) (7,122) (4,127) (4,116) (6,585)
Inventories............... (4,008) 4,132 (1,952) (1,708) 1,939
Prepaid expenses and other
assets................... 381 12 (38) (403) (584)
Refundable income taxes... 1,414 61 -- -- --
Accounts payable.......... (214) 2,459 263 502 1,443
Accrued expenses.......... 840 2,203 (357) 400 1,073
Taxes payable............. 772 1,434 (1,178) (1,719) (1,177)
Other long-term
postretirement liability. (175) (306) (274) -- --
-------- -------- ------- ------- -------
Net cash provided by
operating activities... 12,683 21,898 20,322 7,164 13,964
Investing Activities
Capital expenditures.......... (8,640) (5,806) (17,101) (6,913) (17,127)
Payable to (receivable from)
joint venture................ 1,259 293 (1,694) (345) 3
Note receivable collected from
(issued to) shareholders..... 669 (14) (15) -- (7)
-------- -------- ------- ------- -------
Net cash used in
investing activities... (6,712) (5,527) (18,810) (7,258) (17,131)
Financing Activities
Net change in note payable.... 3,000 (4,750) (275) (1,750) 7,525
Borrowing on long-term debt... 62,000 -- 15,000 15,000 --
Principal payments on long-
term debt.................... (67,500) (11,250) (8,375) (4,625) (3,750)
Principal payments on capital
lease obligation............. (75) (85) (97) (51) (39)
Redemption of preferred stock. -- -- (8,000) (8,000) --
Deferred financing costs...... (754) -- (403) (350) --
Cash surrender value of life
insurance, net............... 16 522 596 257 --
Payment of dividends.......... (850) (850) (1,112) (1,112) (50)
-------- -------- ------- ------- -------
Net cash provided by
(used in) financing
activities............. (4,163) (16,413) (2,666) (631) 3,686
Net decrease in cash and cash
equivalents.................. 1,808 (42) (1,154) (725) 519
Cash and cash equivalents at
beginning of year............ 1,335 3,143 3,101 3,101 1,947
-------- -------- ------- ------- -------
Cash and cash equivalents at
end of period................ $ 3,143 $ 3,101 $ 1,947 $ 2,376 $ 2,466
======== ======== ======= ======= =======
</TABLE>
See accompanying notes.
F-6
<PAGE>
GLOBE MANUFACTURING CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Globe
Manufacturing Co. and its wholly-owned subsidiaries, Globe Elastic Co. and
Globe Manufacturing FSC, Ltd. (collectively, the Company). All significant
intercompany accounts have been eliminated.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid, short-term investments with an
original maturity of three months or less to be cash equivalents.
RISKS AND UNCERTAINTIES
Segment Information and Concentration of Credit Risk
The Company operates in one dominant industry segment encompassing the
manufacture and sale of elastomeric fibers. These fibers, which consist of
spandex fibers and latex thread, are sold to customers in the textile and
apparel industries that are geographically diversified throughout the United
States and in various foreign countries. The Company performs credit
evaluations on all new customers and requires collateral in certain
circumstances.
For the years ended December 31, 1995, 1996 and 1997, respectively, sales to
foreign customers totaled 24%, 27% and 28%. Historically, transfers of product
between geographic areas have not been significant. Sales to one customer
represented 11%, 9% and 10% of total sales for the years ended December 31,
1995, 1996 and 1997, respectively. Also for the years ended December 31, 1995,
1996 and 1997, respectively, sales to five customers totaled 32%, 34% and 36%.
At December 31, 1996 and 1997, 48% and 47%, respectively, of total
receivables were from foreign customers. Balances owed from one customer
totaled 9% and 8% of total receivables at December 31, 1996 and 1997,
respectively. Also at December 31, 1996 and 1997, 33% and 39%, respectively,
of total receivables were from five customers of which 21% and 24% represented
receivables from foreign customers.
Use of Estimates
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Actual results could differ from those
estimates.
ACCOUNTS RECEIVABLE
Accounts receivable at December 31, 1996 and 1997 are shown net of an
allowance for doubtful accounts of $1,346 and $1,870, respectively. At
December 31, 1994 and 1995, the allowance for doubtful accounts was $314 and
$416, respectively. Additions to the allowance for doubtful accounts charged
to costs and expenses were $333, $1,085 and $684, respectively, during each of
the years in the three-year period ended December 31, 1997. Deductions to the
allowance for doubtful accounts were $231, $115 and $160 during each of the
years in the three-year period ended December 31, 1997.
F-7
<PAGE>
GLOBE MANUFACTURING CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996 AND 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
REVENUE RECOGNITION
Revenue is recognized when products are shipped to customers.
INVENTORIES
Inventories are valued at lower of cost or market. Cost is determined by the
last-in, first-out (LIFO) method for latex and certain spandex inventories and
the first-in, first out (FIFO) method for the other inventories. Management
utilizes LIFO for those product lines that have exhibited increasing costs to
better match costs with revenues.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Depreciation is provided
using an accelerated method over estimated useful lives of the assets for
financial statement purposes, which range from 3 to 39.5 years. For the years
ended December 31, 1995, 1996 and 1997, the Company recorded depreciation
expense of $10,390, $9,183 and $9,322, respectively. The Company capitalizes
direct materials, labor and certain overhead costs for self-constructed
assets. In 1996 and 1997, the Company capitalized $0 and $506,007,
respectively, of interest costs incurred in connection with the expansion of
the manufacturing plant in Alabama. Total interest costs in 1996 and 1997
amounted to $5,347 and $4,573, respectively.
INTANGIBLE ASSET
The intangible asset (and minimum pension liability) represents the
adjustment required to record the Company's minimum pension liability for a
defined benefit pension plan covering salaried employees of the Company at
December 31, 1996.
INVESTMENT IN JOINT VENTURE
The Company accounts for its 40% investment in a joint venture using the
equity method of accounting (see Note 10).
DEFERRED FINANCING COSTS
Deferred financing costs are amortized over the term of the facility using
the straight line method of amortization.
STOCK BASED COMPENSATION
The Company accounts for its stock based compensation arrangements under the
provisions of APB 25, Accounting for Stock Issued to Employees.
The Company recognizes as compensation expense the excess of the deemed fair
value of the common stock issuable upon exercise of compensatory stock options
over the aggregate exercise price of such options. The expense is amortized
over the vesting period of each option.
INCOME TAXES
The liability method is used in accounting for income taxes. Deferred tax
assets and liabilities are determined based on differences between financial
reporting and income tax bases of assets and liabilities and
F-8
<PAGE>
GLOBE MANUFACTURING CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996 AND 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
are measured using the currently enacted tax rates and laws that are in effect
for the period when the differences are expected to reverse.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of accounts receivable, accounts payable, long term
debt, notes payable and other current and long-term liabilities approximate
their respective fair values.
INTEREST RATE SWAP AGREEMENTS
The differential to be paid or received on interest rate swap agreements is
accrued as an interest rate charge and is recognized over the life of the
agreements (see Note 3).
UNAUDITED INTERIM FINANCIAL DATA
The interim financial data relating to the six months ended June 30, 1997
and 1998 are unaudited; however, in the opinion of the Company's management,
the interim data includes all adjustments, consisting of only normal recurring
adjustments, necessary for a fair statement of the results for the interim
periods. The results for the six months ended June 30, 1998 are not
necessarily indicative of the results to be expected for the full year or any
other interim period.
RESEARCH AND DEVELOPMENT COSTS
The Company expenses research and development costs as incurred.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 130, Reporting Comprehensive
Income (Statement 130), which establishes standards for the reporting and
display of comprehensive income and its components in a full set of general
purpose financial statements. Statement 130 is effective for fiscal years
beginning after December 15, 1997. Disclosure of total comprehensive income is
required in interim period financial statements. Management does not believe
that comprehensive income for prior periods will differ significantly from net
income in those periods.
In June, 1997, the FASB issued Statement of Financial Accounting Standards
No. 131, Disclosures about Segments of an Enterprise and Related Information
(Statement 131), which is effective for years beginning after December 15,
1997. However, Statement 131 need not be applied to interim financial
statements in the initial year of application. Statement 131 establishes
standards for the way that public business enterprises report information
about operating segments in annual financial statements and requires that
those enterprises report selected information about operating segments in
interim financial reports. It also establishes standards for related
disclosures about products and services, geographic areas, and major
customers. Since Statement 131 is effective for financial statements for
fiscal years beginning after December 15, 1997, the Company will adopt the new
requirements retroactively in 1998. Management has not yet determined the
impact it will have on disclosures of the Company's reported segments.
In February 1998, the FASB issued Statement of Financial Accounting
Standards No. 132, Employers' Disclosures about Pensions and Other
Postretirement Benefits (Statement 132), that revises and improves
F-9
<PAGE>
GLOBE MANUFACTURING CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996 AND 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
disclosure requirements of FASB Statements No. 87, Employers' Accounting for
Pensions, and No. 106, Employers' Accounting for Postretirement Benefits Other
Than Pensions. The Statement is effective for fiscal years beginning after
December 15, 1997. Statement 132 does not change the recognition or
measurement of pension or postretirement benefit plans, but standardizes
disclosure requirements for pensions and other postretirement benefits,
eliminates unnecessary disclosures and requires additional information.
Management does not anticipate that the adoption of Statement 132 will have a
material impact on the Company's financial position or the results of its
operations.
In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133, Accounting for Derivative Instruments and for Hedging Activities
(Statement 133). Statement 133 is effective for years beginning after June 15,
1999. Statement 133 provides a comprehensive and consistent standard for the
recognition and measurement of derivatives and hedging activities. Management
does not anticipate that the adoption of Statement 133 will have a material
impact on the Company's financial position or the results of its operations.
2. INVENTORIES
At December 31, 1996 and 1997, inventories totaling approximately $5,452 and
$6,465, respectively, were valued using the LIFO method. Had the FIFO method
of inventory valuation been used, inventories and income before taxes would
have increased (decreased) by approximately $786 and $(687) in 1995; $1,149
and $363 in 1996; and, $1,247 and $98 in 1997.
Inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31
----------------
1996 1997
------- -------
<S> <C> <C>
Raw materials........................................... $ 2,233 $ 2,460
Finished goods.......................................... 10,728 12,551
------- -------
12,961 15,011
Less LIFO reserve....................................... (1,149) (1,247)
------- -------
$11,812 $13,764
======= =======
</TABLE>
3. DEBT
On June 9, 1995, the Company refinanced its existing debt by entering into a
new debt agreement with a group of banks consisting of a $62,000 term loan and
a $12,000 working capital facility. As a result of the refinancing, the
unamortized deferred financing costs totaling $1,801, relating to the prior
debt facility, and a fee associated with terminating the prior debt agreement
of $315, were charged to expense as an extraordinary item in 1995.
On April 16, 1997, the Company amended and restated its existing credit
agreement (as amended, the "Credit Agreement"). The Credit Agreement consists
of a new $60,000 term loan, extension of the $12,000 working capital facility
to March 31, 2002, and a reduction in interest rates and other fees charged on
the loans. The Credit Agreement allows for letters of credit to the extent of
the unused portion of the working capital facility up to a maximum of $3,000.
At December 31, 1996 and 1997, respectively, the Company had $2,750
F-10
<PAGE>
GLOBE MANUFACTURING CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996 AND 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
and $2,475 outstanding under the working capital facility and $1,200 and
$1,000 outstanding under letters of credit to secure the Company's workers'
compensation self-insurance program (see Note 11).
In connection with the Credit Agreement, a portion of the additional
proceeds from the term note ($15,000) were used to redeem all outstanding
shares of Series A Cumulative Preferred Stock for $8,000 (see Note 5). As a
result of the amendment, the unamortized deferred financing costs totaling
$477, relating to the original term note, were charged to expense as an
extraordinary item in 1997.
Borrowings under the term loan bear interest at either the bank's prime rate
plus a margin ranging from .25% to 1.00% (.0% to .75% for advances under the
working capital facility) or the applicable Eurodollar rate plus a margin
ranging from 1.25% to 2.00% (1.125% to 1.875% for advances under the working
capital facility), as determined by the borrower. At December 31, 1996 and
1997, the weighted average interest rates on the working capital facility were
9.75% and 8.75%, respectively.
In February 1998, the Credit Agreement was modified so as to provide an
additional $14,000 in term loans beginning on June 30, 1998.
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31
---------------
1996 1997
------- -------
<S> <C> <C>
Term note, principal due in variable quarterly installments
through 2003; variable interest rates based on the base rate
(see above) (7.3125%-8.75% at December 31, 1997; 8.3789%-
8.5938% at December 31, 1996)................................. $47,750 $54,375
Less current maturities........................................ 13,250 7,500
------- -------
$34,500 $46,875
======= =======
</TABLE>
The Credit Agreement contains certain covenants that limit, among other
things, capital expenditures, investments, debt, and dividends declared and
distributed. The Credit Agreement also limits net extraordinary losses and
requires the maintenance of a minimum fixed charge coverage, leverage ratio,
and earnings before interest, income taxes, depreciation and amortization as
defined in the Credit Agreement. All of the Company's assets are pledged under
the Credit Agreement.
The Company uses interest-rate swap agreements to effectively convert a
portion of its floating rate debt to a fixed rate basis, thus reducing the
impact of interest-rate changes on future income. At December 31, 1997, the
Company had outstanding interest rate swap agreements with a commercial bank,
having a total notional principal amount of $15 million. These agreements
effectively change the Company's interest rate exposure on $15 million of its
variable rate term notes to a fixed rate of 6.29%. The interest rate swap
agreements in effect at December 31, 1997 matured on March 18, 1998. The
Company is obligated to maintain such agreements during the first two years
that the term note is outstanding. While the Company is exposed to credit loss
for the periodic settlement of amounts due under the agreements in the event
of nonperformance by the counterparty, the Company does not anticipate
nonperformance by this party. The fair value of these agreements representing
the estimated amount that the Company would receive from a third party
assuming the Company's obligations under the interest rate agreements ceased
at December 31, 1997, is approximately $187. The fair value of the agreements
was determined by independent commercial bankers and represents the fair value
based on pricing models or formulas using current assumptions.
F-11
<PAGE>
GLOBE MANUFACTURING CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996 AND 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The term loan matures on a quarterly basis during the following years:
<TABLE>
<S> <C>
December 31
1998........................... $ 7,500
1999........................... 9,375
2000........................... 10,000
2001........................... 11,875
2002........................... 12,500
2003........................... 3,125
-------
$54,375
=======
</TABLE>
Cash paid for interest, net of amounts capitalized amounted to $6,182,
$5,469 and $4,192 in 1995, 1996 and 1997, respectively.
4. LEASE COMMITMENTS
The Company leases certain assets under capital leases. At December 31, 1996
and 1997, leased assets, with a cost of approximately $316 and $366, have been
included in property, plant and equipment. Accumulated amortization was
approximately $256 and $302 at December 31, 1996 and 1997, respectively.
Future minimum lease payments relating to the equipment under the capital
lease are as follows:
<TABLE>
<S> <C>
1998............................................................... $40
1999............................................................... 15
2000............................................................... 9
2001............................................................... 6
2002............................................................... 4
---
Total minimum lease payments....................................... 74
Less amount representing interest.................................. 7
---
Present value of net minimum lease payments........................ 67
Lease payments due within one year................................. 37
---
Lease obligations due after one year............................... $30
===
</TABLE>
5. REDEEMABLE CUMULATIVE PREFERRED STOCK AND WARRANTS
At December 31, 1996, the Company had authorized 30 shares of Series A
Cumulative Preferred Stock with a redemption price of $1,000 per share.
Dividends were payable on December 22 of each year at a rate of 10% per annum,
to the extent that such dividends were paid in cash and 15% per annum, to the
extent that dividends were paid in additional shares of Series A Cumulative
Preferred Stock. In 1997, the Company redeemed all outstanding shares of
Series A Cumulative Preferred Stock at a price of $1,000 per share, plus
unpaid dividends at the time of redemption. In connection with the redemption,
the Company terminated any future vesting associated with its agreement to
issue warrants to purchase shares of Class B Common Stock at a price of $.01
per share. At December 31, 1996 and 1997, the Company had 59 and 50 of such
warrants issued and outstanding.
During the years ended December 31, 1995, 1996 and 1997, the Company paid
cash dividends on the preferred stock of $800, $822 and $240, respectively.
The preferred stock required redemption on the earlier of December 21, 1999 or
consummation of certain transactions.
F-12
<PAGE>
GLOBE MANUFACTURING CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996 AND 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
6. SHAREHOLDERS' EQUITY
COMMON STOCK
The Company has authorized 2,000 shares of Class A Common Stock and 2,000
shares of Class B Common Stock. Class B Common Stock automatically converts
into Class A Common Stock if the Company sells stock pursuant to a registered
public offering and Class A Common Stock automatically converts into Class B
Common Stock upon certain transfers of Class A Common Stock. The Company paid
cash dividends of $0.05 per share in 1995, 1996 and 1997.
STOCK OPTIONS
The Company has a Management Incentive Plan ("the Plan") which authorizes
the grant of incentive stock options and nonqualified stock options including
performance options based on the financial performance of the Company to
employees. A total of 103 shares has been reserved for issuance under the
Plan.
The exercise price of incentive stock options granted under the Plan may not
be less than 100% of the fair market value of the common stock as of the grant
date, as determined by the Board of Directors. The exercise price of
nonqualified stock options may not be less than $1.00 per share. Options
issued under the Plan generally have a five year vesting period, unless
otherwise determined by the Board of Directors. The term of stock options
granted under the Plan may not exceed ten years.
The following table presents the activity under the Plan for the years ended
December 31, as follows:
<TABLE>
<CAPTION>
1996 1997
---------------------- ----------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
OPTIONS EXERCISE PRICE OPTIONS EXERCISE PRICE
------- -------------- ------- --------------
<S> <C> <C> <C> <C>
Outstanding at January 1......... 22,500 $30.00 22,500 $30.00
Granted........................ -- -- 22,500 30.00
Canceled....................... -- -- -- --
------ ------ ------ ------
Outstanding at December 31....... 22,500 $30.00 45,000 $30.00
====== ====== ====== ======
Options exercisable at December
31............................ 9,000 $30.00 22,500 $30.00
====== ====== ====== ======
</TABLE>
In connection with the grant of performance options, the Company recorded a
total of $5,820 of unearned compensation ($735 and $5,085 in 1996 and 1997,
respectively) of which $341 and $2,791 was earned and recognized as
compensation expense in 1996 and 1997, respectively. Options that did not vest
in the years 1994 and 1995 were vested in the current year since cumulative
five-year performance measurements were achieved for the option granted in
1993.
The weighted average remaining contractual life of options outstanding at
December 31, 1996 and 1997, is six and eight years, respectively.
FAS 123 DISCLOSURES
The Company has only adopted the disclosure provisions of Statement of
Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation ("Statement 123"). If the compensation cost for the option plans
had been determined based on the fair value at the grant date for grants in
1997, consistent with the provisions of Statement 123, the pro forma net
income for 1997, would not have differed materially from reported amounts.
F-13
<PAGE>
GLOBE MANUFACTURING CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996 AND 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The weighted average fair value per share of options granted during 1997 was
$219.44. The fair value of options issued at the date of grant were estimated
using the Black-Scholes model with the following weighted average assumptions:
<TABLE>
<CAPTION>
OPTIONS
GRANTED
1997
-------
<S> <C>
Expected life (years)............ 5.0
Interest rate.................... 5.7%
</TABLE>
STOCK RESERVED
As of December 31, 1997, a total of 1,668,383 shares of Class A Common Stock
and 258,383 shares of Class B Common Stock are reserved for issuance under the
various capital stock conversion and warrant arrangements.
7. COMMITMENTS AND CONTINGENCIES
The Company is a party to an agreement with a utility company, under the
terms of which, the Company is obligated to purchase power generated from a
co-generation power plant through 2006. The Company receives a portion of the
savings generated by the plant and profits on excess supply generated. The co-
generation power plant began operations in January 1991.
From time to time, the Company has been and is involved in various legal and
environmental proceedings, all of which management believes are routine in
nature and incidental to the conduct of its business. The ultimate legal and
financial liability of the Company with respect to such proceedings cannot be
estimated with certainty, but the Company believes, based on its examination
of such matters, that none of such proceedings, if determined adversely to the
Company, would have a material adverse effect on the Company's results of
operations, or financial condition.
8. PENSION AND OTHER BENEFITS
The Company sponsors three noncontributory defined benefit pension plans
covering substantially all employees. The Plan assets are invested in a group
annuity contract with an insurance company and in a trust that holds a
balanced portfolio of corporate stocks and bonds, U.S. Government bonds and
money market investments. The plan covering salaried employees at the
Massachusetts, North Carolina and Alabama locations provides pension benefits
based on the employee's average monthly compensation during a defined period.
The plans covering hourly employees at the Massachusetts, North Carolina and
Alabama locations provide benefits based on years of service. The Company's
funding policy is to contribute annually the maximum deductible amount
allowable under applicable tax regulations.
Net periodic pension cost includes the following components:
<TABLE>
<CAPTION>
DECEMBER 31
-----------------------
1995 1996 1997
------- ----- -------
<S> <C> <C> <C>
Service cost..................................... $ 258 $ 257 $ 303
Interest cost on projected benefit obligations... 471 427 477
Actual return on plan assets..................... (1,103) (669) (1,102)
Net amortization and deferral.................... 798 337 697
------- ----- -------
Net periodic pension cost........................ $ 424 $ 352 $ 375
======= ===== =======
</TABLE>
F-14
<PAGE>
GLOBE MANUFACTURING CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996 AND 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The following summarizes the funded status of the Company's pension plans,
measured as of:
<TABLE>
<CAPTION>
DECEMBER 31
-----------------------------------------------
1996 1997
----------------------- -----------------------
ASSETS ACCUMULATED ASSETS ACCUMULATED
EXCEED BENEFITS EXCEED BENEFITS
ACTUARIAL PRESENT VALUE OF ACCUMULATED EXCEED ACCUMULATED EXCEED
BENEFIT OBLIGATIONS BENEFITS ASSETS BENEFITS ASSETS
-------------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Vested benefit obligations..... $2,010 $3,856 $2,250 $3,631
====== ====== ====== ======
Accumulated benefit
obligations................... $2,071 $3,925 $2,309 $3,736
====== ====== ====== ======
Projected benefit obligations.. $2,071 $4,268 $2,309 $4,282
Less: Plan assets at fair
value, mutual funds........... 2,313 3,770 2,699 3,981
------ ------ ------ ------
Projected benefit obligations
(in excess of) less than plan
assets........................ 242 (498) 390 (301)
Unrecognized actuarial net
losses (gains)................ 123 159 (5) (13)
Prior service cost to be
recognized in future periods.. 14 204 12 179
Unrecognized initial net
(asset) obligation............ (123) 193 (104) 152
Adjustment required to
recognize minimum liability... -- (213) -- --
------ ------ ------ ------
Prepaid (accrued) pension cost
at end of period.............. $ 256 $ (155) $ 293 $ 17
====== ====== ====== ======
</TABLE>
In 1996 and 1997, the salaried and Massachusetts hourly plans had
distribution of $502 and $602, respectively. Inasmuch as the 1996 settlements
exceeded the 1996 service and interest cost components of the net periodic
pension cost, an additional loss of $89 has been recognized in the
accompanying statement of income.
Assumptions used in calculating the pension expense and the accumulated
benefit obligation, were as follows:
<TABLE>
<CAPTION>
DECEMBER 31
--------------
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Discount rate.............................................. 7.5% 7.5% 7.5%
Rate of increase in compensation levels.................... 5.5% 5.5% 5.5%
Expected long-term rate of return on assets................ 7.5% 7.5% 7.5%
</TABLE>
The Company has instituted a tax deferred savings plan covering all
employees of the Company under Section 401(k) of the Internal Revenue Code.
Under the Plan, subject to certain limitations, each eligible employee may
contribute up to 10% of gross wages per year to the maximum amount set by law.
The Company matches one third of the first 6% of employee contributions.
Company contributions to the Plan for employees were approximately $345 in
1995; $356 in 1996; and $384 in 1997.
In addition to the Company's defined benefit plans, the Company currently
provides postretirement medical and life insurance benefits (postretirement
benefits) to eligible full-time employees. The Company is recognizing the
initial accumulated benefit obligation over a 20-year period.
F-15
<PAGE>
GLOBE MANUFACTURING CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996 AND 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table provides information on the status of the postretirement
benefit plan as of December 31:
<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees............................................. $ 1,675 $ 1,505
Fully eligible plan participants..................... 1,077 1,186
Other active plan participants....................... 2,324 2,968
------- -------
Total.............................................. 5,076 5,659
Unrecognized net gain.................................. 1,594 1,055
Unrecognized transition obligation..................... (3,149) (2,952)
------- -------
Accrued postretirement benefit cost................ $ 3,521 $ 3,762
======= =======
</TABLE>
Net periodic postretirement benefit cost consisted of the following:
<TABLE>
<CAPTION>
1995 1996 1997
----- ----- ----
<S> <C> <C> <C>
Service cost--benefits attributed to service during
the period......................................... $ 442 $284 $273
Interest cost on accumulated postretirement benefit
obligation......................................... 550 347 366
Amortization of unrecognized net (gain) or loss..... (379) (175) (192)
Amortization of unrecognized transition obligation.. 379 196 197
----- ----- ----
Net periodic postretirement benefit cost.......... $ 992 $ 652 $644
===== ===== ====
</TABLE>
At December 31, 1995, 1996 and 1997, respectively, 951, 908 and 833 active
employees and 176, 185 and 181 retired employees are covered by the Plan.
The Company's policy is to fund postretirement benefits as claims are paid.
The accumulated postretirement benefit obligation was determined using a
discount rate of 7% in 1996 and 7.5% in 1997 and a health care cost trend rate
of 9.5%, declining each year to 4% in the year 2007 and thereafter. The effect
of a 1% annual increase in these assumed cost trend rates would increase the
accumulated postretirement benefit obligation by approximately $481 and the
annual net periodic postretirement benefit cost by approximately $74.
F-16
<PAGE>
GLOBE MANUFACTURING CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996 AND 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
9. INCOME TAXES
Significant components of the Company's deferred tax assets and liabilities
as of December 31, are as follows:
<TABLE>
<CAPTION>
1996 1997
------ ------
<S> <C> <C>
Deferred tax liabilities:
Pension................................................. $ 125 $ 126
Depreciation............................................ 235 249
------ ------
Total deferred tax liabilities........................ 360 375
Deferred tax assets:
Other postretirement benefits........................... 1,390 1,519
Joint venture........................................... 428 --
Professional fees, primarily financing fees............. 84 279
Inventories............................................. 231 639
Bad debts............................................... 534 759
Workers' compensation accrued........................... 344 491
Deferred compensation................................... 198 1,330
Vacation accrued........................................ 221 241
Other, net.............................................. 174 388
------ ------
Total deferred tax assets............................. 3,604 5,646
Valuation allowance for deferred tax assets............... (428) --
------ ------
Net deferred tax assets............................... $2,816 $5,271
====== ======
</TABLE>
The following table sets forth selected data with respect to the Company's
provision for income taxes from continuing operations for the years ended:
<TABLE>
<CAPTION>
1995 1996 1997
------ ------ -------
<S> <C> <C> <C>
Current:
Federal....................................... $1,819 $4,683 $ 9,090
State......................................... 505 1,059 1,748
------ ------ -------
2,324 5,742 10,838
Deferred:
Federal....................................... (448) (820) (2,034)
State......................................... (158) (138) (421)
------ ------ -------
(606) (958) (2,455)
------ ------ -------
Total....................................... $1,718 $4,784 $ 8,383
====== ====== =======
</TABLE>
F-17
<PAGE>
GLOBE MANUFACTURING CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996 AND 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The reconciliation of income taxes computed at the U.S. federal statutory
tax rate to income tax expense for continuing operations is as follows:
<TABLE>
<CAPTION>
1995 1996 1997
------------ ------------ ------------
AMOUNT % AMOUNT % AMOUNT %
------ ---- ------ ---- ------ ----
<S> <C> <C> <C> <C> <C> <C>
Tax at statutory rate................ $1,403 34.0 $4,538 34.0 $8,831 35.0
State income tax expense, less
federal tax benefit................. 351 8.5 601 4.5 858 3.4
Foreign sales corporation............ (187) (4.5) (203) (1.5) (775) (3.0)
Change in valuation allowance........ 219 5.3 -- -- (428) (1.7)
Other, net........................... (68) (1.7) (152) (1.1) (103) (0.5)
====== ==== ====== ==== ====== ====
Total.............................. $1,718 41.6 $4,784 35.9 $8,383 33.2
====== ==== ====== ==== ====== ====
</TABLE>
Cash paid for income taxes amounted to $1,150, $4,247 and $11,833 in 1995,
1996 and 1997, respectively.
10. INVESTMENT IN JOINT VENTURE
On November 23, 1990, the Company entered into a joint venture agreement
(Joint Venture) with PT Bakrie Nusantara Corporation ("Bakrie"), an Indonesian
company, to engage in the business of the manufacturer of rubber thread and
its related products. During 1997, the Company took steps to terminate its
Joint Venture relationship. However, the Company continues to acquire and sell
the entire production of the Joint Venture other than production sold in
Indonesia. During the years ended December 31, 1996 and 1997, respectively,
the Company purchased inventory totaling $5,912 and $9,854 from the Joint
Venture.
11. SELF-INSURANCE
The Company has a self-insurance program for its workers' compensation. The
plan, which is administered by an insurance company, contains certain stop
loss clauses that limit the Company's liability in the event of catastrophic
losses ($200 per incident, $580 in the aggregate per year). Claims are accrued
as incurred based on available claim information and management's estimate of
claims incurred but not yet reported.
At December 31, 1996 and 1997, the Company had outstanding letters of credit
of $1,200 and $1,000, respectively, to secure the Company's workers'
compensation self-insurance program.
12. SUBSEQUENT EVENTS
On June 23, 1998, the Company entered into an Agreement and Plan of Merger
(the Agreement) with an affiliate of Code, Hennessy & Simmons III, L.P. The
Agreement provides for the obtaining of additional debt and equity to be used
in a recapitalization transaction whereby Code, Hennessy & Simmons III, L.P.
will obtain a majority interest in the Company and certain continuing
shareholders will retain a minority interest. The recapitalization transaction
will be financed with $50,000 of equity and $295,000 of debt. Prior to the
closing of the Merger, substantially all of the assets and liabilities of
Globe Manufacturing Co. will be contributed to its wholly owned subsidiary,
Globe Elastic Co., Inc., which will be renamed Globe Manufacturing Corp.
On July 31, 1998, Globe Manufacturing Corp. issued $150,000 of 10% Senior
Subordinated Notes due 2008 (the "Senior Subordinated Notes"). The proceeds of
the Senior Subordinated Notes were used to (i) pay consideration under the
Agreement to certain shareholders of the Company (ii) repay certain
indebtedness of the Company and (iii) repay related fees and expenses of the
recapitalization and refinancing.
F-18
<PAGE>
GLOBE MANUFACTURING CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
DECEMBER 31, 1996 AND 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
On August 6, 1998 the Company issued and sold 49,086 units (the "Units"),
each consisting of one 14% Senior Discount Note due 2009 (the "Notes") and one
warrant (a "Warrant") to purchase 1.4155 shares of Class A Common Stock, $.01
par value, of the Company. The aggregate purchase price of the Units was
$25,000 and the net proceeds to the Company were $24,562 after deducting
underwriting discounts and commissions and other expenses payable by the
Company. The proceeds of these Units were used to repay a $25,000 loan made by
Code, Hennessy & Simmons, III, L.P. to the Company pursuant to the
recapitalization transaction.
F-19
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR SOLICITATION OF AN OFFER TO BUY TO ANY PERSON
IN ANY JURISDICTION WHERE SUCH AN OFFER OR SOLICITATION WOULD BE UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
-------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 1
Risk Factors.............................................................. 13
Use of Proceeds........................................................... 22
Capitalization............................................................ 23
Selected Consolidated Financial Data...................................... 24
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 26
Business.................................................................. 38
Management................................................................ 48
Certain Relationships and Related Transactions............................ 51
Security Ownership of Certain Beneficial Owners and Management............ 55
Description of Senior Credit Facility..................................... 56
Description of Senior Subordinated Notes.................................. 58
Description of the New Notes.............................................. 59
Description of the Warrants............................................... 98
Description of Capital Stock.............................................. 101
Certain United States Federal Tax Considerations.......................... 102
Book-Entry Procedures and Transfer........................................ 107
Plan of Distribution...................................................... 108
Legal Matters............................................................. 109
Experts................................................................... 109
Available Information..................................................... 109
Index to Consolidated Financial Statements................................ F-1
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
LOGO
GLOBE HOLDINGS, INC.
OFFER TO EXCHANGE ITS
14% SENIOR DISCOUNT NOTES
DUE 2009, SERIES B FOR
ANY AND ALL OF ITS OUTSTANDING
14% SENIOR DISCOUNT NOTES DUE 2009
-------------------
PROSPECTUS
, 1998
-------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II: INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20: INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 67 of Chapter 156B of the Massachusetts General Laws ("Section 67")
provides that a corporation may indemnify its directors and officers to the
extent specified in or authorized by (i) the articles of organization, (ii) a
by-law adopted by the stockholders, or (iii) a vote adopted by the holders of
a majority of the shares of stock entitled to vote on the election of
directors. In all instances, the extent to which a corporation provides
indemnification to its directors and officers under Section 67 is optional.
Article VI of the Company's Restated Articles of Organization, as amended
(the "Articles of Organization") eliminates the personal liability of the
Company's directors to the Company or its stockholders for monetary damages
for breach of a director's fiduciary duty, except to the extent Chapter 156B
of the Massachusetts General Laws prohibits the elimination or limitation of
such liability.
Article VI of the Articles of Organization provides that the Company shall
indemnify each person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the
fact that he is or was, or has agreed to become, a director or officer of the
Company, or is or was serving, or has agreed to serve, at the request of the
Company, as a director or officer of, or in a similar capacity with, another
organization or in any capacity with respect to any employee benefit plan of
the Company (all such persons being referred to hereafter as an "Indemnitee"),
or by reason of any action alleged to have been taken or omitted in such
capacity, against all expenses (including attorneys' fees), judgments and
fines incurred by him or on his behalf in connection with such action, suit or
proceeding and any appeal therefrom, unless the Indemnitee shall be finally
adjudicated in such action, suit or proceeding not to have acted in good faith
in the reasonable belief that his action was in the best interests of the
Company or, to the extent such matter relates to service with respect to an
employee benefit plan, in the best interests of the participants or
beneficiaries of such employee benefit plan. Notwithstanding anything to the
contrary in Article VI, except as set forth in Article VI(B)(6) (which
provides that indemnification may be denied if the Indemnitee violated the
applicable standard of conduct), the Company shall not indemnify an Indemnitee
seeking indemnification in connection with a proceeding (or part thereof)
initiated by the Indemnitee unless the initiation thereof was approved by the
Board of Directors of the Company. Notwithstanding anything to the contrary in
Article VI, the Company shall not indemnify an Indemnitee to the extent such
Indemnitee is reimbursed from the proceeds of insurance, and in the event the
Company makes any indemnification payments to an Indemnitee and the Indemnitee
is subsequently reimbursed from the proceeds of insurance, such Indemnitee
shall promptly refund such indemnification payments to the Company to the
extent of such insurance reimbursement.
The right to indemnification conferred by Article VI includes the right to
be paid by the Company for amounts paid in settlement of any such action, suit
or proceeding and any appeal therefrom, and all expenses (including attorneys'
fees) incurred in connection with such settlement, pursuant to a consent
decree or otherwise, unless and to the extent it is determined that the
Indemnitee did not act in good faith in the reasonable belief that his action
was in the best interests of the Company or, to the extent such matter relates
to service with respect to an employee benefit plan, in the best interests of
the participants or beneficiaries of such employee benefit plan.
The indemnification and advancement of expenses provided by Article VI shall
not be deemed exclusive of any other rights to which an Indemnitee seeking
indemnification or advancement of expenses may be entitled under any law
(common or statutory), agreement or vote of stockholders or directors or
otherwise, both as to action in his official capacity and as to action in any
other capacity while holding office for the Company, and shall continue as to
an Indemnitee who has ceased to be a director or officer, and shall inure to
the benefit of the estate, heirs, executors and administrators of the
Indemnitee. Nothing contained in Article VI shall be deemed to prohibit, and
the Company is specifically authorized to enter into, agreements with officers
and directors
II-1
<PAGE>
providing indemnification rights and procedures different from those set forth
in Article VI. In addition, the Company may, to the extent authorized from
time to time by its Board of Directors, grant indemnification rights to other
employees or agents of the Company or other persons serving the Company and
such rights may be equivalent to, or greater or less than, those set forth in
Article VI.
All of the directors and officers of the Company are covered by insurance
policies maintained and held in effect by the Company against certain
liabilities for actions taken in such capacities, including liabilities under
the Securities Act of 1933.
ITEM 21. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
2.1 Agreement and Plan of Merger dated as of June 23, 1998 between the
Company and Globe Acquisition Company.(1)
2.2 Asset Transfer Agreement dated as of July 29, 1998 between Globe
Elastic Co., Inc. and the Company.(1)
2.3 Amendment No. 1 dated as of July 17, 1998 to the Agreement and
Plan of Merger dated as of June 23, 1998 between the Company and
Globe Acquisition Company.(1)
2.4 Amendment No. 2 dated as of July 30, 1998 to the Agreement and
Plan of Merger dated as of June 23, 1998 between the Company and
Globe Acquisition Company.(1)
2.5 Purchase Agreement dated as of July 31, 1998 by and among Globe
Acquisition Company, Code, Hennessy & Simmons III, L.P. and
certain other purchasers to purchase shares of Globe Acquisition
Company's stock.(1)
3.1 Articles of Merger filed July 31, 1998 for the merger of Globe
Acquisition Company and the Company and amending the Company's
Restated Articles of Organization.
3.2 Articles of Amendment filed July 2, 1998 amending the Company's
Restated Articles of Organization.
3.3 Restated Articles of Organization of the Company filed July 22,
1992.
3.4 Bylaws of the Company.
4.1 Indenture dated as of August 6, 1998 by and between the Company
and Norwest Bank Minnesota, National Association.
4.2 Purchase Agreement dated as of August 6, 1998 by and between the
Company and BancAmerica Robertson Stephens.
4.3 Registration Rights Agreement dated as of August 6, 1998 by and
between the Company and BancAmerica Robertson Stephens.
4.4 Unit Agreement dated as of August 6, 1998 by and between the
Company and BancAmerica Robertson Stephens.
4.5 Warrant Agreement dated as of August 6, 1998 by and between the
Company and BancAmerica Robertson Stephens.
4.6 Warrant Registration Rights Agreement dated as of August 6, 1998
by and between the Company and BancAmerica Robertson Stephens.
4.7 Securityholders Agreement dated as of July 31, 1998 by and among
the shareholders of the Company.(1)
4.8 Registration Agreement dated as of July 31, 1998 by and among the
shareholders of the Company.(1)
5.1* Opinion and Consent of Kirkland & Ellis.
10.1 Employment Agreement dated as of December 31, 1997 between the
Company and Thomas A. Rodgers, III.(1)
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
10.2 Employment Agreement dated as of December 31, 1997 between the
Company and Americo Reis.(1)
10.3 Employment Agreement dated as of December 31, 1997 between the
Company and Lawrence R. Walsh.(1)
10.4 Employment Agreement dated as of December 31, 1997 between the
Company and Robert L. Bailey.(1)
10.5 Form of Executive Securities Agreement dated as of July 31, 1998
between the Company, Code Hennessy & Simmons and each of Messrs.
Walsh, Reis and Bailey.(1)
10.6 Form of Non-Competition Agreement dated as of July 31, 1998
between the Company and each of Messrs. Rodgers, III, Walsh, Reis
and Bailey. Mr. Bailey's non-competition restriction terminates on
December 31, 2000, compared to July 31, 2001 for the other
executives.(1)
10.7 Management Agreement, dated as of July 31, 1998 between Globe
Manufacturing and CHS Management III, L.P.(1)
10.8 Tax Sharing Agreement dated as of July 31, 1998 between the
Company and Globe Manufacturing.(1)
10.9 Credit Agreement dated as of July 31, 1998 by and among the
Company, Globe Manufacturing, various banks, Bank of America
National Trust and Savings Association, BancAmerica Robertson
Stephens and Merrill Lynch, Pierce, Fenner & Smith, Inc.(1)
10.10 Pledge Agreement dated as of July 31, 1998 by the Company and
Globe Manufacturing in favor of Bank of America Trust and Savings
Association.(1)
10.11 Security Agreement dated as of July 31, 1998 by the Company and
Globe Manufacturing in favor of Bank of America National Trust and
Savings Association.(1)
10.12 Form of Amended and Restated Performance Option Agreement by and
between the Company and each of Messrs. Walsh, Reis, and
Bailey.(1)
10.13 Globe Holdings Management Incentive Plan.(1)
10.14* Consulting Agreement dated as of July 31, 1998 between Globe
Manufacturing and Thomas A. Rodgers.(1)
12.1 Statement of Computation of Ratios.
21.1 Subsidiaries of the Registrant.
23.1 Consent of Ernst & Young LLP.
23.2* Consent of Kirkland & Ellis (included in Exhibit 5-1).
24.1 Powers of Attorney (included in signature page).
25.1 Statement of Eligibility of Trustee on Form T-1.
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
99.3 Form of Tender Instructions.
</TABLE>
- --------
* To be filed by amendment
+The Company agrees to furnish supplementally to the Commission a copy of any
omitted schedule to such agreement upon the request of the Commission in
accordance with Item 601(b)(2) of Regulation S-K.
(1) Filed as an Exhibit to the Registration Statement on Form S-4 (File No.
333- ) filed by Globe Manufacturing Corp. with the Securities and
Exchange Commission on September 29, 1998.
II-3
<PAGE>
(b) FINANCIAL STATEMENT SCHEDULE.
Note: All financial statement schedules have been omitted because the
required information is not present or is not present in amounts sufficient to
require submission of the schedules, or because the information required is
included in the consolidated financial statements and notes thereto.
ITEM 22. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933.
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at the time shall be deemed to
be the initial bona fide offering thereof;
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act
of 1934) that is incorporated by reference in the registration statement 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.
(c) 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 provisions, or otherwise, the registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
(d) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
(e) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-4
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE COMPANY DULY
CAUSED THIS REGISTRATION STATEMENT ON FORM S-4 TO BE SIGNED ON ITS BEHALF BY
THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN CITY OF FALL RIVER, STATE OF
MASSACHUSETTS, ON THE 28TH DAY OF SEPTEMBER, 1998.
Globe Holdings, Inc.
/s/ Thomas A. Rodgers, III
By: _________________________________
Thomas A. Rodgers, III
President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, THAT EACH PERSON WHOSE SIGNATURE APPEARS
BELOW CONSTITUTES AND APPOINTS THOMAS A. RODGERS, III, LAWRENCE R. WALSH AND
EDWARD M. LHEE , AND EACH OF THEM, HIS TRUE AND LAWFUL ATTORNEYS-IN-FACT AND
AGENTS, WITH FULL POWER OF SUBSTITUTION AND RESUBSTITUTION, FOR HIM AND IN HIS
NAME, PLACE AND STEAD, IN ANY AND ALL CAPACITIES, TO SIGN ANY OR ALL
AMENDMENTS (INCLUDING 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
INTENDS AND PURPOSES AS HE MIGHT OR COULD DO IN PERSON, HEREBY RATIFYING AND
CONFIRMING ALL THAT SAID ATTORNEYS-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, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES INDICATED ON THE 28TH DAY OF SEPTEMBER, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ Thomas A. Rodgers, Jr. Chairman
___________________________________________
Thomas A. Rodgers, Jr.
/s/ Thomas A. Rodgers, III President, Chief Executive Officer and
___________________________________________ Director (Principal Executive Officer)
Thomas A. Rodgers, III
/s/ Lawrence R. Walsh Vice President, Finance and Administration
___________________________________________ (Principal Financial Officer)
Lawrence R. Walsh
/s/ Kevin T. Cardullo Director of Finance and Accounting
___________________________________________ (Principal Accounting Officer)
Kevin T. Cardullo
/s/ Andrew W. Code Director
___________________________________________
Andrew W. Code
/s/ Peter M. Gotsch Director
___________________________________________
Peter M. Gotsch
/s/ Edward M. Lhee Director
___________________________________________
Edward M. Lhee
</TABLE>
II-5
<PAGE>
Exhibit 3.1
FEDERAL IDENTIFICATION FEDERAL IDENTIFICATION
No. Applied For No. 04-2017769
__________
Examiner The Commonwealth of Massachusetts
William Francis Galvin
Secretary of the Commonwealth
One Ashburton Place, Boston, Massachusetts 02108-1512
ARTICLES OF MERGER
(General Laws, Chapter 156B, Section 79)
merger of Globe Acquisition Company
(a Delaware corporation)
Globe Manufacturing Co.
(a Massachusetts corporation),
the constituent corporations, into
Globe Manufacturing Co. (the name of
which is changed to Globe Holdings, Inc.
pursuant to Article 3 below)
one of the constituent corporations organized under the laws of:
Massachusetts.
The undersigned officers of each of the constituent corporations
certify under the penalties of perjury as follows:
1. An agreement of merger has been duly adopted in compliance with
the requirements of General Laws, Chapter 156B, Section 79, and will
be kept as provided by Subsection (c) thereof. The surviving
corporation will furnish a copy of said agreement to any of its
stockholders, or to any person who was a stockholder of any
constituent corporation, upon written request and without charge.
2. The effective date of the merger determined pursuant to the
agreement of merger shall be the date approved and filed by the
Secretary of the Commonwealth. If a later effective date is desired,
specify such date which shall not be more than thirty days after the
date of filing:
3. (For a merger)
The following amendments to the Articles of Organization of the
surviving corporation have been effected pursuant to the agreement of
merger:
See Attachment 3A
___
C ___
___
P ___
___
M ___
___
R.A. ___
*Delete the inapplicable words.
_________ Note: If the space provided under any article or item on this form
P.C. is insufficient, additions shall be set forth on separate 8 1/2 x 11
sheets of paper with a left margin of at least 1 inch. Additions to
more than one article may be made on a single sheet as long as each
article requiring each addition is clearly indicated.
<PAGE>
(For a consolidation)
(b) State the total number of shares and the par value, if any, of each class of
stock which the resulting corporation is authorized to issue.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
WITHOUT PAR VALUE WITH PAR VALUE
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE
- -----------------------------------------------------------------------------
Common: Common:
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
Preferred: Preferred:
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
</TABLE>
**(C) If more than one class of stock is authorized, state a distinguishing
designation for each class and provide a description of the preferences, voting
powers, qualifications, and special or relative rights or privileges of each
class and of each series then established.
**(d) The restrictions, if any, on the transfer of stock contained in the
agreement of consolidation are:
**(e) Other lawful provisions, if any, for the conduct and regulation of the
business and affairs of the corporation, for its voluntary dissolution, or for
limiting, defining, or regulating the powers of the corporation, or of its
directors or stockholders, or of any class of stockholders:
Item 4 below may be deleted if the resulting/surviving corporation is organized
under the laws of a state other than Massachusetts.
4. The information contained in Item 4 is not a permanent part of the Articles
of Organization of the surviving corporation.
(a) The street address (post office boxes are not acceptable) of the surviving
corporation in Massachusetts is:
456 Bedford Street
Fall River, MA 02720
<PAGE>
ATTACHMENT 3A
-------------
In connection with the merger of Globe Acquisition Company, a Delaware
corporation, with and into Globe Manufacturing Co., a Massachusetts corporation
and the surviving corporation in such merger, pursuant to Article 3 of the
Articles of Merger to which these amendments are attached, the following
Articles of the current Articles of Organization of Globe Manufacturing Co. are
amended as set forth below.
ARTICLE I
The exact name of the corporation is:
GLOBE HOLDINGS, INC.
ARTICLE III
<TABLE>
<CAPTION>
WITHOUT PAR VALUE WITH PAR VALUE
- -------------------------------------------------------------------------------
TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common: None Class A Common: 5,000,000 $.01
- -------------------------------------------------------------------------------
None Class B Common: 350,000 $.01
- -------------------------------------------------------------------------------
Preferred: None Class C Common: 600,000 $.01
- -------------------------------------------------------------------------------
None Class A Preferred: 40,000 $.01
- -------------------------------------------------------------------------------
</TABLE>
ARTICLE IV
The total number of shares of all classes of stock which the corporation
shall have authority to issue is 5,990,000 shares, consisting of (i) 5,000,000
shares of the Class A Common Stock, $.01 par value per share (the "Class A
Common Stock"), (ii) 350,000 shares of the Class B Common Stock, $.01 par value
per share (the "Class B Common Stock"), (iii) 600,000 shares of the Class C
Common Stock, $.01 par value per share (the "Class C Common Stock"), and (iv)
40,000 shares of the Class A Preferred Stock, $.01 par value per share (the
"Class A Preferred").
The following is a statement of the designations and the powers, privileges
and rights, and the qualifications, limitations or restrictions thereof in
respect of each class of capital stock of the corporation.
3A-1
<PAGE>
A. COMMON STOCK
Section 1. General. Except as otherwise provided in this Part A, or as
otherwise required by applicable law, the rights and privileges of the Class A
Common Stock, the Class B Common Stock and the Class C Common Stock shall be
identical, and the Class A Common Stock, the Class B Common Stock and the Class
C Common Stock (the Class A Common Stock, the Class B Common Stock and the Class
C Common Stock are sometimes collectively referred to herein as the "Common
Stock") shall be treated as one class of stock of the corporation. The voting,
dividend and liquidation rights of the holders of the Class A Common Stock, the
Class B Common Stock and the Class C Common Stock are subject to and qualified
by the rights of the holders of the Class A Preferred.
Section 2. Voting Rights. Except as otherwise provided in this Part A,
or as otherwise required by applicable law, the holders of the Class A Common
Stock shall be entitled to one vote for each share held at all meetings of
stockholders (and written actions in lieu of meetings), and the holders of the
Class B Common Stock and the Class C Common Stock shall have no voting rights;
provided that the holders of Class C Common Stock shall have the right to vote
as a separate class on any merger or consolidation of the Corporation with or
into another entity or entities, or any recapitalization or reorganization, in
which shares of Class C Common Stock would receive or be exchanged for
consideration different on a per share basis from consideration received with
respect to or in exchange for the shares of Class A Common Stock or would
otherwise be treated differently from shares of Class A Common Stock in
connection with such transaction, except that shares of Class C Common Stock
may, without such a separate class vote, receive or be exchanged for non-voting
securities (except as otherwise required by law) which are otherwise identical
on a per share basis in amount and form to the voting securities received with
respect to or exchanged for the Class A Common Stock so long as (i) such non-
voting securities are convertible into such voting securities on the same terms
as the Class C Common Stock is convertible into Class A Common Stock and (ii)
all other consideration is equal on a per share basis. There shall be no
cumulative voting.
Section 3. Dividends. Dividends may be declared and paid on the Class
A Common Stock, the Class B Common Stock and the Class C Common Stock from funds
lawfully available therefor if, as and when determined by the Board of Directors
of the Corporation (the "Board") and subject to any preferential dividend rights
of any then outstanding Class A Preferred. As and when dividends are declared or
paid with respect to shares of Common Stock, whether in cash, property or
securities of the Corporation, the holders of the Class A Common Stock, the
holders of the Class B Common Stock and the holders of the Class C Common Stock
shall be entitled to receive such dividends pro rata at the same rate per share
of each class of Common Stock; provided that (i) if
3A-2
<PAGE>
dividends are declared or paid in shares of Common Stock, the dividends payable
to holders of the Class A Common Stock shall be payable in shares of the Class A
Common Stock, the dividends payable to the holders of the Class B Common Stock
shall be payable in shares of the Class B Common Stock and the dividends payable
to the holders of the Class C Common Stock shall be payable in shares of the
Class C Common Stock and (ii) if the dividends consist of other voting
securities of the Corporation, the Corporation shall make available to each
holder of the Class C Common Stock, at such holder's request, dividends
consisting of non-voting securities (except as otherwise required by law) of the
Corporation which are otherwise identical to the voting securities and which are
convertible into such voting securities on the same terms as the Class C Common
Stock is convertible into the Class A Common Stock. The right of the holders of
Common Stock to receive dividends are subject to the provisions of the Class A
Preferred.
Section 4. Liquidation. Subject to the provisions of the Class A
Preferred, the holders of the Class A Common Stock, the holders of the Class B
Common Stock and the holders of the Class C Common Stock shall be entitled to
participate pro rata at the same rate per share of each class of Common Stock in
all distributions to the holders of Common Stock in any liquidation, dissolution
or winding up of the Corporation.
Section 5. Conversion.
5A. Conversion of the Class A Common Stock. Each holder of Class A
Common Stock shall be entitled at any time to convert any or all of the shares
of such holder's Class A Common Stock into an equal number of shares of Class C
Common Stock.
5B. Conversion of the Class B Common Stock.
1. Class B Conversion Event.
(a) Without any action on the part of the holder thereof, each
outstanding share of Class B Common Stock shall automatically be converted into
a share of Class A Common Stock immediately prior to the consummation of a Class
B Conversion Event (the "Class B Mandatory Conversion Date").
(b) For purposes of this paragraph 5B, a "Class B Conversion Event"
shall mean any public offering of Common Stock registered under the Securities
Act of 1933.
3A-3
<PAGE>
(ii) Certificate Exchange Procedure.
(a) All holders of record of shares of Class B Common Stock will
be given written notice of the Class B Mandatory Conversion Date and the place
designated for mandatory conversion of all such shares of Class B Common Stock
pursuant to this paragraph 5B. Upon receipt of such notice, each holder of
shares of Class B Common Stock shall surrender his or its certificate or
certificates for all such shares to the Corporation at the place designated in
such notice, and shall thereafter receive certificates for the number of shares
of Class A Common Stock to which such holder is entitled pursuant to this
paragraph 5B. On the Class B Mandatory Conversion Date the rights of the holder
of the converted Class B Common Stock as such holder shall cease and the person
or persons in whose name or names the certificate or certificates for shares of
the Class A Common Stock are to be issued upon such conversion shall be deemed
to have become the holder or holders of record of the shares of the Class A
Common Stock represented thereby.
(b) Promptly after the surrender of certificates, the
Corporation shall issue and deliver in accordance with the surrendering holder's
instructions the certificate or certificates for the Class A Common Stock
issuable upon such conversion. If so required by the Corporation, certificates
surrendered for conversion shall be endorsed or accompanied by written
instrument or instruments of transfer, in form satisfactory to the Corporation,
duly executed by the registered holder or by his or its attorney duly authorized
in writing.
(c) The Corporation shall at all times reserve and keep
available out of its authorized but unissued shares of the Class A Common Stock
solely for the purpose of issuance upon the conversion of the Class B Common
Stock such number of shares of the Class A Common Stock issuable upon the
conversion of all outstanding Class B Common Stock. All shares of Class A
Common Stock which are so issuable shall, when issued, be duly and validly
issued, fully paid and nonassessable and free from all taxes, liens and charges.
The Corporation shall take all such actions as may be necessary to assure that
all such shares of Class A Common Stock may be so issued without violation of
any applicable law or governmental regulation or any requirements of any
domestic securities exchange upon which shares of Class A Common Stock may be
listed (except for official notice of issuance which shall be immediately
transmitted by the Corporation upon issuance).
(d) The issuance of certificates for the Class A Common Stock
upon conversion of the Class B Common Stock shall be made without charge to the
holders of such shares for any issuance tax in respect thereof or other cost
incurred by the Corporation in connection with such conversion and the related
issuance of the Class A Common Stock.
3A-4
<PAGE>
(e) The Corporation shall not close its books against the
transfer of shares of Class B Common Stock in any manner which would interfere
with the timely conversion of any shares of Class B Common Stock. The
Corporation shall assist and cooperate with any holder of Class B Common Stock
required to make any governmental filings or obtain any governmental approval
prior to or in connection with any conversion of Common Stock hereunder
(including, without limitation, making any filings required to be made by the
Corporation).
5C. Conversion of the Class C Common Stock.
(i) Class C Conversion Events.
(a) In connection with the occurrence (or the expected occurrence as
described in 5C(iii) below) of any Class C Conversion Event, each holder of
Class C Common Stock shall be entitled to convert into an equal number of shares
of Class A Common Stock any or all of the shares of such holder's Class C Common
Stock being (or expected to be) distributed, disposed of or sold in connection
with such Class C Conversion Event.
(b) For purposes of this paragraph 5C, a "Class C Conversion Event"
shall mean (a) any public offering or public sale of securities of the
Corporation (including a public offering registered under the Securities Act of
1933 and a public sale pursuant to Rule 144 of the Securities and Exchange
Commission or any similar rule then in force), (b) any sale of securities of the
Corporation to a person or group of persons (within the meaning of the
Securities Exchange Act of 1934, as amended (the "1934 Act")) if, after such
sale, such person or group of persons in the aggregate would own or control
securities which possess in the aggregate the ordinary voting power to elect a
majority of the Corporation's directors (provided that such sale has been
approved by the Board or a committee thereof), (c) any sale of securities of the
Corporation to a person or group of persons (within the meaning of the 1934 Act)
if, after such sale, such person or group of persons in the aggregate would own
or control securities of the Corporation (excluding any Class C Common Stock
being converted and disposed of in connection with such Class C Conversion
Event) which possess in the aggregate the ordinary voting power to elect a
majority of the Corporation's directors, (d) any sale of securities of the
Corporation to a person or group of persons (within the meaning of the 1934 Act)
if, after such sale, such person or group of persons would not, in the
aggregate, own, control or have the right to acquire more than two percent (2%)
of the outstanding securities of any class of voting securities of the
Corporation, and (e) a merger, consolidation or similar transaction involving
the Corporation if, after such transaction, a person or group of persons (within
the meaning of the 1934 Act) in the aggregate would own or control securities
which possess in the aggregate the ordinary voting power to elect a majority of
the surviving corporation's directors (provided that the
3A-5
<PAGE>
transaction has been approved by the Board or a committee thereof). For purpose
of this paragraph 5C, "person" shall include any natural person and any
corporation, partnership, joint venture, trust, unincorporated organization and
any other entity or organization.
(ii) Class C Conversion Procedure.
(a) Each holder of Class C Common Stock shall be entitled to
convert shares of Class C Common Stock in connection with any Class C Conversion
Event if such holder reasonably believes that such Class C Conversion Event
shall be consummated, and a written request for conversion from any holder of
Class C Common Stock to the Corporation stating such holder's reasonable belief
that a Class C Conversion Event shall occur shall be conclusive and shall
obligate the Corporation to effect such conversion in a timely manner so as to
enable each such holder to participate in such Class C Conversion Event. The
Corporation shall not cancel the shares of the Class C Common Stock so converted
before the tenth day following such Class C Conversion Event and shall reserve
such shares until such tenth day for reissuance in compliance with the next
sentence. If any shares of the Class C Common Stock are converted into shares
of the Class A Common Stock in connection with a Class C Conversion Event and
such shares of the Class A Common Stock are not actually distributed, disposed
of or sold pursuant to such Class C Conversion Event, such shares of the Class A
Common Stock shall be promptly converted back into the same number of shares of
the Class C Common Stock as were originally converted to the Class A Common
Stock.
(b) Unless otherwise provided in connection with a Class C
Conversion Event, each conversion of shares of Class C Common Stock into shares
of Class A Common Stock shall be effected by the surrender of the certificate or
certificates representing the shares to be converted at the principal office of
the Corporation at any time during normal business hours, together with a
written notice by the holder of such Class C Common Stock stating that such
holder desires to convert the shares, or a stated number of the shares, of such
Class C Common Stock represented by such certificate or certificates into shares
of Class A Common Stock. Unless otherwise provided in connection with a Class C
Conversion Event, each conversion shall be deemed to have been effected as of
the close of business on the date on which such certificate or certificates have
been surrendered and such notice has been received, and at such time the rights
of the holder of the converted Class C Common Stock as such holder shall cease
and the person or persons in whose name or names the certificate or certificates
for shares of the Class A Common Stock are to be issued upon such conversion
shall be deemed to have become the holder or holders of record of the shares of
the Class A Common Stock represented thereby.
3A-6
<PAGE>
(c) Promptly after the surrender of certificates, the
Corporation shall issue and deliver in accordance with the surrendering holder's
instructions (a) the certificate or certificates for the Class A Common Stock
issuable upon such conversion and (b) a certificate representing any Class C
Common Stock which was represented by the certificate or certificates delivered
to the Corporation in connection with such conversion but which was not
converted.
(d) The Corporation shall at all times reserve and keep
available out of its authorized but unissued shares of the Class A Common Stock
solely for the purpose of issuance upon the conversion of the Class C Common
Stock such number of shares of the Class A Common Stock issuable upon the
conversion of all outstanding Class C Common Stock. All shares of Class A
Common Stock which are so issuable shall, when issued, be duly and validly
issued, fully paid and nonassessable and free from all taxes, liens and charges.
The Corporation shall take all such actions as may be necessary to assure that
all such shares of Class A Common Stock may be so issued without violation of
any applicable law or governmental regulation or any requirements of any
domestic securities exchange upon which shares of Class A Common Stock may be
listed (except for official notice of issuance which shall be immediately
transmitted by the Corporation upon issuance).
(e) The issuance of certificates for the Class A Common Stock
upon conversion of the Class C Common Stock shall be made without charge to the
holders of such shares for any issuance tax in respect thereof or other cost
incurred by the Corporation in connection with such conversion and the related
issuance of the Class A Common Stock.
(f) The Corporation shall not close its books against the
transfer of shares of Class C Common Stock in any manner which would interfere
with the timely conversion of any shares of Class C Common Stock. The
Corporation shall assist and cooperate with any holder of Class C Common Stock
required to make any governmental filings or obtain any governmental approval
prior to or in connection with any conversion of Class C Common Stock hereunder
(including, without limitation, making any filings required to be made by the
Corporation).
5D. Stock Splits. If the Corporation in any manner subdivides or
combines the outstanding shares of one class of Common Stock, the outstanding
shares of the other class of Common Stock shall be proportionately subdivided or
combined in a similar manner.
Section 6. Registration of Transfer. The Corporation shall keep at
its principal office (or such other place as the Corporation reasonably
designates) a register for the registration of Common Stock. Upon the surrender
of any certificate
3A-7
<PAGE>
representing Common Stock at such place, the Corporation shall, at the request
of the record holder of such certificate, execute and deliver (at the
Corporation's expense) a new certificate or certificates in exchange therefor
representing in the aggregate the number of shares represented by the
surrendered certificate. Each such new certificate shall be registered in such
name and shall represent such number of shares as is requested by the holder of
the surrendered certificate and shall be substantially identical in form to the
surrendered certificate, and dividends shall accrue on the Common Stock
represented by such new certificate from the date to which dividends have been
fully paid on such Common Stock represented by the surrendered certificate.
Section 7. Replacement. Upon receipt of evidence reasonably
satisfactory to the Corporation (an affidavit of the registered holder shall be
satisfactory) of the ownership and the loss, theft, destruction or mutilation of
any certificate evidencing shares of Common Stock, and in the case of any such
loss, theft or destruction, upon receipt of indemnity reasonably satisfactory to
the Corporation (provided that if the holder is a financial institution or other
institutional investor its own agreement shall be satisfactory), or in the case
of any such mutilation upon surrender of such certificate, the Corporation shall
(at its expense) execute and deliver in lieu of such certificate a new
certificate of like kind representing the number of shares of such class
represented by such lost, stolen, destroyed or mutilated certificate and dated
the date of such lost, stolen, destroyed or mutilated certificate, and dividends
shall accrue on the Common Stock represented by such new certificate from the
date to which dividends have been fully paid on such lost, stolen, destroyed or
mutilated certificate.
Section 8. Notices. Except as otherwise expressly provided
hereunder, all notices referred to herein shall be in writing and shall be
delivered by registered or certified mail, return receipt requested and postage
prepaid, or by reputable overnight courier service, charges prepaid, and shall
be deemed to have been given when so mailed or sent (i) to the Corporation, at
its principal executive offices and (ii) to any stockholder, at such holder's
address as it appears in the stock records of the Corporation (unless otherwise
indicated by any such holder).
Section 9. Amendment and Waiver. No amendment or waiver of any
provision of this Part A shall be effective without the prior approval of the
holders of a majority of the then outstanding Class C Common Stock voting as a
separate class.
B. CLASS A PREFERRED
Section 1. Dividends.
1A. General Obligation. When, if and as declared by the Board and to
the extent permitted under the Business Corporation Law of the Commonwealth of
3A-8
<PAGE>
Massachusetts, the Corporation shall pay preferential dividends in cash to the
holders of the Class A Preferred as provided in this Section 1. Dividends on
each share of the Class A Preferred (a "Share") shall accrue on a daily basis at
the rate of 14% per annum of the sum of the Liquidation Value thereof plus all
accumulated and unpaid dividends thereon from and including the date of issuance
of such Share to and including the first to occur of (i) the date on which the
Liquidation Value of such Share (plus all accrued and unpaid dividends thereon)
is paid to the holder thereof in connection with the liquidation of the
Corporation or the redemption of such Share by the Corporation or (ii) the date
on which such Share is otherwise acquired by the Corporation. Such dividends
shall accrue whether or not they have been declared and whether or not there are
profits, surplus or other funds of the Corporation legally available for the
payment of dividends, and such dividends shall be cumulative such that all
accrued and unpaid dividends shall be fully paid or declared with funds
irrevocably set apart for payment before any dividends, distributions,
redemptions or other payments may be made with respect to any Junior Securities.
The date on which the Corporation initially issues any Share shall be deemed to
be its "date of issuance" regardless of the number of times transfer of such
Share is made on the stock records maintained by or for the Corporation and
regardless of the number of certificates which may be issued to evidence such
Share.
1B. Dividend Reference Dates. To the extent not paid on July 31 of
each year, beginning on July 31, 1999 (the "Dividend Reference Dates"), all
dividends which have accrued on each Share outstanding during the twelve-month
period (or other period in the case of the initial Dividend Reference Date)
ending upon each such Dividend Reference Date shall be accumulated and shall
remain accumulated dividends with respect to such Share until paid to the holder
thereof.
1C. Distribution of Partial Dividend Payments. Except as otherwise
provided herein, if at any time the Corporation pays less than the total amount
of dividends then accrued with respect to the Class A Preferred, such payment
shall be distributed pro rata among the holders thereof based upon the aggregate
accrued but unpaid dividends on the Shares held by each such holder.
Section 2. Liquidation. Upon any liquidation, dissolution or winding
up of the Corporation (whether voluntary or involuntary), each holder of Class A
Preferred shall be entitled to be paid, before any distribution or payment is
made upon any Junior Securities, an amount in cash equal to the aggregate
Liquidation Value of all Shares held by such holder (plus all accrued and unpaid
dividends thereon), and the holders of Class A Preferred shall not be entitled
to any further payment. If upon any such liquidation, dissolution or winding up
of the Corporation, the Corporation's assets to be distributed among the holders
of the Class A Preferred are insufficient to permit payment to such holders of
the aggregate amount which they are entitled to be paid under this Section 2,
then the entire assets available to be distributed to the
3A-9
<PAGE>
Corporation's stockholders shall be distributed pro rata among such holders
based upon the aggregate Liquidation Value (plus all accrued and unpaid
dividends) of the Class A Preferred held by each such holder. Prior to the
liquidation, dissolution or winding up of the Corporation, the Corporation shall
declare for payment all accrued and unpaid dividends with respect to the Class A
Preferred, but only to the extent of funds of the Corporation legally available
for the payment of dividends. Not less than 60 days prior to the payment date
stated therein, the Corporation shall mail written notice of any such
liquidation, dissolution or winding up to each record holder of Class A
Preferred, setting forth in reasonable detail the amount of proceeds to be paid
with respect to each Share and each share of Common Capital Stock in connection
with such liquidation, dissolution or winding up.
Section 3. Priority of Class A Preferred on Dividends and
Redemptions. So long as any Class A Preferred remains outstanding, without the
prior written consent of the holders of a majority of the outstanding shares of
Class A Preferred, the Corporation shall not, nor shall it permit any Subsidiary
to redeem, purchase or otherwise acquire directly or indirectly any Junior
Securities, nor shall the Corporation directly or indirectly pay or declare any
dividend or make any distribution upon any Junior Securities, provided that the
Corporation may repurchase shares of Common Capital Stock from present or former
employees of the Corporation and its Subsidiaries, and from certain other
security holders in accordance with the provisions of agreements approved by the
Board.
Section 4. Voting Rights. Except as otherwise provided herein and as
otherwise required by applicable law, the Class A Preferred shall have no voting
rights.
Section 5. Registration of Transfer. The Corporation shall keep at
its principal office (or such other place as the Corporation reasonably
designates) a register for the registration of Class A Preferred. Upon the
surrender of any certificate representing Class A Preferred at such place, the
Corporation shall, at the request of the record holder of such certificate,
execute and deliver (at the Corporation's expense) a new certificate or
certificates in exchange therefor representing in the aggregate the number of
Shares represented by the surrendered certificate. Each such new certificate
shall be registered in such name and shall represent such number of Shares as is
requested by the holder of the surrendered certificate and shall be
substantially identical in form to the surrendered certificate, and dividends
shall accrue on the Class A Preferred represented by such new certificate from
the date to which dividends have been fully paid on such Class A Preferred
represented by the surrendered certificate.
Section 6. Replacement. Upon receipt of evidence reasonably
satisfactory to the Corporation (an affidavit of the registered holder shall be
satisfactory) of the ownership and the loss, theft, destruction or mutilation of
any certificate
3A-10
<PAGE>
evidencing Shares of Class A Preferred, and in the case of any such loss, theft
or destruction, upon receipt of indemnity reasonably satisfactory to the
Corporation (provided that if the holder is a financial institution or other
institutional investor its own agreement shall be satisfactory), or in the case
of any such mutilation upon surrender of such certificate, the Corporation shall
(at its expense) execute and deliver in lieu of such certificate a new
certificate of like kind representing the number of Shares of such class
represented by such lost, stolen, destroyed or mutilated certificate and dated
the date of such lost, stolen, destroyed or mutilated certificate, and dividends
shall accrue on the Class A Preferred represented by such new certificate from
the date to which dividends have been fully paid on such lost, stolen, destroyed
or mutilated certificate.
Section 7. Definitions.
"Common Capital Stock" means, collectively, the Corporation's Common
Stock and any capital stock of any class of the Corporation hereafter authorized
which is not limited to a fixed sum or percentage of par or stated value in
respect to the rights of the holders thereof to participate in dividends or in
the distribution of assets upon any liquidation, dissolution or winding up of
the Corporation.
"Junior Securities" means any capital stock or other equity securities
of the Corporation, except for the Class A Preferred.
"Liquidation Value" of any Share as of any particular date shall be
equal to $1,000.00.
"Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a government entity or any
department, agency or political subdivision thereof.
"Subsidiary" means, with respect to any Person, any corporation,
limited liability company, partnership, association or other business entity of
which (i) if a corporation, a majority of the total voting power of shares of
stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (ii) if a limited
liability company, partnership, association or other business entity, a majority
of the partnership or other similar ownership interest thereof is at the time
owned or controlled, directly or indirectly, by any Person or one or more
Subsidiaries of that person or a combination thereof. For purposes hereof, a
Person or Persons shall be deemed to have a majority ownership interest in a
limited liability company, partnership, association or other business entity if
such Person or Persons
3A-11
<PAGE>
shall be allocated a majority of limited liability company, partnership,
association or other business entity gains or losses or shall be or control the
managing general partner of such limited liability company, partnership,
association or other business entity.
Section 8. Amendment and Waiver. No amendment, modification or
waiver shall be binding or effective with respect to any provision of this Part
B without the prior written consent of the holders of a majority of the Class A
Preferred outstanding at the time such action is taken; provided that no change
in the terms hereof may be accomplished by merger or consolidation of the
Corporation with another corporation or entity unless the Corporation has
obtained the prior written consent of the holders of the applicable percentage
of the Class A Preferred then outstanding.
Section 9. Notices. Except as otherwise expressly provided
hereunder, all notices referred to herein shall be in writing and shall be
delivered by registered or certified mail, return receipt requested and postage
prepaid, or by reputable overnight courier service, charges prepaid, and shall
be deemed to have been given when so mailed or sent (i) to the Corporation, at
its principal executive offices and (ii) to any stockholder, at such holder's
address as it appears in the stock records of the Corporation (unless otherwise
indicated by any such holder).
Section 10. Fractional Shares. The Corporation may issue fractional
Shares or fractional interest in Shares, and if they are issued, they shall
entitle the holder to receive dividends, participate in distributions and to
have the benefit of all other rights of a holder of the Class A Preferred in
proportion to the fractional shares or interest held by such holder.
ARTICLE VI
Other lawful provisions for the conduct and regulation of the business and
affairs of the corporation, for its voluntary dissolution, or for limiting,
defining, or regulating the powers of the corporation, or of its directors or
stockholders, or of any class of stockholders:
A. LIMITATION OF DIRECTOR LIABILITY
Except to the extent that Chapter 156B of the Massachusetts General Laws
prohibits the elimination or limitation of liability of directors for breaches
of fiduciary duty, no director of the corporation shall be personally liable to
the corporation or its stockholders for monetary damages for any breach of
fiduciary duty as a director, notwithstanding any provision of law imposing such
liability. No amendment to or
3A-12
<PAGE>
repeal of this provision shall apply to or have any effect on the liability or
alleged liability of any director of the corporation for or with respect to any
acts or omissions of such director occurring prior to such amendment.
B. INDEMNIFICATION
2. Actions, Suits and Proceedings. The corporation shall indemnify each
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he is or
was, or has agreed to become, a director or officer of the corporation, or is or
was serving, or has agreed to serve, at the request of the corporation, as a
director or officer of, or in a similar capacity with, another organization or
in any capacity with respect to any employee benefit plan of the corporation
(all such persons being referred to hereafter as an "Indemnitee"), or by reason
of any action alleged to have been taken or omitted in such capacity, against
all expenses (including attorneys' fees), judgments and fines incurred by him or
on his behalf in connection with such action, suit or proceeding and any appeal
therefrom, unless the Indemnitee shall be finally adjudicated in such action,
suit or proceeding not to have acted in good faith in the reasonable belief that
his action was in the best interests of the corporation or, to the extent such
matter relates to service with respect to an employee benefit plan, in the best
interests of the participants or beneficiaries of such employee benefit plan.
Notwithstanding anything to the contrary in this Article, except as set forth in
Section 6 below, the corporation shall not indemnify an Indemnitee seeking
indemnification in connection with a proceeding (or part thereof) initiated by
the Indemnitee unless the initiation thereof was approved by the Board of
Directors of the corporation. Notwithstanding anything to the contrary in this
Article, the corporation shall not indemnify an Indemnitee to the extent such
Indemnitee is reimbursed from the proceeds of insurance, and in the event the
corporation makes any indemnification payments to an Indemnitee and the
Indemnitee is subsequently reimbursed from the proceeds of insurance, such
Indemnitee shall promptly refund such indemnification payments to the
corporation to the extent of such insurance reimbursement.
3. Settlements. The right to indemnification conferred in this Article
shall include the right to be paid by the corporation for amounts paid in
settlement of any such action, suit or proceeding and any appeal therefrom, and
all expenses (including attorneys' fees) incurred in connection with such
settlement, pursuant to a consent decree or otherwise, unless and to the extent
it is determined pursuant to Section 5 below that the Indemnitee did not act in
good faith in the reasonable belief that his
3A-13
<PAGE>
action was in the best interests of the corporation or, to the extent such
matter relates to service with respect to an employee benefit plan, in the best
interests of the participants or beneficiaries of such employee benefit plan.
4. Notification and Defense of Claim. As a condition precedent to his
right to be indemnified, the Indemnitee must notify the corporation in writing
as soon as practicable of any action, suit, proceeding or investigation
involving him for which indemnity will or could be sought. With respect to any
action, suit, proceeding or investigation of which the corporation is so
notified, the corporation will be entitled to participate therein at its own
expense and/or to assume the defense thereof at its own expense, with legal
counsel reasonably acceptable to the Indemnitee. After notice from the
corporation to the Indemnitee of its election so to assume such defense, the
corporation shall not be liable to the Indemnitee for any legal or other
expenses subsequently incurred by the Indemnitee in connection with such claim,
other than as provided below in this Section 3. The Indemnitee shall have the
right to employ his own counsel in connection with such claim, but the fees and
expenses of such counsel incurred after notice from the corporation of its
assumption of the defense thereof shall be at the expense of the Indemnitee
unless (i) the employment of counsel by the Indemnitee has been authorized by
the corporation, (ii) counsel to the Indemnitee shall have reasonably concluded
that there may be a conflict of interest or position on any significant issue
between the corporation and the Indemnitee in the conduct of the defense of such
action or (iii) the corporation shall not in fact have employed counsel to
assume the defense of such action, in each of which cases the fees and expenses
of counsel for the Indemnitee shall be at the expense of the corporation, except
as otherwise expressly provided by this Article. The corporation shall not be
entitled, without the consent of the Indemnitee, to assume the defense of any
claim brought by or in the right of the corporation or as to which counsel for
the Indemnitee shall have reasonably made the conclusion provided for in clause
(ii) above.
5. Advance of Expenses. Subject to the provisions of Section 5 below, in
the event that the corporation does not assume the defense pursuant to Section 3
of this Article of any action, suit, proceeding or investigation of which the
corporation receives notice under this Article, any expenses (including
attorneys' fees) incurred by an Indemnitee in defending a civil or criminal
action, suit, proceeding or investigation or any appeal therefrom shall be paid
by the corporation in advance of the final disposition of such matter; provided,
however, that the payment of such expenses incurred by an Indemnitee in advance
of the final disposition of such matter shall be made only upon receipt of an
undertaking by or on behalf of the Indemnitee to repay all amounts so advanced
in the event that it shall ultimately be determined that the Indemnitee is not
entitled to be indemnified by the corporation as authorized in this Article.
Such undertaking shall be accepted without reference to the financial ability of
the Indemnitee to make such repayment.
3A-14
<PAGE>
6. Procedure for Indemnification. In order to obtain indemnification or
advancement of expenses pursuant to Section 1, 2 or 4 of this Article, the
Indemnitee shall submit to the corporation a written request, including in such
request such documentation and information as is reasonably available to the
Indemnitee and is reasonably necessary to determine whether and to what extent
the Indemnitee is entitled to indemnification or advancement of expenses. Any
such indemnification or advancement of expenses shall be made promptly, and in
any event within 60 days after receipt by the corporation of the written request
of the Indemnitee, unless the corporation determines within such 60-day period
that the Indemnitee did not meet the applicable standard of conduct set forth in
Section 1 or 2, as the case may be. Such determination shall be made in each
instance by (a) a majority vote of a quorum of the directors of the corporation,
(b) a majority vote of a quorum of the outstanding shares of stock of all
classes entitled to vote for directors, voting as a single class, which quorum
shall consist of stockholders who are not at that time parties to the action,
suit or proceeding in question, (c) independent legal counsel (who may, to the
extent permitted by law, be regular legal counsel to the corporation), or (d) a
court of competent jurisdiction.
7. Remedies. The right to indemnification or advances as granted by this
Article shall be enforceable by the Indemnitee in any court of competent
jurisdiction if the corporation denies such request, in whole or in part, or if
no disposition thereof is made within the 60-day period referred to above in
Section 5. Unless otherwise required by law, the burden of proving that the
Indemnitee is not entitled to indemnification or advancement of expenses under
this Article shall be on the corporation. Neither the failure of the corporation
to have made a determination prior to the commencement of such action that
indemnification is proper in the circumstances because the Indemnitee has met
the applicable standard of conduct, nor an actual determination by the
corporation pursuant to Section 5 that the Indemnitee has not met such
applicable standard of conduct, shall be a defense to the action or create a
presumption that the Indemnitee has not met the applicable standard of conduct.
The Indemnitee's expenses (including attorneys' fees) incurred in connection
with successfully establishing his right to indemnification, in whole or in
part, in any such proceeding shall also be indemnified by the corporation.
8. Subsequent Amendment. No amendment, termination or repeal of this
Article or of the relevant provisions of Chapter 156B of the Massachusetts
General Laws or any other applicable laws shall affect or diminish in any way
the rights of any Indemnitee to indemnification under the provisions hereof with
respect to any action, suit, proceeding or investigation arising out of or
relating to any actions, transactions or facts occurring prior to the final
adoption of such amendment, termination or repeal.
3A-15
<PAGE>
9. Other Rights. The indemnification and advancement of expenses provided
by this Article shall not be deemed exclusive of any other rights to which an
Indemnitee seeking indemnification or advancement of expenses may be entitled
under any law (common or statutory), agreement or vote of stockholders or
directors or otherwise, both as to action in his official capacity and as to
action in any other capacity while holding office for the corporation, and shall
continue as to an Indemnitee who has ceased to be a director or officer, and
shall inure to the benefit of the estate, heirs, executors and administrators of
the Indemnitee. Nothing contained in this Article shall be deemed to prohibit,
and the corporation is specifically authorized to enter into, agreements with
officers and directors providing indemnification rights and procedures different
from those set forth in this Article. In addition, the corporation may, to the
extent authorized from time to time by its Board of Directors, grant
indemnification rights to other employees or agents of the corporation or other
persons serving the corporation and such rights may be equivalent to, or greater
or less than, those set forth in this Article.
10. Partial Indemnification. If an Indemnitee is entitled under any
provision of this Article to indemnification by the corporation for some or a
portion of the expenses (including attorneys' fees), judgments, fines or amounts
paid in settlement actually and reasonably incurred by him or on his behalf in
connection with any action, suit, proceeding or investigation and any appeal
therefrom but not, however, for the total amount thereof, the corporation shall
nevertheless indemnify the Indemnitee for the portion of such expenses
(including attorneys' fees), judgments, fines or amounts paid in settlement to
which the Indemnitee is entitled.
11. Insurance. The corporation may purchase and maintain insurance, at its
expense, to protect itself and any director, officer, employee or agent of the
corporation or another organization or employee benefit plan against any
expense, liability or loss incurred by him in any such capacity, or arising out
of his status as such, whether or not the corporation would have the power to
indemnify such person against such expense, liability or loss under Chapter 156B
of the Massachusetts General Laws.
12. Merger or Consolidation. If the corporation is merged into or
consolidated with another corporation and the corporation is not the surviving
corporation, the surviving corporation shall assume the obligations of the
corporation under this Article with respect to any action, suit, proceeding or
investigation arising out of or relating to any actions, transactions or facts
occurring prior to the date of such merger or consolidation.
13. Savings Clause. If this Article or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless indemnify each Indemnitee as to any expenses
(including attorneys' fees),
3A-16
<PAGE>
judgments, fines and amounts paid in settlement in connection with any action,
suit, proceeding or investigation, whether civil, criminal or administrative,
including an action by or in the right of the corporation, to the fullest extent
permitted by any applicable portion of this Article that shall not have been
invalidated and to the fullest extent permitted by applicable law.
14. Subsequent Legislation. If the Massachusetts General Laws are amended
after adoption of this Article to expand further the indemnification permitted
to Indemnitees, then the corporation shall indemnify such persons to the fullest
extent permitted by the Massachusetts General Laws, as so amended.
C. OTHER PROVISIONS
(a) The directors may make, amend, or repeal the by-laws in whole or in
part, except with respect to any provision of such by-laws which by law or these
Articles or the by-laws requires action by the stockholders.
(b) Meetings of the stockholders of the corporation may be held anywhere in
the United States.
(c) The corporation shall have the power to be a partner in any business
enterprise which this corporation would have the power to conduct by itself.
3A-17
<PAGE>
(b) The name, residential address and post office address of each director and
officer of the surviving corporation is:
POST OFFICE
NAME RESIDENTIAL ADDRESS ADDRESS
President: Thomas A. Rodgers, III
Treasurer: Thomas A. Rodgers, Jr.
Clerk:
Directors: Thomas A. Rodgers, III
Thomas A. Rodgers, Jr.
Elizabeth Cogan
Richard Friedman
Robert E. Gregory
Robert F. Stoico
(c) The fiscal year end (i.e. tax year) of the surviving corporation shall end
on the last day of the month of:
December
(d) The name and business address of the resident agent, if any, of the
surviving corporation is:
Lawrence R. Walsh, 456 Bedford Street, Fall River, MA 02720
Item 5 below may be deleted if the resulting/surviving corporation is organized
under the laws of Massachusetts.
FOR MASSACHUSETTS CORPORATIONS
The undersigned *President*/*Vice President* and *Clerk/*Assistant Clerk of
Globe Manufacturing Co., a corporation organized under the laws of
Massachusetts, further state under the penalties of perjury that the agreement
of merger has been duly executed on behalf of such corporation and duly approved
in the manner required by General Laws, Chapter 156B, Section 78.
/s/ Thomas A. Rodgers, III, President
/s/ Lawrence R. Walsh, Asst. Clerk, Clerk/Assistant Clerk
FOR CORPORATIONS ORGANIZED IN A STATE OTHER THAN MASSACHUSETTS
The undersigned, +/s/ Peter M. Gotsch and
-----------------------------------------------------
++/s/ Edward M. Lhee ,
- -------------------------------------------------------------
of Globe Acquisition Company, a corporation organized under the laws of
Delaware, further state under the penalties of perjury that the agreement of
merger has been duly adopted by such corporation in the manner required by the
laws of Delaware.
*Delete the inapplicable words
+Specify the officer having powers and duties corresponding
to those of the president or vice president of a Massachusetts
corporation organized under General Laws, Chapter 156B.
+__________________________________
++Specify the officer having powers and duties corresponding
to the clerk or assistant clerk of such a Massachusetts corporation.
++_________________________________
<PAGE>
THE COMMONWEALTH OF MASSACHUSETTS
ARTICLES OF *CONSOLIDATION/*MERGER
(General Laws, Chapter 156B, Section 79)
================================================================================
I hereby approve the written Articles of *Consolidation/*Merger and, the filing
fee in the amount of $1,860 having been paid, said articles are deemed to have
been filed with me this 31st day of July, 1998.
Effective date:_____________________________
WILLIAM FRANCIS GALVIN
Secretary of the Commonwealth
TO BE FILLED IN BY CORPORATION
Photocopy of document to be sent to:
Karen Pitzi
Hale and Door LLP
60 State Street
Boston, MA 02109
Telephone: (617) 526-5177
<PAGE>
EXHIBIT 3.2
FEDERAL IDENTIFICATION
NO. 04-2017769
The Commonwealth of Massachusetts
/s/ JM William Francis Galvin
- ------------ Secretary of the Commonwealth
Examiner One Ashburton Place, Boston, Massachusetts 02108-1512
/s/ N/A
- -------------
ARTICLES OF AMENDMENT
Name Approved (General Laws, Chapter 156B, Section 72)
We, Thomas A. Rodgers III, President
----------------------------------------------------
and Lawrence Walsh Assistant Clerk
----------------------------------------------
of Globe Manufacturing Co. ,
-------------------------------------------------------------
(Exact name of corporation)
located at 456 Bedford Street, Fall River MA 02720 ,
------------------------------------------------------
(Street address of corporation in Massachusetts)
certify that these Articles of Amendment affecting articles
numbered:
Articles #3 and 4
----------------------------------------------------------------
(Number those articles 1, 2, 3, 4, 5 and/or 6 being amended)
of the Articles of Organization were duly adopted at a meeting
held on June 23, 1998, by vote of:
<TABLE>
<CAPTION>
<S> <C>
100,000 shares of Class A Common Stock of 100,000 shares outstanding,
------- -------------------- -------
(type, class & series, if any)
shares of of shares outstanding, and
---------- ------------- --------
(type, class & series, if any)
shares of of shares outstanding, and
---------- ------------- --------
(type, class & series, if any)
</TABLE>
C [__] or /2/being at least two thirds of each type, class or series
outstanding and entitled to vote thereon and of each type, class or
P [__] series of stock whose rights are adversely affected thereby:
M [__] *Delete the inapplicable words. **Delete the inapplicable clause.
/1/ For amendments adopted pursuant to Chapter 156B, Section 70.
R.A. [__] /2/ For amendments adopted pursuant to Chapter 156B, Section 71.
Note: If the space provided under any article or item on this form
8 is insufficient, additions shall be set forth on one side only of
- ------- separate 8 1/2 x 11 sheets of paper with a left margin of at least
P.C. 1 inch. Additions to more than one article may be made on a single
sheet so long as each article requiring each addition is clearly
indicated.
<PAGE>
To change the number of shares and the par value (if any) of any type, class or
series of stock which the corporation is authorized to issue, fill in the
following:
The total presently authorized is:
<TABLE>
<CAPTION>
WITHOUT PAR VALUE STOCKS WITH PAR VALUE STOCKS
- ----------------------------------------------------------------------------
TYPE NUMBER OF SHARES TYPE NUMBER OF PAR VALUE
SHARES
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------
Common: None Common: Class A: 2,000,000 $0.01
- ----------------------------------------------------------------------------
Class B: 2,000,000 $0.01
- ----------------------------------------------------------------------------
Preferred: None Preferred: Series A: 30,000 $0.01
- ----------------------------------------------------------------------------
</TABLE>
Change the total authorized to:
<TABLE>
<CAPTION>
WITHOUT PAR VALUE STOCKS WITH PAR VALUE STOCKS
- ----------------------------------------------------------------------------
TYPE NUMBER OF SHARES TYPE NUMBER OF PAR VALUE
SHARES
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------
Common: None Common: Class A: 2,000,000 $0.01
- ----------------------------------------------------------------------------
Class B: 2,000,000 $0.01
- ----------------------------------------------------------------------------
Preferred: None Class C: 100,000 $0.01
- ----------------------------------------------------------------------------
Preferred: Series A: 30,000 $0.01
- ----------------------------------------------------------------------------
</TABLE>
<PAGE>
ATTACHMENT 4
------------
AMENDMENT OF ARTICLE FOUR
The two unnumbered introductory paragraphs and Part A of Article Four of
the Articles of Organization of Globe Manufacturing Co. (the "Corporation") are
hereby deleted in their entirety and replaced by the following:
The total number of shares of all classes of stock which the Corporation
shall have authority to issue is 4,130,000 shares, consisting of (i) 2,000,000
shares of Class A Common Stock, $.01 par value per share ("Class A Common
Stock"), (ii) 2,000,000 shares of Class B Common Stock, $.01 par value per share
("Class B Common Stock"), (iii) 100,000 shares of Class C Common Stock, $.01 par
value per share ("Class C Common Stock"), and (iv) 30,000 shares of Series A
Cumulative Preferred Stock, $.01 par value per share ("Series A Preferred").
The following is a statement of the designations and the powers, privileges
and rights, and the qualifications, limitations or restrictions thereof in
respect of each class of capital stock of the Corporation.
1. CLASS A COMMON STOCK, CLASS B COMMON STOCK AND CLASS C COMMON STOCK.
a. General. The voting, dividend and liquidation rights of the holders
of the Class A Common Stock, Class B Common Stock and Class C Common Stock are
subject to and qualified by the rights of the holders of the Series A Preferred.
Except for the mandatory conversion provisions, the difference in voting rights
and provisions with respect to an Acquisition Event (as defined in Section 7
below), each as set forth below, the rights and privileges of the Class A Common
Stock, Class B Common Stock and Class C Common Stock shall be identical, and the
Class A Common Stock, Class B Common Stock and Class C Common Stock shall be
treated as one class of stock of the Corporation. The Class A Common Stock,
Class B Common Stock and Class C Common Stock are sometimes collectively
referred to herein as the "Common Stock."
b. Voting. The holders of the Class A Common Stock and Class C Common
Stock, voting together as a single class, are entitled to one vote for each
share held at all meetings of stockholders (and written actions in lieu of
meetings). The holders of the Class B Common Stock shall have no voting rights
except as otherwise required by law. There shall be no cumulative voting.
c. Dividends. Dividends may be declared and paid on the Common Stock
from funds lawfully available therefor as and when determined by the Board of
Directors and subject to any preferential dividend rights of any then
outstanding Series A Preferred.
d. Liquidation. Upon the dissolution or liquidation of the Corporation,
whether
IV-1
<PAGE>
voluntary or involuntary, holders of Common Stock will be entitled to receive
all assets of the Corporation available for distribution to its stockholders,
subject to any preferential rights of any then outstanding Series A Preferred.
e. Mandatory Conversion of Class A Common Stock.
i. At any time prior to the termination of that certain Shareholders'
Agreement dated as of December 22, 1992 among the Corporation, the Shareholders
(as such term is defined therein) and the other individuals named on the
signature pages thereof, as such agreement may be amended or otherwise modified
from time to time (the "Shareholders Agreement"), each outstanding share of
Class A Common Stock transferred in violation of Section 4.4 of the Shareholders
Agreement shall be automatically converted into a share of Class B Common Stock
on the date of such transfer ("Class A Mandatory Conversion Date").
ii. Upon any such transfer of shares of Class A Common Stock in violation
of Section 4.4 of the Shareholders Agreement, each transferee of such shares of
Class A Common Stock shall surrender his or its certificate or certificates for
all such shares to the Corporation at its principal office, and shall thereafter
receive certificates for the number of shares of Class B Common Stock to which
such holder is entitled pursuant to this Section A.5. On the Class A Mandatory
Conversion Date, all rights with respect to the Class A Common Stock so
converted will terminate, except only the rights of the holders thereof, upon
surrender of their certificate or certificates therefor, to receive certificates
for the number of shares of Class B Common Stock into which such Class A Common
Stock has been converted, and payment of any declared or accrued but unpaid
dividends thereon (all of which shall be deemed to be declared by the Board of
Directors on the Class A Mandatory Conversion Date). If so required by the
Corporation, certificates surrendered for conversion shall be endorsed or
accompanied by written instrument or instruments of transfer, in form
satisfactory to the Corporation, duly executed by the registered holder or by
his or its attorney duly authorized in writing. As soon as practicable after
the Class A Mandatory Conversion Date and the surrender of the certificate or
certificates for Class A Common Stock, the Corporation shall cause to be issued
and delivered to such holder, or on his or its written order, a certificate or
certificates for the number of full shares of Class B Common Stock issuable on
such conversion in accordance with the provisions hereof and cash as reasonably
determined by the Board of Directors in respect of any fraction of a share of
Class B Common Stock otherwise issuable upon such conversion.
iii. All certificates evidencing shares of Class A Common Stock which are
required to be surrendered for conversion in accordance with the provisions
hereof shall, from and after the Class A Mandatory Conversion Date, be deemed to
have been retired and cancelled and the shares of Class A Common Stock
represented thereby converted into Class B Common Stock for all purposes,
notwithstanding the failure of the holder or holders thereof to surrender such
certificates on or prior to such date. The Corporation may thereafter take such
appropriate action (without the need for stockholder action) as may be necessary
to reduce the authorized Class A Common Stock accordingly.
IV-2
<PAGE>
f. Mandatory Conversion of Class B Common Stock and Class C Common Stock.
i. Without any action on the part of the holder thereof, each outstanding
share of Class B Common Stock and Class C Common Stock shall automatically be
converted into a share of Class A Common Stock immediately prior to the
consummation of a primary or secondary sale of Common Stock to the public
pursuant to a registered public offering under the Securities Act of 1933, as
amended (the "Securities Act"), as a result of which offering the public
(including for this purpose, all purchasers in the underwriting irrespective of
any relationship with the Corporation) will own 20% or more of the Common Stock
then issued and outstanding (the "Class B/C Mandatory Conversion Date").
ii. All holders of record of shares of Class B Common Stock and Class C
Common Stock will be given written notice of the Class B/C Mandatory Conversion
Date and the place designated for mandatory conversion of all such shares of
Class B Common Stock and Class C Common Stock pursuant to this Section A.6.
Such notice shall be sent by first class or registered mail, postage prepaid, to
each record holder of Class B Common Stock and Class C Common Stock at such
holder's address last shown on the records of the transfer agent for the Class B
Common Stock and Class C Common Stock (or the records of the Corporation, if it
serves as its own transfer agent). Upon receipt of such notice, each holder of
shares of Class B Common Stock and/or Class C Common Stock shall surrender his
or its certificate or certificates for all such shares to the Corporation at the
place designated in such notice, and shall thereafter receive certificates for
the number of shares of Class A Common Stock to which such holder is entitled
pursuant to this Section A.5. On the Class B/C Mandatory Conversion Date, all
rights with respect to the Class B Common Stock and Class C Common Stock so
converted will terminate, except only the rights of the holders thereof, upon
surrender of their certificate or certificates therefor, to receive certificates
for the number of shares of Class A Common Stock into which such Class B Common
Stock and/or Class C Common Stock has been converted, and payment of any
declared or accrued but unpaid dividends thereon (all of which shall be deemed
to be declared by the Board of Directors on the Class B/C Mandatory Conversion
Date). If so required by the Corporation, certificates surrendered for
conversion shall be endorsed or accompanied by a written instrument or
instruments of transfer, in form satisfactory to the Corporation, duly executed
by the registered holder or by his or its attorney duly authorized in writing.
As soon as practicable after the Class B/C Mandatory Conversion Date and the
surrender of the certificate or certificates for Class B Common Stock and Class
C Common Stock, the Corporation shall cause to be issued and delivered to such
holder or on his or its written order, a certificate or certificates for the
number of full shares of Class A Common Stock issuable on such conversion in
accordance with the provisions hereof and cash as reasonably determined by the
Board of Directors in respect of any fraction of a share of Class A Common Stock
otherwise issuable upon such conversion.
iii. All certificates evidencing shares of Class B Common Stock and
Class C Common Stock which are required to be surrendered for conversion in
accordance with the provisions
IV-3
<PAGE>
hereof shall, from and after the Class B/C Mandatory Conversion Date, be deemed
to have been retired and cancelled and the shares of Class B Common Stock and
Class C Common Stock represented thereby converted into Class A Common Stock for
all purposes, notwithstanding the failure of the holder or holders thereof to
surrender such certificates on or prior to such date. The Corporation may
thereafter take such appropriate action (without the need for stockholder
action) as may be necessary to reduce the authorized Class B Common Stock and
Class C Common Stock accordingly.
g. Exchange of Class C Common Stock Upon an Acquisition Event. Upon the
merger or consolidation of the Corporation with or into another corporation
(except one in which the holders of capital stock of the Corporation immediately
prior to such merger or consolidation continue to hold at least 75% by voting
power of the capital stock of the surviving corporation) (an "Acquisition
Event"), the Board of Directors of the Corporation may provide that debt and/or
equity of the corporation surviving such merger or consolidation shall be
distributed to the holders of Class C Common Stock, notwithstanding that cash,
property or other different rights or securities are to be distributed to the
holders of Class A Common Stock and/or Class B Common Stock by the Corporation
or the acquiring person, firm or other entity; provided that the value of the
consideration to be distributed to the holders of Class C Common Stock shall be
equal on a per-share basis to the value of the consideration to be distributed
to the holders of Class A Common Stock and/or Class B Common Stock, such
valuations to be determined in good faith by the Board of Directors of the
Corporation and to be conclusive and binding on the stockholders of the
Corporation.
IV-4
<PAGE>
The foregoing amendment(s) will become effective when these Articles of
Amendment are filed in accordance with General Laws, Chapter 156B, Section 6
unless these articles specify, in accordance with the vote adopting the
amendment, a later effective date not more than thirty days after such filing,
in which event the amendment will become effective on such later date.
Later effective date:___________________________________.
SIGNED UNDER THE PENALTIES OF PERJURY, this 29th day of June, 1998.
/s/ Thomas A. Rodgers, III *President,
- -------------------------------------------------------
/s/ Lawrence R. Walsh *Assistant Clerk.
- -------------------------------------------------------
*Delete the inapplicable words
<PAGE>
THE COMMONWEALTH OF MASSACHUSETTS
ARTICLES OF AMENDMENT
(General Laws, Chapter 156B, Section 72)
========================================
I hereby approve the written Articles of
Amendment and, the filing fee in the amount
of $200 having been paid, said articles are
deemed to have been filed with me this 2nd
day of July, 1998.
Effective date:_____________________________
/s/ William Francis Galvin
WILLIAM FRANCIS GALVIN
Secretary of the Commonwealth
TO BE FILLED IN BY CORPORATION
Photocopy of document to be sent to:
Pamela L. Finan, Corporate Paralegal
Hale and Door LLP
60 State Street
Boston, MA 02109
<PAGE>
Exhibit 3.3
The Commonwealth of Massachusetts
/s/ illegible FEDERAL IDENTIFICATION
- ---------------- No. 04-2017769
Examiner ----------------------
MICHAEL JOSEPH CONNOLLY
Secretary of State
ONE ASHBURTON PLACE, BOSTON, MASS: 02108
RESTATED ARTICLES OF ORGANIZATION
General Laws, Chapter 156B, Section 74
This certificate must be submitted to the Secretary of the
Commonwealth within sixty days after the date of the vote of
stockholders adopting the restated articles of organization. The fee
for filing this certificate is prescribed by General Laws, Chapter
156B, Section 114. Make check payable to the Commonwealth of
Massachusetts.
-------------------
We, Thomas A. Rodgers, III, President and
Lawrence R. Walsh, Assistant Clerk of
Globe Manufacturing Co.
----------------------------------------------------------------------
(Name of Corporation)
located at 156 Bedford Street, Fall River, MA 02720
-----------------------------------------------------------
do hereby certify that the following restatement of the articles of
organization of the corporation was duly adopted by unanimous written
consent of all of the stockholders of the Corporation on December 21,
1992, by vote of
<TABLE>
<CAPTION>
<S> <C>
150 shares of Voting Common Stock out of 150 shares outstanding,
----- --------------------- -----
(Class of Stock)
1,609 shares of Class B Common Stock out of 1,609 shares outstanding and
----- ---------------------- -----
(Class of Stock)
shares of out of shares outstanding.
------- ----------------------- -------
(Class of Stock)
</TABLE>
being at least two-thirds of each class of stock outstanding and
entitled to vote and of each class or series of stock adversely
affected thereby:
1. The name by which the corporation shall be known is:
Globe Manufacturing Co.
2. The purposes for which the corporation is formed are as
follows:
(a) To manufacture and sell elastomeric fibers, including
spandex fiber and latex thread.
(b) To carry on any business or other activity which may
C [_] lawfully be carried on by a corporation organized under the
P [_] Business Corporation Law of the Commonwealth of
M [_] Massachusetts, whether or not related to those referred to
RA [_] in the preceding paragraph.
Note: If the space provided under any article or item on this form
is insufficient, additions shall be set forth on separate 8-1/2 x 11
sheets of paper leaving a left hand margin of at least 1 inch for
25 binding. Additions to more than one article may be continued on a
- ------ single sheet so long as each article requiring each such addition is
P.C. clearly indicated.
<PAGE>
3. The total number of shares and the par value, if any, of each class of
stock which the corporation is authorized to issue is as follows:
<TABLE>
<CAPTION>
WITHOUT PAR VALUE WITH PAR VALUE
----------------- --------------
CLASS OF STOCK NUMBER OF SHARES NUMBER OF SHARES PAR VALUE
- -------------- ---------------- ---------------- ---------
<S> <C> <C> <C>
Preferred
Series A Cumulative
Preferred Stock 30,000 $.01
Common
Class A Common 2,000,000 $.01
Class B Common 2,000,000 $.01
</TABLE>
*4. If more than one class is authorized, a description of each of the
different classes of stock with, if any, the preferences, voting powers,
qualifications, special or relative rights or privileges as to each
class thereof and any series now established:
See Attachment 4
*5. The restrictions, if any, imposed by the articles of organization upon
the transfer of shares of stock of any class are as follows:
None.
*6. Other lawful provisions, if any, for the conduct and regulation of the
business and affairs of the corporation, for its voluntary dissolution,
or for limiting, defining, or regulating the powers of the corporation,
or of its directors or stockholders, or of any class of stockholders.
See Attachment 6
* If there are no such provisions, state "None".
<PAGE>
ATTACHMENT 4
------------
The total number of shares of all classes of stock which the corporation
shall have authority to issue is 4,030,000 shares, consisting of (i) 2,000,000
shares of Class A Common Stock, $.01 par value per share ("Class A Common
Stock"), (ii) 2,000,000 shares of Class B Common Stock, $.01 par value per
share, and (iii) 30,000 shares of Series A Cumulative Preferred Stock, $.01 par
value per share ("Series A Preferred").
The following is a statement of the designations and the powers, privileges
and rights, and the qualifications, limitations or restrictions thereof in
respect of each class of capital stock of the corporation.
A. CLASS A COMMON STOCK AND CLASS B COMMON STOCK.
1. General. The voting, dividend and liquidation rights of the holders of
the Class A Common Stock and Class B Common Stock are subject to and qualified
by the rights of the holders of the Series A Preferred. Except for the mandatory
conversion provisions and the difference in voting rights as set forth below,
the rights and privileges of the Class A Common Stock and Class B Common Stock
shall be identical, and the Class A Common Stock and Class B Common Stock shall
be treated as one class of stock of the corporation. The Class A Common Stock
and Class B Common Stock are hereinafter collectively referred to as "Common
Stock".
2. Voting. The holders of the Class A Common Stock are entitled to one vote
for each share held at all meetings of stockholders (and written actions in lieu
of meetings). The holders of the Class B Common Stock shall have no voting
rights except as otherwise required by law. There shall be no cumulative voting.
3. Dividends. Dividends may be declared and paid on the Class A Common
Stock and Class B Common Stock from funds lawfully available therefor as and
when determined by the Board of Directors and subject to any preferential
dividend rights of any then outstanding Series A Preferred.
4. Liquidation. Upon the dissolution or liquidation of the corporation,
whether voluntary or involuntary, holders of Class A Common Stock and Class B
Common Stock will be entitled to receive all assets of the corporation available
for distribution to its stockholders, subject to any preferential rights of any
then outstanding Series A Preferred.
5. Mandatory Conversation of Class B Common Stock.
(a) Without any action on the part of the holder thereof, each outstanding
share of Class B Common Stock shall automatically be converted into a share of
Class A Common Stock immediately prior to the consummation of a primary or
secondary sale of Common Stock to the public pursuant to a registered public
offering under the Securities Act of 1933, as amended (the
1
<PAGE>
"Securities Act"), as a result of which offering the public (including for this
purpose, all purchasers in the underwriting irrespective of any relationship
with the Corporation) will own 20% or more of the Common Stock then issued and
outstanding (the "Class B Mandatory Conversion Date").
(b) All holders of record of shares of Class B Common Stock will be given
written notice of the Class B Mandatory Conversion Date and the place designated
for mandatory conversion of all such shares of Class B Common Stock pursuant to
this Section A.5. Such notice shall be sent by first class or registered mail,
postage prepaid, to each record holder of Class B Common Stock at such holder's
address last shown on the records of the transfer agent for the Class B Common
Stock (or the records of the Corporation, if it serves as its own transfer
agent). Upon receipt of such notice, each holder of shares of Class B Common
Stock shall surrender his or its certificate or certificates for all such shares
to the Corporation at the place designated in such notice, and shall thereafter
receive certificates for the number of shares of Class A Common Stock to which
such holder is entitled pursuant to this Section A.5. On the Class B Mandatory
Conversion Date, all rights with respect to the Class B Common Stock so
converted will terminate, except only the rights of the holders thereof, upon
surrender of their certificate or certificates therefor, to receive certificates
for the number of shares of Class A Common Stock into which such Class B Common
Stock has been converted, and payment of any declared or accrued but unpaid
dividends thereon (all of which shall be deemed to be declared by the Board of
Directors on the Class B Mandatory Conversion Date). If so required by the
Corporation, certificates surrendered for conversion shall be endorsed or
accompanied by written instrument or instruments of transfer, in form
satisfactory to the Corporation, duly executed by the registered holder or by
his or its attorney duly authorized in writing. As soon as practicable after the
Class B Mandatory Conversion Date and the surrender of the certificate or
certificates for Class B Common Stock, the Corporation shall cause to be issued
and delivered to such holder, or on his or its written order, a certificate or
certificates for the number of full shares of Class A Common Stock issuable on
such conversion in accordance with the provisions hereof and cash as reasonably
determined by the Board of Directors in respect of any fraction of a share of
Class A Common Stock otherwise issuable upon such conversion.
(c) All certificates evidencing shares of Class B Common Stock which are
required to be surrendered for conversion in accordance with the provisions
hereof shall, from and after the Class B Mandatory Conversion Date, be deemed to
have been retired and cancelled and the shares of Class B Common Stock
represented thereby converted into Class A Common Stock for all purposes,
notwithstanding the failure of the holder or holders thereof to surrender such
certificates on or prior to such date. The Corporation may thereafter take such
appropriate action (without the need for stockholder action) as may be necessary
to reduce the authorized Class B Common Stock accordingly.
2
<PAGE>
6. Mandatory Conversion of Class A Common Stock.
(a) At any time prior to the termination of that certain Shareholders'
Agreement dated as of December __, 1992 among the Corporation, the Shareholders
(as such term is defined therein) and the other individuals named on the
signature pages thereof, as such agreement may be amended or otherwise modified
from time to time (the "Shareholders Agreement"), each outstanding share of
Class A Common Stock transferred in violation of Section 4.4 of the Shareholders
Agreement shall be automatically converted into a share of Class B Common Stock
on the date of such transfer ("Class A Mandatory Conversion Date").
(b) Upon any such transfer of shares of Class A Common Stock in violation
of Section 4.4 of the Shareholders Agreement, each transferee of such shares of
Class A Common Stock shall surrender his or its certificate or certificates for
all such shares to the Corporation at its principal office, and shall thereafter
receive certificates for the number of shares of Class B Common Stock to which
such holder is entitled pursuant to this Section A.6. On the Class A Mandatory
Conversion Date, all rights with respect to the Class A Common Stock so
converted will terminate, except only the rights of the holders thereof, upon
surrender of their certificate or certificates therefor, to receive certificates
for the number of shares of Class B Common Stock into which such Class A Common
Stock has been converted, and payment of any declared or accrued but unpaid
dividends thereon (all of which shall be deemed to be declared by the Board of
Directors on the Class A Mandatory Conversion Date). If so required by the
Corporation, certificates surrendered for conversion shall be endorsed or
accompanied by written instrument or instruments of transfer, in form
satisfactory to the Corporation, duly executed by the registered holder or by
his or its attorney duly authorized in writing. As soon as practicable after the
Class A Mandatory Conversion Date and the surrender of the certificate or
certificates for Class A Common Stock, the Corporation shall cause to be issued
and delivered to such holder, or on his or its written order, a certificate or
certificates for the number of full shares of Class B Common Stock issuable on
such conversion in accordance with the provisions hereof and cash as reasonably
determined by the Board of Directors in respect of any fraction of a share of
Class B Common Stock otherwise issuable upon such conversion.
(c) All certificates evidencing shares of Class A Common Stock which are
required to be surrendered for conversion in accordance with the provisions
hereof shall, from and after the Class A Mandatory Conversion Date, be deemed to
have been retired and cancelled and the shares of Class A Common Stock
represented thereby converted into Class B Common Stock for all purposes,
notwithstanding the failure of the holder or holders thereof to surrender such
certificates on or prior to such date. The Corporation may thereafter take such
appropriate action (without the need for stockholder action) as may be necessary
to reduce the authorized Class A Common Stock accordingly.
3
<PAGE>
B. SERIES A CUMULATIVE PREFERRED STOCK.
1. Number of Shares.
(a) The number of authorized shares constituting Series A Preferred is
30,000.
(b) All shares of Series A Preferred redeemed, purchased or otherwise
acquired by the Corporation shall be retired and cancelled and shall be restored
to the status of authorized but unissued shares of preferred stock, without
designation as to series, and may thereafter be issued, but not as shares of
Series A Preferred. After the Series A Initial Issuance Date (as defined below),
the Corporation shall not issue any shares of Series A Preferred other than
shares which comprise Additional Shares of Series A Preferred (as defined below)
pursuant to Section B.2.(b) herein or shares which are issued pursuant to
Section 7.7 of the Stock and Warrant Purchase and Recapitalization Agreement,
dated as of December 21, 1991, by and among the Goldman Shareholders (as defined
therein), the Corporation, Island Development Corp., and the Shareholders (as
defined therein) (the "Section 7.7 Shares").
(c) The Series A Preferred shall, with respect to dividend rights and
rights of liquidation, winding up and dissolution, rank (i) junior to any other
series of preferred stock established by the Board of Directors of the
Corporation, the terms of which shall specifically provide that such series
shall rank prior to the Series A Preferred, (ii) on a parity with any other
series of preferred stock established by the Board of Directors, the terms of
which shall specifically provide that such series shall rank on a parity with
the Series A Preferred, and (iii) prior to any other equity securities of the
Corporation, including without limitation, all classes of the Common Stock; all
of such equity securities of the Corporation to which the Series A Preferred
ranks prior, including without limitation the Common Stock, are collectively
referred to herein as the "Junior Securities").
2. Dividends.
(a) Subject to Section B.2(c) hereof, with respect to each dividend period
the Board of Directors shall declare, the Corporation shall pay and the holders
of the shares of Series A Preferred shall be entitled to receive, out of funds
legally available therefor, cumulative dividends on the shares of the Series A
Preferred, at a rate per annum equal to the Applicable Rate (as defined below)
multiplied by the liquidation preference thereof. All dividends described in
this Section B.2(a) shall be payable on December 22 of each year, which date
shall be the first day of the next succeeding dividend period (an "Annual
Dividend Period"), and on the date of any redemption of the Series A Preferred,
or if any such date is not a Business Day (as hereinafter defined), on the next
succeeding Business Day (each of such dates being a "Series A Dividend Payment
Date"), commencing December 22, 1993, in preference to and in priority over
dividends on the Junior Securities, except as provided in Section B.2(d)(iii)
below. Such dividends shall be paid to the holders of record at the close of
business on the date specified by the Board of Directors of the Corporation at
the time such dividend is declared; provided,
4
<PAGE>
however, that such date shall not be more than 60 days nor less than 10 days
prior to the respective Series A Dividend Payment Date. Each of such annual
dividends shall be fully cumulative and shall accrue (whether or not earned or
declared), without interest, from the first day of the Annual Dividend Period,
except that with respect to the Annual Dividend Period ending on December 22,
1993, such dividend shall accrue from the initial date of issuance of the Series
A Preferred (the "Series A Initial Issuance Date"). The amount of dividends
payable hereunder shall be determined on the basis of twelve 30-day months and a
360-day year. Cumulative dividends with respect to Series A Preferred which are
in arrears may be declared and paid at any time without reference to any regular
Series A Dividend Payment Date.
(b) Any dividend on the Series A Preferred accrued and payable on any
Series A Dividend Payment Date shall be paid either, as so elected by the vote
of a majority of the members of Board of Directors of the Corporation (excluding
the Goldman Directors, as that term is defined in a certain Shareholders'
Agreement, dated as of December 22, 1992, among the Corporation and its
shareholders), (x) in cash or (y) by issuing a number of additional shares of
the Series A Preferred (the "Additional Shares of Series A Preferred") for each
such share (or partial share) of Series A Preferred then outstanding equal to
the dividend then payable on each such share (or partial share) of Series A
Preferred for the Annual Dividend Period then ended (expressed as a dollar
amount) divided by the liquidation value of one share of Series A Preferred
(expressed as a dollar amount). If at any time after the Series A Initial
Issuance Date, the Corporation fails for any reason to pay any dividend on the
Series A Preferred in cash as set forth in clause (x) of the preceding sentence,
then the Corporation shall instead pay such dividend by the issuance of
Additional Shares of Series A Preferred as set forth in clause (y) of the
preceding sentence. For purposes of this Section B.2., the "Applicable Rate"
shall mean (i) 10% per annum, to the extent that dividends are paid in cash and
(ii) 15% per annum, to the extent that dividends are paid in Additional Shares
of Series A Preferred.
(c) Notwithstanding any of the other provisions of this Section B.2, the
Corporation shall not be required to pay cash dividends on shares of Series A
Preferred to the extent the payment of cash dividends on shares of Series A
Preferred is prohibited by the then applicable corporation law of the
Commonwealth of Massachusetts, and the Corporation shall not be required to pay
dividends on shares of Series A Preferred in Additional Shares of Series A
Preferred to the extent such payment is prohibited by the then applicable
corporation law of the Commonwealth of Massachusetts.
(d) (i) No full cash dividends shall be declared or paid or set apart for
payment on the preferred stock of any series ranking, as to dividends, on a
parity with Series A Preferred for any period unless full cumulative dividends
have been or contemporaneously are declared and paid in cash or declared and a
sum sufficient for the payment thereof set apart for such payment in cash on
shares of Series A Preferred or unless such dividends shall have been paid by
the issuance of Additional Shares of Series A Preferred, in any event, through
the most recent Series A Dividend Payment Date. When dividends are not paid in
full, as aforesaid, upon the shares of Series A Preferred and any other series
of preferred stock ranking on a party as to dividends with Series A
5
<PAGE>
Preferred, all dividends declared on Series A Preferred and any other series of
preferred stock ranking on a parity as to dividends with Series A Preferred
shall be declared and paid in cash or by the issuance of additional shares of
such respective series of preferred stock pro rata so that the amount of
dividends so declared per share on Series A Preferred and such other series of
preferred stock shall in all cases bear to each other the same ratio that
accrued dividends per share on the shares of Series A Preferred through the most
recent Series A Dividend Payment Date and such other series of preferred stock
through such date bear to each other.
(ii) Subject to Section B.2(d)(iii), as long as any shares of Series A
Preferred are outstanding, no dividend shall be declared or paid or set aside
for payment or other distribution declared or made (in each case, other than
dividends or distributions paid in shares of, or options, warrants or rights to
subscribe for or purchase shares of, Junior Securities) upon the Junior
Securities, nor shall any Junior Securities be redeemed, purchased or otherwise
acquired by the Corporation for any consideration (except for shares of Junior
Securities or options, warrants or rights to subscribe for or purchase shares of
Junior Securities or by conversion into or exchange for Junior Securities),
unless, in each case, (x) the full cumulative dividends on all outstanding
shares of Series A Preferred shall have been paid (either in cash or by issuance
of Additional Shares of Series A Preferred) through the most recent Series A
Dividend Payment Date, (y) after giving effect to such dividend, distribution,
redemption, purchase or acquisition Cumulative Net Income (as defined below)
equals or exceeds $8,400,000 and (z) all amounts paid by the Corporation in
respect of such dividends, distributions, redemptions, purchases or acquisitions
during or subsequent or the most recent four full fiscal quarters of the
Corporation does not exceed the Net Income (as defined below) for such four full
fiscal quarters. For purposes of the foregoing, "Net Income" means the
consolidated net income (including net losses) of the Corporation and its
subsidiaries as reflected on the regularly prepared quarterly consolidated
income statements of the Corporation and its subsidiaries which are provided to
certain holders of the Preferred Stock pursuant to Section B.9 hereof, excluding
gains, but including losses, from any sales, transfers or other dispositions of
assets by the Corporation or any of its subsidiaries outside the ordinary course
of business or from other extraordinary transactions, effected during the
applicable period, and including income from non-consolidated subsidiaries only
to the extent of cash dividends received by the Corporation or any of its
consolidated subsidiaries during such period, and "Cumulative Net Income" means
the cumulative Net Income of the Corporation and its subsidiaries for all full
fiscal quarters completed subsequent to January 2, 1993, less all cash amounts
paid and the fair market value, as determined in good faith by the Board of
Directors, of all non-cash consideration paid or distributed, by the Corporation
during or subsequent to such periods in respect of dividends, distributions,
redemptions, purchases or acquisitions of any capital stock of the Corporation,
excluding such dividends or distributions on such capital stock made in, or
redemptions, purchases or acquisitions of such capital stock for, shares of
capital stock ranking junior to such capital stock with respect to dividend
rights and rights of liquidation, winding up and dissolution (or options,
warrants or rights to subscribe for or purchase additional shares of such
capital stock or shares of capital stock ranking junior to such capital stock).
In connection with any declaration or payment of dividends upon Junior
Securities, the making of any distribution on
6
<PAGE>
Junior Securities or any purchase, redemption or other acquisition of Junior
Securities by the Corporation, other than any such dividend, distribution,
redemption, purchase or acquisition permitted by Section B.2(d)(iii), the
Corporation shall furnish to each holder of shares of Series A Preferred a
certificate signed by the chief financial officer or the chief executive officer
of the Corporation setting forth the basis upon which such dividend,
distribution, purchase, redemption or acquisition is permitted by the terms of
this Section B.2(d)(ii).
(iii) Nothing contained in this Section B of Article IV shall prevent
(x) the purchase, redemption or other acquisition by the Corporation or any of
its subsidiaries for any consideration of Junior Securities pursuant to Section
4.10 or 4.11 of the Shareholders Agreement, (y) the payment of dividends upon
Junior Securities declared prior to the Series A Initial Issuance Date but which
are payable after such date or (z) the payment of dividends upon Junior
Securities declared after the Series A Initial Issuance Date, not to exceed
$50,000 in the aggregate in any twelve-month period.
(e) Any dividend payment made on shares of Series A Preferred shall first
be credited against the dividends accrued with respect to the earliest periods
for which dividends have not been paid. Holders of shares of Series A Preferred
shall not be entitled to (i) any dividends, whether payable in cash, property or
stock, in excess of full cumulative dividends, as herein provided, on the Series
A Preferred, or (ii) any interest, or sum of money in lieu of interest, in
respect of any dividend payment or payments on the Series A Preferred which may
be in arrears. Notwithstanding the foregoing, any Additional Shares of Series A
Preferred payable as dividends on the Series A Preferred which are not paid when
due and payable (whether as a result of there not being sufficient authorized
shares of the Series A Preferred Stock or for any other reason) shall, for
purposes of determining the amount of dividends payable in any subsequent Annual
Dividend Period or for any other purpose hereunder, including in connection with
any redemption obligation of the Corporation relating to the Series A Preferred
and any determination made with respect thereto, be deemed to be outstanding
from and after the Series A Dividend Payment Date with respect to such
dividends. The foregoing shall not relieve the Corporation from its obligation
to pay any dividend on the Series A Preferred when due.
(f) Certificates for Additional Shares of Series A Preferred or Section 7.7
Shares shall bear a legend identifying such shares as Additional Shares of
Series A Preferred or Section 7.7 Shares, as applicable. Shares of Additional
Shares of Series A Preferred and Section 7.7 Shares shall be identical in all
respects to shares of Series A Preferred and shall be treated alike including,
without limitation, with respect to the payment of dividends under Section 3.2
herein.
3. Redemption; Repurchase; Refinancing. Shares of Series A Preferred shall
be redeemable by the Corporation as provided below (with all references in this
Section B.3 to a redemption price per share to be adjusted proportionally in
respect of partial shares):
(a) Option Redemption. At the option of the Corporation, shares of Series A
Preferred may be redeemed at any time in whole or in part from time to time, out
of funds legally
7
<PAGE>
available therefor, at a cash redemption price of $1,000 per share, plus, in
each case, an amount in cash equal to accrued and unpaid dividends thereon
(whether or not earned or declared), if any, to the date fixed for redemption.
(b) Mandatory Redemption. On the earliest of (i) the seventh anniversary of
the Series A Initial Issuance Date, (ii) the consummation of any merger of the
Corporation with or into, or its consolidation with, another corporation if,
immediately after such merger or consolidation, the holders of Common Stock
immediately prior to the execution of a definitive agreement providing for such
merger or consolidation own, in the aggregate, capital stock of the surviving or
resulting corporation representing less than a majority of the total voting
power of such corporation, (iii) the consummation of a primary or secondary sale
of Common Stock to the public pursuant to a registered public offering under the
Securities Act, as a result of which offering the public (including for this
purpose, all purchasers in the underwriting irrespective of any relationship
with the corporation) will own 20% or more of the Common Stock then issued and
outstanding, or (iv) the consummation of a sale of all or substantially all of
the assets of the Corporation, all of the outstanding shares of Series A
Preferred shall be redeemed by the Corporation, to the extent of and out of
funds legally available to do so, at a cash redemption price of $1000 per share,
plus, in each case, an amount equal to accrued and unpaid dividends thereon
(whether or not earned or declared), if any, to the date fixed for redemption.
(c) Limitations on Redemption Obligations. The Corporation shall not be
required to discharge its redemption obligations pursuant to Section B.3(a) or
Section B.3(b) hereof to the extent such redemption is prohibited by the then
applicable corporation law of the Commonwealth of Massachusetts; provided that
any such redemption obligation shall be discharged as soon as such prohibition
is no longer applicable.
(d) Notice of Redemption; Other Redemption Procedures. (i) Whenever shares
of Series A Preferred (including Additional Shares of Series A Preferred or
Section 7.7 Shares) are to be redeemed pursuant to Section B.3(a) or Section
B.3(b), a notice of such redemption shall be mailed, by first-class mail,
postage prepaid, or delivered to each holder of the shares to be redeemed at
such holder's address as the same appears on the stock transfer books of the
Corporation. Such notice shall be mailed or delivered not less than 10 days and
not more than 60 days prior to the date fixed for redemption. Each such notice
shall state: (i) the date fixed for redemption; (ii) the number of shares of
Series A Preferred to be redeemed; (iii) the redemption price; (iv) the place or
places where such shares of Series A Preferred are to be surrendered for payment
of the redemption price; (v) that dividends on the shares to be redeemed will
cease to accrue on such date fixed for redemption; (vi) the provision of this
Section B.3 under which the redemption is made; and (vii) the extent, if any, to
which Additional Shares of Series A Preferred and/or Section 7.7 Shares are
being redeemed. If fewer than all shares of Series A Preferred held by a holder
are to be redeemed, the notice mailed to such holder shall specify the number of
shares to be redeemed from such holder. Except as required by applicable law, no
defect in the notice of redemption or in the mailing thereof shall affect the
validity of the redemption proceedings.
8
<PAGE>
(ii) Notice having been mailed as aforesaid, from and after the
redemption date (unless default shall be made by the Corporation in providing
money for the payment of the redemption price of the shares called for
redemption) dividends on the shares of Series A Preferred so called for
redemption shall cease to accrue, and said shares shall no longer be deemed to
be outstanding and shall have the status of authorized but unissued shares of
preferred stock, unclassified as to series, and all rights of the holders
thereof as stockholders of the Corporation (except the right to receive from the
Corporation the redemption price and any accrued and unpaid dividends to the
redemption date) shall cease. Upon surrender in accordance with said notice of
the certificates for any shares so redeemed (properly endorsed or assigned for
transfer, if the Board of Directors of the Corporation shall so require and the
notice shall so state), such shares shall be redeemed by the Corporation at the
redemption price aforesaid. In case fewer than all the shares represented by any
such certificates are redeemed, a new certificate shall be redeemed, a new
certificate shall be issued representing the unredeemed shares without cost to
the holder thereof.
(iii) In the event that fewer than all shares of Series A Preferred
are redeemed, except as expressly provided herein, the Corporation may elect
whether to redeem shares of Series A Preferred generally, only Additional Shares
of Series A Preferred, only Section 7.7 shares, or any combination thereof. Any
such redemption of Additional Shares of Series A Preferred, Section 7.7 Shares
or other Series A Preferred shall be made pro rata among Additional Shares of
Series A Preferred, Section 7.7 Shares or other Series A Preferred, as the case
may be.
(iv) Nothing contained herein shall limit any legal right of the
Corporation or any Affiliate (as defined below) to purchase or otherwise acquire
any shares of Series A Preferred at any price, whether higher or lower than the
redemption price.
4. Liquidation.
(a) Upon a liquidation, winding up or dissolution of the affairs of the
Corporation, whether voluntary or involuntary, the holders of shares of Series A
Preferred then outstanding shall be entitled, whether for capital or surplus
before any assets of the Corporation shall be distributed among or paid over to
the holders of Junior Securities but after distribution of such assets among, or
payment thereof over to, creditors of the Corporation and to holders of any
stock of the Corporation with liquidation rights senior to the Series A
Preferred, to be paid $1,000 per share (pro rated for fractional shares), plus,
in each such case, in an amount equal to all accrued and unpaid dividends
thereon (whether or not earned or declared) to and including the date of final
distribution. After any such payment in full, the holders of shares of the
Series A Preferred shall not be entitled to any further participation in any
distribution of assets of the Corporation.
(b) Neither the merger or consolidation of the Corporation into or with any
other corporation or the merger or consolidation of any other corporation into
or with the Corporation,
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nor the sale of all or substantially all of the assets of the Corporation, shall
be deemed to be a liquidation, dissolution or winding up, voluntary or
involuntary, for the purposes of this Section B.4.
(c) If, upon any such liquidation, dissolution or winding up of the
corporation, whether voluntary or involuntary, the assets of the Corporation
shall be insufficient to make the full payments required by subsection (a) of
this Section B.4, no such distribution shall be made on account of any shares of
any other class or series of preferred stock ranking on a parity with the shares
of Series A Preferred upon such dissolution, liquidation or winding up unless
proportionate distributive amounts shall be paid on account of the shares of
Series A Preferred, ratably, in proportion to the full distributable amounts for
which holders of all such parity shares are respectively entitled upon such
dissolution, liquidation or winding up.
(d) Subject to the rights of the holders of shares of any series or class
or classes of stock ranking on a parity with or prior to the shares of Series A
Preferred upon liquidation, dissolution or winding up of the Corporation, after
payment shall have been made in full to the holders of the shares of Series A
Preferred as provided in this Section B.4, but not prior thereto, any Junior
Securities shall, subject to the respective terms and provisions (if any)
applying thereto, be entitled to receive any and all assets remaining to be paid
or distributed, and the holders of the shares of Series A Preferred shall not be
entitled to share therein.
5. Voting. The holders of shares of Series A Preferred shall not be
entitled to any voting rights except as specified in this Section B.5 and
Section B.6 and except as otherwise provided by law. The affirmative vote of the
holders of at least 75% in liquidation value of the outstanding shares of Series
A Preferred, voting separately as a single class on a one vote per share (pro
rated for fractional shares) basis, in person or by proxy, at a special or
annual meeting of stockholders called for the purpose, or by consent, shall be
required (i) for purposes of implementing Section B.6, (ii) to amend, repeal or
change any provisions of this Section B of Article IV of Series A Preferred in
any manner which would materially and adversely affect, alter or change the
powers, preferences or specific rights of any share of Series A Preferred or
(iii) to create, issue, or increase or decrease the amount, of any class or
series of capital stock of the Corporation ranking prior to or on a parity with
the Series A Preferred as to dividends or upon liquidation, dissolution or
winding up of the Corporation.
6. Board Representation.
(a) In the event that the Series A Preferred is not redeemed by the
Corporation as and when required by Section B.3(b) hereof, whether as permitted
by Section B.3(c) hereof or otherwise, the number of directors constituting the
Board of Directors of the Corporation shall, without further action, be
increased by one and the holders of the Series A Preferred shall have the
exclusive right, voting as a single class, to elect the director of the
Corporation to fill such newly created directorship at each meeting of
stockholders held for the purpose of electing directors. Such additional
director shall continue as a director and such additional voting right
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shall continue until such time as all of the issued and outstanding shares of
Series A Preferred are redeemed by the Corporation in accordance with the terms
hereof, at which time such additional director shall cease to be a director and
such additional voting right of the holders of Series A Preferred Stock shall
terminate.
(b) At any time that the holders of the Series A Preferred have voting
powers pursuant to Section B.6(a), the proper officers of the Corporation shall,
upon written request of the holders of record of at least 20% of the Series A
Preferred, addressed to the Clerk of the Corporation, call a special meeting of
the holders of such Series A Preferred Stock for the purpose of electing such
director. Such meeting shall be held at the earliest practicable date thereafter
and shall be held at the place for the holding of annual meetings of the
stockholders of the Corporation. If such meeting shall not be called by the
officers of the Corporation within 25 days after personal service of the above
request upon the Clerk of the Corporation, or within 30 days after mailing of
same within the United States of America by registered mail addressed to the
Clerk of the Corporation at its principal office (such mailing to be evidenced
by the registry receipt issued by the postal authorities), then the holders of
record of at least 20% of the Series A Preferred in which voting power is vested
pursuant to the preceding paragraphs then outstanding may designate in writing
one of their number to call such meeting, and such meeting may be called by such
person so designated upon the giving of notice to stockholders as provided in
the Articles of Organization or By-Laws of the Corporation for a special meeting
of stockholders. Any holder so designated shall have access to the stock books
of the Corporation for the purposes of causing such meeting to be called
pursuant to these provisions. Notwithstanding the provisions of this paragraph,
no such special meeting shall be called by a holder designated pursuant to the
second preceding sentence during the period within 30 days immediately preceding
the date fixed for the next annual meeting of stockholders.
(c) At any meeting held for the purpose of electing a director or directors
at which the holders of the Series A Preferred shall have the right, voting
separately as a class, to elect a director, the presence, in person or by proxy,
of the holders of one-third of the Series A Preferred shares entitled to vote at
such meeting shall be required to constitute a quorum. At any such meeting or
adjournment thereof, (i) the absence of a quorum of holders of the Series A
Preferred shall not prevent the election of directors other than such additional
director and the absence of a quorum of holders of any other class of capital
stock shall not prevent election of such additional director or directors, and
(ii) in the absence of either or both such quorums, the holders of a majority of
the shares present in person or by proxy of the class of stock or classes of
stocks which lack a quorum shall have power to adjourn, until a quorum shall be
present, the meeting for the election of the director or directors which they
are entitled to elect from time to time without notice other than announcement
at the meeting unless otherwise required by law.
(d) Notwithstanding any provision hereof or of the Articles of Organization
to the contrary, at any time that the holders of the Series A Preferred have
voting powers pursuant to Section B.6(a), any action required or permitted to be
taken by the holders of the Series A Preferred at any meeting of such holders
may be taken without a meeting if all of the holders of
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the Series A Preferred entitled to vote on the matter consent to the action in
writing and the written consents are filed with the records of the meetings of
stockholders. Such consents shall be treated for all purposes as a vote at a
meeting.
7. Restrictions on Transfer.
(a) No sale, offer, assignment, transfer, pledge, hypothecation,
encumbrance or other disposition (collectively, "Transfer") of any shares of
Series A Preferred, or any interest therein, in whole or in part, shall be
permitted without the prior written consent of the Corporation, which consent
shall not be unreasonably withheld or delayed, provided, that no such consent
shall be required with respect to a transfer of shares of Series A Preferred, or
any interest therein, (i) by the holder thereof to any Affiliate or Affiliates
of such holder or (ii) by will or the laws of descent.
(b) The Series A Preferred has not been registered under the Securities Act
or any applicable state securities or blue sky law and may not be sold,
transferred or otherwise disposed of without such registration unless the sale,
transfer or disposition can be effected without such registration and in
compliance with the Securities Act and such laws. Without limiting Section
B.7(a) or Section B.8 hereof, a holder of Series A Preferred shall not sell,
transfer or otherwise dispose of all or any part of, any share of Series A
Preferred, or any interest therein, other than pursuant to an effective
registration statement under the Securities Act, without first notifying the
Corporation prior to such sale, transfer or disposition and, if requested by the
Corporation, delivering to the Corporation a written opinion of legal counsel
experienced in Securities Act matters, in form and substance reasonably
satisfactory to the Corporation, that an exemption from registration is
available under the Securities Act and any applicable state securities or blue
sky law.
8. No Registration Rights. No person shall at any time be entitled to
registration or similar rights with respect to any shares of Series A Preferred.
9. Reports and Other Information. So long as any Series A Preferred Stock
is outstanding, the Corporation shall furnish to each holder of shares of Series
A Preferred representing 25% or more of the then outstanding Series A Preferred
such financial and other information concerning the Corporation as is required
to be furnished by the Corporation to a holder of shares of Common Stock
representing 25% or more of the outstanding Common Stock pursuant to Sections
5.1(a) , (b) and (c) of the Shareholders Agreement.
10. Fractional Shares. The Corporation may issue fractional shares of
Series A Preferred Stock or fractional interests in the Series A Preferred
Stock, and if they are issued, they shall entitle the holder to receive
dividends, participate in distributions and to have the benefit of all other
rights of a holder of the Series A Preferred Stock in proportion to the
fractional shares or interests held by such holder.
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<PAGE>
11. Additional Definitions. As used herein, the following terms have the
meanings specified below:
"Affiliate" shall have the meaning assigned to it by Rule 12b-2
under the Securities Exchange Act of 1934, as amended, as in
effect on the date of these Restated Articles of Organization.
"Business Day" shall mean any day (other than a day which is a
Saturday, Sunday or legal holiday in the State of New York) on
which banks are open for business in New York City.
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ATTACHMENT 6
6. Other lawful provisions, if any, for the conduct and regulation of the
business and affairs of the corporation, for its voluntary dissolution, or
for limiting, defining, or regulating the powers of the corporation, or of
its directors or stockholders, or of any class of stockholders:
6A. LIMITATION OF DIRECTOR LIABILITY
Except to the extent that Chapter 156B of the Massachusetts General Laws
prohibits the elimination or limitation of liability of directors for breaches
of fiduciary duty, no director of the corporation shall be personally liable to
the corporation or its stockholders for monetary damages for any breach of
fiduciary duty as a director, notwithstanding any provision of law imposing such
liability. No amendment to or repeal of this provision shall apply to or have
any effect on the liability or alleged liability of any director of the
corporation for or with respect to any acts or omissions of such director
occurring prior to such amendment.
6B. INDEMNIFICATION
1. Actions, Suits and Proceedings. The corporation shall indemnify each
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he is or
was, or has agreed to become, a director or officer of the corporation, or is or
was serving, or has agreed to serve, at the request of the corporation, as a
director or officer of, or in a similar capacity with, another organization or
in any capacity with respect to any employee benefit plan of the corporation
(all such persons being referred to hereafter as an "Indemnitee"), or by reason
of any action alleged to have been taken or omitted in such capacity, against
all expenses (including attorneys' fees), judgments and fines incurred by him or
on his behalf in connection with such action, suit or proceeding and any appeal
therefrom, unless the Indemnitee shall be finally adjudicated in such action,
suit or proceeding not to have acted in good faith in the reasonable belief that
his action was in the best interests of the corporation or, to the extent such
matter relates to service with respect to an employee benefit plan, in the best
interests of the participants or beneficiaries of such employee benefit plan.
Notwithstanding anything to the contrary in this Article, except as set forth in
Section 5 below, the corporation shall not indemnify an Indemnitee seeking
indemnification in connection with a proceeding (or part thereof) initiated by
the Indemnitee unless the initiation thereof was approved by the Board of
Directors of the corporation.
2. Settlements. The right to indemnification conferred in this Article
shall include the right to be paid by the corporation for amounts paid in
settlement of any such action, suit or proceeding and any appeal therefrom, and
all expenses (including attorneys' fees) incurred in connection with such
settlement, pursuant to a consent decree or otherwise, unless and to the extent
it is determined pursuant to Section 5 below that the Indemnitee did not act in
good faith
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in the reasonable belief that his action was in the best interests of the
corporation or, to the extent such matter relates to service with respect to an
employee benefit plan, in the best interests of the participants or
beneficiaries of such employee benefit plan.
3. Notification and Defense of Claim, As a condition precedent to his right
to be indemnified, the Indemnitee must notify the corporation in writing as soon
as practicable of any action, suit, proceeding or investigation involving him
for which indemnity will or could be sought. With respect to any action, suit,
proceeding or investigation of which the corporation is so notified, the
corporation will be entitled to participate therein at its own expense and/or to
assume the defense thereof at its own expense, with legal counsel reasonably
acceptable to the Indemnitee. After notice from the corporation to the
Indemnitee of its election so to assume such defense, the corporation shall not
be liable to the Indemnitee for any legal or other expenses subsequently
incurred by the Indemnitee in connection with such claim, other than as provided
below in this Section 3. The Indemnitee shall have the right to employ his own
counsel in connection with such claim, but the fees and expenses of such counsel
incurred after notice from the corporation of its assumption of the defense
thereof shall be at the expense of the Indemnitee unless (i) the employment of
counsel by the Indemnitee has been authorized by the corporation, (ii) counsel
to the Indemnitee shall have reasonably concluded that there may be a conflict
of interest or position on any significant issue between the corporation and the
Indemnitee in the conduct of the defense of such action or (iii) the corporation
shall not in fact have employed counsel to assume the defense of such action, in
each of which cases the fees and expenses of counsel for the Indemnitee shall be
at the expense of the corporation, except as otherwise expressly provided by
this Article. The corporation shall not be entitled, without the consent of the
Indemnitee, to assume the defense of any claim brought by or in the right of the
corporation or as to which counsel for the Indemnitee shall have reasonably made
the conclusion provided for in clause (ii) above.
4. Advance of Expenses. Subject to the provisions of Section 5 below, in
the event that the corporation does not assume the defense pursuant to Section 3
of this Article of any action, suit, proceeding or investigation of which the
corporation receives notice under this Article, any expenses (including
attorneys' fees) incurred by an Indemnitee in defending a civil or criminal
action, suit, proceeding or investigation or any appeal therefrom shall be paid
by the corporation in advance of the final disposition of such matter, provided,
however, that the payment of such expenses incurred by an Indemnitee in advance
of the final disposition of such matter shall be made only upon receipt of an
undertaking by or on behalf of the Indemnitee to repay all amounts so advanced
in the event that it shall ultimately be determined that the Indemnitee is not
entitled to be indemnified by the corporation as authorized in this Article.
Such undertaking may be accepted without reference to the financial ability of
the Indemnitee to make such repayment.
5. Procedure for Indemnification. In order to obtain indemnification or
advancement of expenses pursuant to Section 1, 2 or 4 of this Article, the
Indemnitee shall submit to the corporation a written request, including in such
request documentation and information as is
2
<PAGE>
reasonably available to the Indemnitee and is reasonably necessary to determine
whether and to what extent the Indemnitee is entitled to indemnification or
advancement of expenses. Any such indemnification or advancement of expenses
shall be made promptly, and in any event within 60 days after receipt by the
corporation of the written request of the Indemnitee, unless the corporation
determines, by clear and convincing evidence, within such 60-day period that the
Indemnitee did not meet the applicable standard of conduct set forth in Section
1 or 2, as the case may be. Such determination shall be made in such instance by
(a) a majority vote of a quorum of the directors of the corporation, (b) a
majority vote of a quorum of the outstanding shares of stock of all classes
entitled to vote for directors, voting as a single class, which quorum shall
consist of stockholders who are not at that time parties to the action, suit or
proceeding in question, (e) independent legal counsel (who may be regular legal
counsel to the corporation), or (d) a court of competent jurisdiction.
6. Remedies. The right to indemnification or advances as granted by this
Article shall be enforceable by the Indemnitee in any court of competent
jurisdiction if the corporation denies such request, in whole or in part, or if
no disposition thereof is made within the 60-day period referred to above in
Section 5. Unless otherwise provided by law, the burden of proving that the
Indemnitee is not entitled to indemnification or advancement of expenses under
this Article shall be on the corporation. Neither the failure of the corporation
to have made a determination prior to the commencement of such action that
indemnification is proper in the circumstances because the Indemnitee has met
the applicable standard of conduct, nor an actual determination by the
corporation pursuant to Section 5 that the Indemnitee has not met such
applicable standard of conduct, shall be a defense to the action or create a
presumption that the Indemnitee has not met the applicable standard of conduct.
The Indemnitee's expenses (including attorneys' fees) incurred in connection
with successfully establishing his right to indemnification, in whole or in
part, in any such proceeding shall also be indemnified by the corporation.
7. Subsequent Amendment. No amendment, termination or repeal of this
Article or of the relevant provisions of Chapter 156B of the Massachusetts
General Laws or any other applicable laws shall affect or diminish in any way
the rights of any Indemnitee to indemnification under the provisions hereof with
respect to any action, suit, proceeding or investigation arising out of or
relating to any actions, transactions or facts occurring prior to the final
adoption of such amendment, termination or repeal.
8. Other Rights. The indemnification and advancement of expenses provided
by this Article shall not be deemed exclusive of any other rights to which an
Indemnitee seeking indemnification or advancement of expenses may be entitled
under any law (common or statutory), agreement or vote of stockholders or
directors or otherwise, both as to action in his official capacity and as to
action in any other capacity while holding office for the corporation, and shall
continue as to an Indemnitee who has ceased to be a director or officer, and
shall inure to the benefit of the estate, heirs, executors and administrators of
the Indemnitee. Nothing contained in this Article shall be deemed to prohibit,
and the corporation is specifically
3
<PAGE>
authorized to enter into, agreements with officers and directors providing
indemnification rights and procedures different from those set forth in this
Article. In addition, the corporation may, to the extent authorized from time to
time by its Board of Directors, grant indemnification rights to other employees
or agents of the corporation or other persons serving the corporation and such
rights may be equivalent to, or greater or less than, those set forth in this
Article.
9. Partial Indemnification. If an Indemnitee is entitled under any
provision of this Article to indemnification by the corporation for some or a
portion of the expenses (including attorneys' fees), judgments, fines or amounts
paid in settlement actually and reasonably incurred by him or on his behalf in
connection with any action, suit, proceeding or investigation and any appeal
therefrom but not, however, for the total amount thereof, the corporation shall
nevertheless indemnify the Indemnitee for the portion of such expenses
(including attorneys' fees), judgments, fines or amounts paid in settlement to
which the Indemnitee is entitled.
10. Insurance. The corporation may purchase and maintain insurance, at its
expense, to protect itself and any director, officer, employee or agent of the
corporation or another organization or employee benefit plan against any
expense, liability or less incurred by him in any such capacity, or arising out
of his status as such, whether or not the corporation would have the power to
indemnify such person against such expense, liability or loss under Chapter 156B
of the Massachusetts General Laws.
11. Merger or Consolidation. If the corporation is merged into or
consolidated with another corporation and the corporation is not the surviving
corporation, the surviving corporation shall assume the obligations of the
corporation under this Article with respect to any action, suit, proceeding or
investigation arising out of or relating to any actions, transactions or facts
occurring prior to the date of such merger or consolidation.
12. Savings Clause. If this Article or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless indemnify each indemnitee as to any expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement in
connection with any action, suit, proceeding or investigation, whether civil,
criminal or administrative, including an action by or in the right of the
corporation, to the fullest extent permitted by any applicable portion of this
Article that shall not have been invalidated and to the fullest extent permitted
by applicable law.
13. Subsequent Legislation. If the Massachusetts General Laws are amended
after adoption of this Article to expand further the indemnification permitted
to Indemnitees, then the corporation shall indemnify such persons to the fullest
extent permitted by the Massachusetts General Laws, as so amended.
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6C. OTHER PROVISIONS
1. The directors may make, amend, or repeal the by-laws in whole or in
part, except with respect to any provision of such by-laws which by law or these
Articles or the by-laws requires action by the stockholders.
2. Meetings of the stockholders of the corporation may be held anywhere in
the United States.
3. The corporation shall have the power to be a partner in any business
enterprise which this corporation would have the power to conduct by itself.
5
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We further certify that the foregoing restated articles of organization
affect no amendments to the articles of reorganization of the corporation as
heretofore amended, except amendments to the following articles 2, 3, 4 and 6.
(*If there are no such amendments, state "None".)
Briefly describe amendments in space below:
Article 2: Amended to broaden and increase the powers of the corporation
consistent with applicable law.
Article 3: Amended to authorize 30,000 shares of Series A Cumulative Preferred
Stock, $0.01 par value per share; change the par value of the voting
Common Stock and Class 3 Common Stock from $100.00 par value per
share to $.01 par value per share; change the name of the class of
voting Common Stock to Class A Common Stock; and increase the
authorized number of shares of Class A Common Stock to 2,000,000
shares and Class B Common Stock to 2,000,000 shares.
Article 4: Amended to reflect the preferences, powers and privileges of the
Series A Cumulative Preferred Stock; to set forth the preferences,
powers and privileges of the Class A Common Stock and Class B Common
Stock; to provide for mandatory conversion of the Class B Common
Stock to Class A Common Stock upon the consummation of a sale of
stock of the corporation to the public pursuant to a registered
public offering under the Securities Act of 1933, as amended; and to
provide for the mandatory conversion of Class A Common Stock to
Class B Common Stock upon certain unauthorized transfers of Class A
Common Stock.
Article 6: Amended to (i) eliminate the liability of directors of the
corporation to the corporation or its stockholders, except to the
extent prohibited by Chapter 156B of the Massachusetts General Laws;
(ii) provide for the Indemnification by the corporation of each
person who was or is, or is threatened to be made, a party to any
threatened, pending or completed action, suit or proceeding by
reason of the fact that he is, was, or has agreed to become, a
director or officer of the corporation or is or was serving, or has
agreed to serve, in certain capacities at the request of the
corporation; (iii) grant the directors authority to make, amend or
repeal the bylaws, except as otherwise provided by law or the
corporation's articles of organization or bylaws; (iv) permit
meetings of the stockholders to be held anywhere in the United
States; and (v) permit the corporation to be a partner in any
business enterprise which the corporation would have the power to
conduct by itself.
IN WITNESS WHEREOF AND UNDER THE PENALTIES OF PERJURY, we have
hereto signed our names this 2nd day of December in the year 1992.
/s/ Thomas A. Rodgers, III President
Thomas A. Rodgers, III
/s/ Lawrence R. Walsh Assistant Clerk
Lawrence R. Walsh
<PAGE>
THE COMMONWEALTH OF MASSACHUSETTS
RESTATED ARTICLES OF ORGANIZATION
(General Laws, Chapter 156B, Section 74)
I hereby approve the within restated articles of
organization and, the filing fee in the amount of $4,130.00
having been paid, said articles are deemed to have been filed
with me this 22nd day of December, 1992.
/s/ Michael Joseph Connolly
MICHAEL JOSEPH CONNOLLY
Secretary of State
TO BE FILLED IN BY CORPORATION
PHOTO COPY OF RESTATED ARTICLES OF ORGANIZATION TO BE SENT
TO:
John H. Chory, Esq.
------------------------------------------------------------
Hale and Dorr
------------------------------------------------------------
60 State Street
------------------------------------------------------------
Boston, MA 02109
------------------------------------------------------------
Telephone (617) 526-6000, Ext. 6674
------------------------------------------------------------
<PAGE>
Exhibit 3.4
AMENDED AND RESTATED
BY-LAWS
OF
GLOBE MANUFACTURING CO.
<PAGE>
<TABLE>
<CAPTION>
By-Laws
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Table of Contents
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Page
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<S> <C>
ARTICLE 1 - Stockholders 1
Section 1.1 Place of Meetings.......................................... 1
Section 1.2 Annual Meeting............................................. 1
Section 1.3 Special Meetings........................................... 1
Section 1.4 Notice of Meetings......................................... 2
Section 1.5 Quorum..................................................... 2
Section 1.6 Adjournments............................................... 2
Section 1.7 Voting and Proxies......................................... 2
Section 1.8 Action at Meeting.......................................... 3
Section 1.9 Action without Meeting..................................... 3
ARTICLE 2 - Directors........................................................ 3
Section 2.1 Powers..................................................... 3
Section 2.2 Number, Election and Qualification......................... 3
Section 2.3 Enlargement of the Board................................... 4
Section 2.4 Tenure..................................................... 4
Section 2.5 Vacancies.................................................. 4
Section 2.6 Resignation................................................ 4
Section 2.7 Removal.................................................... 4
Section 2.8 Regular Meetings........................................... 4
Section 2.9 Special Meetings........................................... 4
Section 2.10 Meetings by Telephone Conference Calls..................... 4
Section 2.11 Notice of Special Meetings................................. 5
Section 2.12 Quorum..................................................... 5
Section 2.13 Action at Meeting.......................................... 5
Section 2.14 Action by Consent.......................................... 5
Section 2.15 Committees................................................. 5
Section 2.16 Compensation of Directors.................................. 6
ARTICLE 3 - Officers......................................................... 6
Section 3.1 Enumeration................................................ 6
</TABLE>
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<TABLE>
<CAPTION>
By-Laws
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Table of Contents
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Page
----
<S> <C>
Section 3.2 Election................................................... 6
Section 3.3 Qualification.............................................. 6
Section 3.4 Tenure..................................................... 6
Section 3.5 Resignation and Removal.................................... 6
Section 3.6 Vacancies.................................................. 7
Section 3.7 Chairman of the Board and Vice-Chairman of the Board....... 7
Section 3.8 President.................................................. 7
Section 3.9 Vice Presidents............................................ 7
Section 3.10 Treasurer and Assistant Treasurers......................... 8
Section 3.11 Clerk and Assistant Clerks................................. 8
Section 3.12 Secretary and Assistant Secretaries........................ 8
Section 3.13 Salaries................................................... 9
ARTICLE 4 - Capital Stock.................................................... 9
Section 4.1 Issue of Capital Stock..................................... 9
Section 4.2 Certificate of Stock....................................... 9
Section 4.3 Transfers.................................................. 9
Section 4.4 Record Date................................................10
Section 4.5 Replacement of Certificates................................10
ARTICLE 5 - Miscellaneous Provisions.........................................11
Section 5.1 Fiscal Year................................................11
Section 5.2 Seal.......................................................11
Section 5.3 Voting of Securities.......................................11
Section 5.4 Corporate Records..........................................11
Section 5.5 Evidence of Authority......................................11
Section 5.6 Articles of Organization...................................11
Section 5.7 Severability...............................................11
Section 5.8 Pronouns...................................................11
ARTICLE 6 - Amendments.......................................................12
</TABLE>
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B Y - L A W S
OF
GLOBE MANUFACTURING CO.
ARTICLE 1 - Stockholders
1.1 Place of Meetings. All meetings of stockholders shall be held within
the Commonwealth of Massachusetts unless the Articles of Organization permit the
holding of stockholders' meetings outside Massachusetts, in which event such
meetings may be held either within or without Massachusetts. Meetings of
stockholders shall be held at the principal office of the corporation unless a
different place is fixed by the Board of Directors or the President and stated
in the notice of the meeting.
1.2 Annual Meeting. The annual meeting of stockholders shall be held
within six months after the end of each fiscal year of the corporation on a date
to be fixed by the Board of Directors or the President (which date shall not be
a legal holiday in the place where the meeting is to be held) at the time and
place to be fixed by the Board of Directors or the President and stated in the
notice of the meeting. The purposes for which the annual meeting is to be held,
in addition to those prescribed by law, by the Articles of Organization or by
these By-Laws, may be specified by the Board of Directors or the President. If
no annual meeting is held in accordance with the foregoing provisions, a special
meeting may be held in lieu of the annual meeting, and any action taken at that
special meeting shall have the same effect as if it had been taken at the annual
meeting, and in such case all references in these By-Laws to the annual meeting
of stockholders shall be deemed to refer to such special meeting.
1.3 Special Meetings. Special meetings of stockholders may be called by
the President or by the Board of Directors. In addition, upon written
application of one or more stockholders who are entitled to vote and who hold at
least the Required Percentage (as defined below) of the capital stock entitled
to vote at the meeting, special meetings shall be called by the Clerk, or in
case of the death, absence, incapacity or refusal of the Clerk, by any other
officer.
For purposes of this Section 1.3, the "Required Percentage" shall be (i)
10% at any time at which the corporation shall not have a class of voting stock
registered under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and (ii) 80% or such lesser percentage as shall constitute the maximum
percentage permitted by law for this purpose at any time at which the
corporation shall have a class of voting stock registered under the Exchange
Act.
Any request for a call of a special meeting of stockholders (a "Call") by
the holders of the Required Percentage of the capital stock entitled to vote at
the meeting shall be accompanied by
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a written statement setting forth the reason or reasons for the Call and the
purpose or purposes of such special meeting.
In the absence of a quorum at any special meeting called pursuant to a
Call, such special meeting may be postponed or adjourned from time to time only
by the officer of the corporation entitled to preside at such meeting.
1.4 Notice of Meetings. A written notice of each meeting of stockholders,
stating the place, date and hour thereof, and the purposes for which the meeting
is to be held, shall be given by the Clerk, Assistant Clerk or other person
calling the meeting at least seven days before the meeting to each stockholder
entitled to vote at the meeting and to each stockholder who by law, by the
Articles of Organization or by these By-Laws is entitled to such notice, by
leaving such notice with him or at his residence or usual place of business, or
by mailing it postage prepaid and addressed to him at his address as it appears
in the records of the corporation. Whenever any notice is required to be given
to a stockholder by law, by the Articles of Organization or by these By-Laws, no
such notice need be given if a written waiver of notice, executed before or
after the meeting by the stockholder of his authorized attorney, is filed with
the records of the meeting.
1.5 Quorum. Unless the Articles of Organization otherwise provide, the
holders of a majority of the number of shares of the stock issued, outstanding
and entitled to vote on any matter shall constitute a quorum with respect to
that matter, except that if two or more classes of stock are outstanding and
entitled to vote as separate classes, then in the case of each such class a
quorum shall consist of the holders of a majority of the number of shares of the
stock of that class issued, outstanding and entitled to vote. Shares owned
directly or indirectly by the corporation shall not be counted in determining
the total number of shares outstanding for this purpose.
1.6 Adjournments. Except as otherwise provided in Section 1.3 hereof,
any meeting of stockholders may be adjourned to any other time and to any other
place at which a meeting of stockholders may be held under these By-Laws by the
stockholders present or represented at the meeting, although less than a quorum,
or by any officer entitled to preside or to act as clerk of such meeting, if no
stockholder is present. It shall not be necessary to notify any stockholder of
any adjournment. Any business which could have been transacted at any meeting of
the stockholders as originally called may be transacted at any adjournment of
the meeting.
1.7 Voting and Proxies. Each stockholder shall have one vote for each
share of stock entitled to vote held of record by such stockholder and a
proportionate vote for each fractional share so held, unless otherwise provided
by the Articles of Organization. Stockholders may vote either in person or by
written proxy dated not more than six months before the meeting named in the
proxy. Proxies shall be filed with the clerk of the meeting, or of any adjourned
meeting, before being voted. Except as otherwise limited by their terms, a proxy
shall entitle the persons
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named in the proxy to vote at any adjournment of such meeting, but shall not be
valid after final adjournment of such meeting. A proxy with respect to stock
held in the name of two or more persons shall be valid if executed by any one of
them, unless at or prior to exercise of the proxy the corporation receives a
specific written notice to the contrary from any one of them. A proxy purported
to be executed by or on behalf of a stockholder shall be deemed valid unless
challenged at or prior to its exercise.
1.8 Action at Meeting. When a quorum is present at any meeting, the
holders of a majority of the stock present or represented and voting on a matter
(or if there are two or more classes of stock entitled to vote as separate
classes, then in the case of each such class, the holders of a majority of the
stock of that class present or represented and voting on a matter), shall decide
any matter to be voted on by the stockholders, except when a larger vote is
required by law, the Articles of Organization or these By-Laws. Any election by
stockholders shall be determined by a plurality of the votes cast by the
stockholders entitled to vote at the election. No ballot shall be required for
such election unless requested by a stockholder present or represented at the
meeting and entitled to vote in the election. The corporation shall not directly
or indirectly vote any share of its own stock.
1.9 Action without Meeting. Any action required or permitted to be taken
at any meeting of the stockholders may be taken without a meeting if all
stockholders entitled to vote on the matter consent to the action in writing and
the written consents are filed with the records of the meetings of stockholders.
Each such consent shall be treated for all purposes as a vote at a meeting.
ARTICLE 2 - Directors
2.1 Powers. The business of the corporation shall be managed by a Board
of Directors, who may exercise all the powers of the corporation except as
otherwise provided by law, by the Articles of Organization or by these By-Laws.
In the event of a vacancy in the Board of Directors, the remaining Directors,
except as otherwise provided by law, may exercise the powers of the full Board
until the vacancy is filled.
2.2 Number, Election and Qualification. The number of Directors which
shall constitute the whole Board of Directors shall be determined by vote of the
stockholders or the Board of Directors, but shall consist of not less than three
Directors (except that whenever there shall be only two stockholders the number
of Directors shall be not less than two and whenever there shall be only one
stockholder or prior to the issuance of any stock, there shall be at least one
Director). The number of Directors may be decreased at any time and from time to
time either by the stockholders or by a majority of the Directors then in
office, but only to eliminate vacancies existing by reason of the death,
resignation, removal or expiration of the term of one or more Directors. The
Directors shall be elected at the annual meeting of stockholders by such
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stockholders as have the right to vote on such election. No Director need be a
stockholder of the corporation.
2.3 Enlargement of the Board. The number of Directors may be increased at
any time and from time to time by the stockholders or by a majority of the
Directors then in office.
2.4 Tenure. Each Director shall hold office until the next annual meeting
of stockholders and until his successor is elected and qualified, or until his
earlier death, resignation or removal.
2.5 Vacancies. Unless and until filled by the stockholders, any vacancy
in the Board of Directors, however occurring, including a vacancy resulting from
an enlargement of the Board, may be filled by vote of a majority of the
Directors present at any meeting of Directors at which a quorum is present. Each
such successor shall hold office for the unexpired term of his predecessor and
until his successor is chosen and qualified or until his earlier death,
resignation or removal.
2.6 Resignation. Any Director may resign by delivering his written
resignation to the corporation at its principal office or to the President or
Clerk. Such resignation shall be effective upon receipt unless it is specified
to be effective at some other time or upon the happening of some other event.
2.7 Removal. A Director may be removed from office with or without cause
by vote of the holders of a majority of the shares entitled to vote in the
election of Directors. However, the Directors elected by the holders of a
particular class or series of stock may be removed from office with or without
cause only by vote of the holders of a majority of the outstanding shares of
such class or series. In addition, a Director may be removed from office for
cause by vote of a majority of the Directors then in office. A Director may be
removed for cause only after reasonable notice and opportunity to be heard
before the body proposing to remove him.
2.8 Regular Meetings. Regular meetings of the Directors may be held
without call or notice at such places, within or without Massachusetts, and at
such times, as the Directors may from time to time determine, provided that any
Director who is absent when such determination is made shall be given notice of
the determination. A regular meeting of the Directors may be held without a call
or notice immediately after and at the same place as the annual meeting of
stockholders.
2.9 Special Meetings. Special meetings of the Directors may be held at
any time and place, within or without Massachusetts, designated in a call by the
Chairman of the Board, President, Treasurer, two or more Directors or by one
Director in the event that there is only a single Director in office.
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2.10 Meetings by Telephone Conference Calls. Directors or members of any
committee designated by the Directors may participate in a meeting of the
Directors or such committee by means of a conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other at the same time and participation by such means
shall constitute presence in person at a meeting.
2.11 Notice of Special Meetings. Notice of any special meeting of the
Directors shall be given to each Director by the Secretary or Clerk or by the
officer or one of the Directors calling the meeting. Notice shall be duly given
to each Director (i) by notice given to such Director in person or by telephone
at least 48 hours in advance of the meeting, (ii) by sending a telegram or
telex, or by delivering written notice by hand, to his last known business or
home address at least 48 hours in advance of the meeting, or (iii) by mailing
written notice to his last known business or home address at least 72 hours in
advance of the meeting. Notice need not be given, to any Director if a written
waiver of notice, executed by him before or after the meeting, is filed with the
records of the meeting, or to any Director who attends the meeting without
protesting prior to the meeting or at its commencement the lack of notice to
him. A notice or waiver of notice of a Directors' meeting need not specify the
purposes of the meeting. If notice is given in person or by telephone, an
affidavit of the Secretary, Clerk, officer or Director who gives such notice
that the notice has been duly given shall, in the absence of fraud, be
conclusive evidence that such notice was duly given.
2.12 Quorum. At any meeting of the Board of Directors, a majority of the
Directors then in office shall constitute a quorum provided, however, that so
long as Section 2.3 of the Shareholders' Agreement dated as of December ___,
1992 among the corporation and the Shareholders and all other individuals named
on the signature pages thereto (the "Agreement") is in effect, a majority of the
Directors then in office, including at least one Goldman Director and one
Rodgers Director (as such terms are defined in the Agreement), shall constitute
a quorum. Less than a quorum may adjourn any meeting from time to time without
further notice.
2.13 Action at Meeting. At any meeting of the Board of Directors at which
a quorum is present, the vote of a majority of those present shall be sufficient
to take any action, unless a different vote is specified by law, by the Articles
of Organization or by these By-Laws.
2.14 Action by Consent. Any action required or permitted to be taken at
any meeting of the Board of Directors may be taken without a meeting if all the
Directors consent to the action in writing and the written consents are filed
with the records of the Directors' meetings. Each such consent shall be treated
for all purposes as a vote at a meeting.
2.15 Committees. The Board of Directors may, by vote of a majority of the
Directors then in office, elect from their number an executive committee or
other committees and may by like vote delegate to committees so elected some or
all of their powers to the extent permitted by
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law. Except as the Board of Directors may otherwise determine, any such
committee may make rules for the conduct of its business, but unless otherwise
provided by the Directors or in such rules, its business shall be conducted as
nearly as possible in the same manner as is provided by these By-Laws for the
Directors. The Board of Directors shall have the power at any time to fill
vacancies in any such committee, to change its membership or to discharge the
committee.
2.16 Compensation of Directors. Directors may be paid such compensation
for their services and such reimbursement for expenses of attendance at meetings
as the Board of Directors may from time to time determine. No such payment shall
preclude any Director from serving the corporation in any other capacity and
receiving compensation therefor.
ARTICLE 3 - Officers
3.1 Enumeration. The officers of the corporation shall consist of a
President, a Treasurer, a Clerk and such other officers with such other titles
as the Board of Directors may determine, including, but not limited to, a
Chairman of the Board, a Vice Chairman of the Board, a Secretary and one or more
Vice Presidents, Assistant Treasurers, Assistant Clerks and Assistant
Secretaries.
3.2 Election. The President, Treasurer and Clerk shall be elected
annually by the Board of Directors at their first meeting following the annual
meeting of stockholders. Other officers may be chosen or appointed by the Board
of Directors at such meeting or at any other meeting.
3.3 Qualification. Neither the President nor any other officer need be a
director or stockholder. Any two or more offices may be held by the same person.
The Clerk shall be a resident of Massachusetts unless the corporation has a
resident agent appointed for the purpose of service of process. Any officer may
be required by the Directors to give bond for the faithful performance of his
duties to the corporation in such amount and with such sureties as the Directors
may determine. The premiums for such bonds may be paid by the corporation.
3.4 Tenure. Except as otherwise provided by law, by the Articles of
Organization or by these By-Laws, the President, Treasurer and Clerk shall hold
office until the first meeting of the Directors following the next annual
meeting of stockholders and until their respective successors are chosen and
qualified; and all other officers shall hold office until the first meeting of
the Directors following the annual meeting of stockholders, unless a different
term is specified in the vote choosing or appointing them, or until his earlier
death, resignation or removal.
3.5 Resignation and Removal. Any officer may resign by delivering his
written resignation to the corporation at its principal office or to the
President, Clerk or Secretary. Such
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resignation shall be effective upon receipt unless it is specified to be
effective at some other time or upon the happening of some other event.
Any officer may be removed at any time, with or without cause, by vote of a
majority of the entire number of Directors then in office. An officer may be
removed for cause only after reasonable notice and opportunity to be heard by
the Board of Directors prior to action thereon.
Except as the Board of Directors may otherwise determine, no officer who
resigns or is removed shall have any right to any compensation as an officer for
any period following his resignation or removal, or any right to damages on
account of such removal, whether his compensation be by the month or the year or
otherwise, unless such compensation is expressly provided in a duly authorized
written agreement with the corporation.
3.6 Vacancies. The Board of Directors may fill any vacancy occurring in
any office for any reason and may, in its discretion, leave unfilled for such
period as it may determine any offices other than those of President, Treasurer
and Clerk. Each such successor shall hold office for the unexpired term of his
predecessor and until his successor is chosen and qualified, or until he sooner
dies, resigns or is removed.
3.7 Chairman of the Board and Vice-Chairman of the Board. The Board of
Directors may appoint a Chairman of the Board and may designate him as Chief
Executive Officer. If the Board of Directors appoints a Chairman of the Board,
he shall perform such duties and possess such powers as are assigned to him by
the Board of Directors. If the Board of Directors appoints a Vice-Chairman of
the Board, he shall, in the absence or disability of the Chairman of the Board,
perform the duties and exercise the powers of the Chairman of the Board and
shall perform such other duties and possess such other powers as may from time
to time be vested in him by the Board of Directors.
3.8 President. The President shall, subject to the direction of the Board
of Directors, have general charge and supervision of the business of the
corporation. Unless otherwise provided by the Board of Directors, he shall
preside at all meetings of the stockholders and, if he is a Director, at all
meetings of the Board of Directors. Unless the Board of Directors has designated
the Chairman of the Board or another officer as Chief Executive Officer, the
President shall be the Chief Executive Officer of the corporation. The President
shall perform such other duties and shall possess such other powers as the Board
of Directors may from time to time prescribe.
3.9 Vice Presidents. Any Vice President shall perform such duties and
possess such powers as the Board of Directors or the President may from time to
time prescribe. In the event of the absence, inability or refusal to act of the
President, the Vice President (or if there shall be more than one, the Vice
Presidents in the order determined by the Board of Directors) shall
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perform the duties of the President and when so performing shall have all the
powers of and be subject to all the restrictions upon the President. The Board
of Directors may assign to any Vice President the title of Executive Vice
President, Senior Vice President or any other title selected by the Board of
Directors.
3.10 Treasurer and Assistant Treasurers. The Treasurer shall perform such
duties and shall have such powers as may from time to time be assigned to him by
the Board of Directors or the President. In addition, the Treasurer shall
perform such duties and have such powers as are incident to the office of
treasurer, including without limitation the duty and power to keep and be
responsible for all funds and securities of the corporation, to deposit funds of
the corporation in depositories selected in accordance with these By-Laws, to
disburse such funds as ordered by the Board of Directors, to make proper
accounts of such funds, and to render as required by the Board of Directors
statements of all such transactions and of the financial condition of the
corporation.
The Assistant Treasurers shall perform such duties and possess such powers
as the Board of Directors, the President or the Treasurer may from time to time
prescribe. In the event of the absence, inability or refusal to act of the
Treasurer, the Assistant Treasurer (or if there shall be more than one, the
Assistant Treasurers in the order determined by the Board of Directors) shall
perform the duties and exercise the powers of the Treasurer.
3.11 Clerk and Assistant Clerks. The Clerk shall perform such duties and
shall possess such powers as the Board of Directors or the President may from
time to time prescribe. In addition, the Clerk shall perform such duties and
have such powers as are incident to the office of the clerk, including without
limitation the duty and power to give notices of all meetings of stockholders
and special meetings of the Board of Directors, to attend all meetings of
stockholders and the Board of Directors and keep a record of the proceedings, to
maintain a stock ledger and prepare lists of stockholders and their addresses as
required, to be custodian of corporate records and the corporate seal and to
affix and attest to the same on documents.
Any Assistant Clerk shall perform such duties and possess such powers as
the Board of Directors, the President or the Clerk may from time to time
prescribe. In the event of the absence, inability or refusal to act of the
Clerk, the Assistant Clerk (or if there shall be more than one, the Assistant
Clerks in the order determined by the Board of Directors) shall perform the
duties and exercise the powers of the Clerk.
In the absence of the Clerk or any Assistant Clerk at any meeting of
stockholders or Directors, the person presiding at meeting shall designate a
temporary clerk to keep a record of the meeting.
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3.12 Secretary and Assistant Secretaries. If a Secretary is appointed, he
shall attend all meetings of the Board of Directors and shall keep a record of
the meetings of the Directors. He shall, when required, notify the Directors of
their meetings, and shall possess such other powers and shall perform such other
duties as the Board of Directors or the President may from time to time
prescribe.
Any Assistant Secretary shall perform such duties and possess such powers
as the Board of Directors, the President or the Secretary may from time to time
prescribe. In the event of the absence, inability or refusal to act of the
Secretary, the Assistant Secretary (or if there shall be more than one, the
Assistant Secretaries in the order determined by the Board of Directors) shall
perform the duties and exercise the powers of the Secretary.
3.13 Salaries. Officers of the corporation shall be entitled to such
salaries, compensation or reimbursement as shall be fixed or allowed from time
to time by the Board of Directors.
ARTICLE 4 - Capital Stock
4.1 Issue of Capital Stock. Unless otherwise voted by the stockholders,
the whole or any part of any unissued balance of the authorized capital stock of
the corporation or the whole or any part of the capital stock of the corporation
held in its treasury may be issued or disposed of by vote of the Board of
Directors, in such manner, for such consideration and on such terms as the
Directors may determine.
4.2 Certificate of Stock. Each stockholder shall be entitled to a
certificate of the capital stock of the corporation in such form as may be
prescribed from time to time by the Directors. The certificate shall be signed
by the President or a Vice President, and by the Treasurer or an Assistant
Treasurer, but when a certificate is countersigned by a transfer agent or a
registrar, other than a Director, officer or employee of the corporation, such
signature may be a facsimile. In case any officer who has signed or whose
facsimile signature has been placed upon such certificate shall have ceased to
be such officer before such certificate is issued, it may be issued by the
corporation with the same effect as if he were such officer at the time of its
issue.
Every certificate for shares of stock which are subject to any restriction
on transfer pursuant to the Articles of Organization, the By-Laws, applicable
securities laws or any agreement to which the corporation is a party, shall have
conspicuously noted on the face or back of the certificate either the full text
of the restriction or a statement of the existence of such restrictions and a
statement that the corporation will furnish a copy of the restrictions to the
holder of such certificate upon written request and without charge. Every
certificate issued when the corporation is authorized to issue more than one
class or series of stock shall set forth on its face or back either the full
text of the preferences, voting powers, qualifications and special and
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relative rights of the shares of each class and series authorized to be issued
or a statement of the existence of such preferences, powers, qualifications and
rights and a statement that the corporation will furnish a copy thereof to the
holder of such certificate upon written request and without charge.
4.3 Transfers. Subject to the restrictions, if any, stated or noted on
the stock certificates, shares of stock may be transferred on the books of the
corporation by the surrender to the corporation or its transfer agent of the
certificate representing such shares properly endorsed or accompanied by a
written assignment or power of attorney properly executed, and with such proof
of authority or the authenticity of signature as the corporation or its transfer
agent may reasonably require. Except as may be otherwise required by law, by the
Articles of Organization or by these By-Laws, the corporation shall be entitled
to treat the record holder of stock as shown on its books as the owner of such
stock for all purposes, including the payment of dividends and the right to vote
with respect thereto, regardless of any transfer, pledge or other disposition of
such stock until the shares have been transferred on the books of the
corporation in accordance with the requirements of these By-Laws.
It shall be the duty of each stockholder to notify the corporation of his
post office address and of his taxpayer identification number.
4.4 Record Date. The Board of Directors may fix in advance a time not
more than 60 days preceding the date of any meeting of stockholders or the date
for the payment of any dividend or the making of any distribution to
stockholders or the last day on which the consent or dissent of stockholders may
be effectively expressed for any purpose, as the record date for determining the
stockholders having the right to notice of and to vote at such meeting, and any
adjournment, or the right to receive such dividend or distribution or the right
to give such consent or dissent. In such case only stockholders of record on
such record date shall have such right, notwithstanding any transfer of stock on
the books of the corporation after the record date. Without fixing such record
date the Directors may for any of such purposes close the transfer books for all
or any part of such period.
If no record date is fixed and the transfer books are not closed, the
record date for determining the stockholders having the right to notice of or to
vote at a meeting of stockholders shall be at the close of business on the day
before the day on which notice is given, and the record date for determining the
stockholders for any other purpose shall be at the close of business on the day
on which the Board of Directors acts with respect to such purpose.
4.5 Replacement of Certificates. In case of the alleged loss or
destruction or the mutilation of a certificate of stock, a duplicate certificate
may be issued in place of the lost, destroyed or mutilated certificate, upon
such terms as the Directors may prescribe, including the presentation of
reasonable evidence of such loss, destruction or mutilation and the giving of
such
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indemnity as the Directors may require for the protection of the corporation or
any transfer agent or registrar.
ARTICLE 5 - Miscellaneous Provisions
5.1 Fiscal Year. Except as otherwise set forth in the Articles of
Organization or as otherwise determined from time to time by the Board of
Directors, the fiscal year of the corporation shall in each year end on December
31.
5.2 Seal. The seal of the corporation shall, subject to alteration by the
Directors, bear its name, the word "Massachusetts" and the year of its
incorporation.
5.3 Voting of Securities. Except as the Board of Directors may otherwise
designate, the President or Treasurer may waive notice of, and act as, or
appoint any person or persons to act as, proxy or attorney-in-fact for this
corporation (with or without power of substitution) at, any meeting of
stockholders or shareholders of any other corporation or organization, the
securities of which may be held by this corporation.
5.4 Corporate Records. The original, or attested copies, of the Articles
of Organization, By-Laws and records of all meetings of the incorporators and
stockholders, and the stock records, which shall contain the names of all
stockholders and the record address and the amount of stock held by each, shall
be kept in Massachusetts at the principal office of the corporation, or at an
office of its transfer agent or of the Clerk. These copies and records need not
all be kept in the same office. They shall be available at all reasonable times
for the inspection of any stockholder for any proper purpose, but not to secure
a list of stockholders for the purpose of selling the list or copies of the list
or of using the list for a purpose other than in the interest of the applicant,
as a stockholder, relative to the affairs of the corporation.
5.5 Evidence of Authority. A certificate by the Clerk or Secretary, or an
Assistant Clerk or Assistant Secretary, or a temporary Clerk or temporary
Secretary, as to any action taken by the stockholders, Directors, any committee
or any officer or representative of the corporation shall as to all persons who
rely on the certificate in good faith by conclusive evidence of such action.
5.6 Articles of Organization. All references in these By-Laws to the
Articles of Organization shall be deemed to refer to the Articles of
Organization of the corporation, as amended and in effect from time to time.
5.7 Severability. Any determination that any provision of these By-Laws
is for any reason inapplicable, illegal or ineffective shall not affect or
invalidate any other provision of these By-Laws.
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5.8 Pronouns. All pronouns used in these By-Laws shall be deemed to refer
to the masculine, feminine or neuter, singular or plural, as the identify of the
person or persons may require.
ARTICLE 6 - Amendments
These By-Laws may be amended by vote of the holders of a majority of the
shares of each class of the capital stock at the time outstanding and entitled
to vote at any annual or special meeting of stockholders, if notice of the
substance of the proposed amendment is stated in the notice of such meeting. If
authorized by the Articles of Organization, the Directors, by a majority of
their number then in office, may also make, amend or repeal these By-Laws, in
whole or in part, except with respect to (a) the provisions of these By-Laws
governing (i) the removal of Directors and (ii) the amendment of these By-Laws
and (b) any provision of these By-Laws which by law, the Articles of
Organization or these By-Laws requires action by the stockholders.
Not later than the time of giving notice of the meeting of stockholders
next following the making, amending or repealing by the Directors of any By-Law,
notice stating the substance of such change shall be given to all stockholders
entitled to vote on amending the By-Laws.
Any By-Law adopted by the Directors may be amended or repealed by the
stockholders entitled to vote on amending the By-Laws.
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Exhibit 4.1
EXECUTION COPY
================================================================================
INDENTURE
Dated as of August 6, 1998
Among
GLOBE HOLDINGS, INC.,
as Issuer,
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as Trustee
----------------------------------
$49,086,000
14% Senior Discount Notes due 2009
================================================================================
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CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA Indenture
Section Section
- ------- ----------
<S> <C> <C>
310 (a)(1)........................................ 7.10
(a)(2)........................................ 7.10
(a)(3)........................................ N.A.**
(a)(4)........................................ N.A.
(a)(5)........................................ 7.08; 7.10
(b)........................................... 7.08; 7.10
(c)........................................... N.A.
311 (a)........................................... 7.11
(b)........................................... 7.11
(c)........................................... N.A.
312 (a)........................................... 2.05
(b)........................................... 13.03
(c)........................................... 13.03
313 (a)........................................... 7.06
(b)(1)........................................ 7.06
(b)(2)........................................ 7.06
(c)........................................... 7.06; 13.02
(d)........................................... 7.06
314 (a)(1),(2),(3)................................ 4.06; 4.08; 7.06; 13.02
(a)(4)........................................ 4.06
(b)........................................... N.A.
(c)(1)........................................ 13.04
(c)(2)........................................ 13.04
(c)(3)........................................ N.A.
(d)........................................... N.A.
(e)........................................... 13.05
(f)........................................... N.A
315 (a)........................................... 7.01(b)
(b)........................................... 7.05; 13.02
(c)........................................... 7.01(a)
(d)........................................... 7.01(c)
(e)........................................... 6.11
316 (a)(last sentence)............................ 2.09
(a)(1)(A)..................................... 6.05
(a)(1)(B)..................................... 6.04
(a)(2)........................................ N.A.
(b)........................................... 6.07
317 (a)(1)........................................ 6.08
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
(a)(2)........................................ 6.09
(b)........................................... 2.04
318 (a)........................................... 13.01
(c)........................................... 13.01
</TABLE>
- ------------------------
** N.A. means Not Applicable
This Cross-Reference Table shall not, for any purpose, be deemed to be a part of
this Indenture.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C> <C>
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE............................ 1
SECTION 1.01. Definitions......................................... 1
SECTION 1.02. Incorporation by Reference of TIA................... 25
SECTION 1.03. Rules of Construction............................... 26
ARTICLE TWO
THE SECURITIES........................................................ 26
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 Assets in Trust................ 29
SECTION 2.05. Securityholder Lists................................ 29
SECTION 2.06. Transfer and Exchange............................... 29
SECTION 2.07. Replacement Securities.............................. 30
SECTION 2.08. Outstanding Securities.............................. 30
SECTION 2.09. Treasury Securities................................. 31
SECTION 2.10. Temporary Securities................................ 31
SECTION 2.11. Cancellation........................................ 31
SECTION 2.12. Defaulted Interest.................................. 32
SECTION 2.13. CUSIP Number........................................ 32
SECTION 2.14. Deposit of Moneys................................... 33
SECTION 2.15. Book-Entry Provisions for Global Securities......... 33
SECTION 2.16. Special Transfer Provisions......................... 34
SECTION 2.17. Liquidated Damages under Registration Rights
Agreement........................................... 37
ARTICLE THREE
REDEMPTION............................................................ 37
SECTION 3.01. Optional Redemption................................. 37
SECTION 3.02. Applicability of Article............................ 38
SECTION 3.03. Election To Redeem; Notice to Trustee............... 39
SECTION 3.04. Selection by Trustee of Securities To Be Redeemed... 39
SECTION 3.05. Notice of Redemption................................ 39
SECTION 3.06. Deposit of Redemption Price......................... 40
SECTION 3.07. Securities Payable on Redemption Date............... 40
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SECTION 3.08. Securities Redeemed in Part......................... 41
ARTICLE FOUR
COVENANTS 41
SECTION 4.01. Payment of Securities............................... 41
SECTION 4.02. Maintenance of Office or Agency..................... 42
SECTION 4.03. Corporate Existence................................. 42
SECTION 4.04. Payment of Taxes and Other Claims................... 42
SECTION 4.05. Maintenance of Properties and Insurance............. 42
SECTION 4.06. Compliance Certificate; Notice of Default........... 43
SECTION 4.07. Compliance with Laws................................ 43
SECTION 4.08. Reports............................................. 44
SECTION 4.09. Waiver of Stay, Extension or Usury Laws............. 44
SECTION 4.10. Limitation on Restricted Payments................... 44
SECTION 4.11. Limitation on Transactions with Related Persons..... 47
SECTION 4.12. Limitation on Incurrence of Debt and Issuance of
Preferred Stock..................................... 48
SECTION 4.13. Payment Restrictions Affecting Restricted
Subsidiaries........................................ 51
SECTION 4.14. [Intentionally Omitted.]............................ 52
SECTION 4.15. Change of Control................................... 52
SECTION 4.16. Limitation on Asset Sales........................... 54
SECTION 4.17. Limitation on Liens................................. 56
SECTION 4.18. [Intentionally Omitted.]............................ 57
SECTION 4.19. Conduct of Business of the Issuer and Its
Restricted Subsidiaries............................. 57
SECTION 4.20. [Intentionally Omitted.]............................ 57
SECTION 4.21. Rule 144A Information Requirement................... 57
SECTION 4.22. Issuance and Sale of Capital Stock of Restricted
Subsidiaries........................................ 57
SECTION 4.23. Limitation on Sale and Lease-Back Transactions...... 57
SECTION 4.24. Payments for Consent................................ 58
ARTICLE FIVE
SUCCESSOR CORPORATION................................................. 58
SECTION 5.01. Merger, Consolidation or Sale of Assets............. 58
SECTION 5.02. Successor Corporation Substituted................... 59
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
ARTICLE SIX
<S> <C>
DEFAULT AND REMEDIES.................................................. 59
SECTION 6.01. Events of Default................................... 59
SECTION 6.02. Acceleration........................................ 61
SECTION 6.03. Other Remedies...................................... 62
SECTION 6.04. Waiver of Past Defaults............................. 62
SECTION 6.05. Control by Majority................................. 63
SECTION 6.06. Limitation on Suits................................. 63
SECTION 6.07. Rights of Holders To Receive Payment................ 63
SECTION 6.08. Collection Suit by Trustee.......................... 64
SECTION 6.09. Trustee May File Proofs of Claim.................... 64
SECTION 6.10. Priorities.......................................... 64
SECTION 6.11. Undertaking for Costs............................... 65
SECTION 6.12. Restoration of Rights and Remedies.................. 65
ARTICLE SEVEN
TRUSTEE............................................................... 65
SECTION 7.01. Duties of Trustee................................... 65
SECTION 7.02. Rights of Trustee................................... 67
SECTION 7.03. Individual Rights of Trustee........................ 68
SECTION 7.04. Disclaimer of Trustee............................... 68
SECTION 7.05. Notice of Default................................... 68
SECTION 7.06. Reports by Trustee to Holders....................... 69
SECTION 7.07. Compensation and Indemnity.......................... 69
SECTION 7.08. Replacement of Trustee.............................. 70
SECTION 7.09. Successor Trustee by Merger, etc.................... 71
SECTION 7.10. Eligibility; Disqualification....................... 71
SECTION 7.11. Preferential Collection of Claims Against the Issuer 71
ARTICLE EIGHT
DISCHARGE OF THIS INDENTURE; DEFEASANCE............................... 72
SECTION 8.01. Option to Effect Defeasance or Covenant Defeasance.. 72
SECTION 8.02. Defeasance and Discharge............................ 72
SECTION 8.03. Covenant Defeasance................................. 72
SECTION 8.04. Conditions to Defeasance or Covenant Defeasance..... 73
SECTION 8.05. Deposited Money and U.S. Government Obligations
to Be Held in Trust; Other Miscellaneous
Provisions.......................................... 75
SECTION 8.06. Reinstatement....................................... 75
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
ARTICLE NINE
<S> <C>
AMENDMENTS, SUPPLEMENTS AND WAIVERS................................... 76
SECTION 9.01. Without Consent of Holders.......................... 76
SECTION 9.02. With Consent of Holders............................. 77
SECTION 9.03. Compliance with TIA................................. 78
SECTION 9.04. Revocation and Effect of Consents................... 78
SECTION 9.05. Notation on or Exchange of Securities............... 79
SECTION 9.06. Trustee To Sign Amendments, etc..................... 79
ARTICLE TEN
[Intentionally Omitted.].............................................. 80
ARTICLE ELEVEN
[Intentionally Omitted.].............................................. 80
ARTICLE TWELVE
[Intentionally Omitted.].............................................. 80
ARTICLE THIRTEEN
MISCELLANEOUS......................................................... 80
SECTION 13.01. TIA Controls........................................ 80
SECTION 13.02. Notices............................................. 80
SECTION 13.03. Communications by Holders with Other Holders........ 81
SECTION 13.04. Certificate and Opinion as to Conditions Precedent.. 81
SECTION 13.05. Statements Required in Certificate or Opinion....... 82
SECTION 13.06. Rules by Trustee, Paying Agent, Registrar........... 82
SECTION 13.07. Legal Holidays...................................... 83
SECTION 13.08. Governing Law....................................... 83
SECTION 13.09. No Adverse Interpretation of Other Agreements....... 83
SECTION 13.10. No Recourse Against Others.......................... 83
SECTION 13.11. Successors.......................................... 83
SECTION 13.12. Duplicate Originals................................. 83
SECTION 13.13. Severability........................................ 84
SIGNATURES................................................................. 85
</TABLE>
iv
<PAGE>
<TABLE>
<CAPTION>
<S><C>
Exhibit A-1 - Form of Security
Exhibit A-2 - Form of Exchange Security
Exhibit B - Form of Legend for Global Security
Exhibit C - Transferee Certificate for Institutional
Accredited Investors Who Are Not QIBs
Exhibit D - Form of Letter for Transfers to Non-U.S. Persons
</TABLE>
This Table of Contents shall not, for any purpose, be deemed to be part of this
Indenture.
v
<PAGE>
This INDENTURE, dated as of August 6, 1998, among Globe Holdings,
Inc., a Massachusetts corporation (the "Issuer"), and Norwest Bank Minnesota,
National Association, a national banking association, as trustee (the
"Trustee").
Each party hereto agrees as follows for the benefit of the other
parties and for the equal and ratable benefit of the holders of the Issuer's 14%
Senior Discount Notes due 2009:
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
"Acceleration Notice" has the meaning provided in Section 6.02.
"Accounts Receivable Subsidiary" means any Subsidiary of the Issuer
that is, directly or indirectly, wholly owned by the Issuer (other than director
qualifying shares) and organized solely for the purpose of and engaged in (i)
purchasing, financing and collecting accounts receivable obligations of
customers of the Issuer or its Subsidiaries, (ii) the sale or financing of such
accounts receivable or interest therein and (iii) other activities incident
thereto.
"Accreted Value" means for each $1,000 face amount of Securities, as
of any date of determination prior to August 1, 2003, the sum of (i) the initial
offering price of each Security ($509.31) and (ii) that portion of the excess of
the principal amount at maturity of each Security over such initial offering
price which shall have been accreted thereon through such date, such amount to
be so accreted on a daily basis and compounded semi-annually on each August 1
and February 1 at the rate of 14% per anum from the date of issuance of the
Security through the date of determination.
"Acquired Debt" means, with respect to any specified Person, (i) Debt
of any other Person existing at the time such other Person is merged with or
into or became a Restricted Subsidiary of such specified Person, including,
without limitation, Debt incurred in connection with, or in contemplation of,
such other Person merging with or into or becoming a Restricted Subsidiary of
such specified Person, and (ii) Debt secured by a Lien encumbering any asset
acquired by such specified Person which, in each case, is not repaid at or
within five days following the date of such acquisition.
<PAGE>
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For 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, shall mean
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. Notwithstanding the
foregoing, no Person (other than the Issuer or any Subsidiary of the Issuer) in
whom a Securitization Entity makes an Investment in connection with a Qualified
Securitization Transaction shall be deemed to be an Affiliate of the Issuer or
any of its Subsidiaries solely by reason of such Investment.
"Agent" means any Registrar, Paying Agent or co-Registrar.
"Agent Members" has the meaning provided in Section 2.15.
"Applicable Premium" means, with respect to a Security at any
redemption date, the greater of (i) 1.0% of the Accreted Value of such Security
to the date of redemption and (ii) the excess of (A) the present value at such
time of the redemption price of such Security at August 1, 2003 (such redemption
price being set forth in the table set forth in Section 3.01) computed using a
discount rate equal to the Treasury Rate plus 50 basis points, over (b) the
Accreted Value of such Security as of the date of redemption.
"Asset Sale" means (i) the sale, lease (other than operating leases
entered into in the ordinary course of business), conveyance or other
disposition of any assets or rights (including, without limitation, by way of a
Sale and Lease-Back Transaction) other than in the ordinary course of business
(provided that the sale, lease, conveyance or other disposition of all or
substantially all of the assets of the Issuer and its Restricted Subsidiaries
taken as a whole will be governed by the provisions of Section 4.15 and/or the
provisions of Section 5.01 and not by the provisions of Section 4.16), and (ii)
the issue or sale by the Issuer or any of its Restricted Subsidiaries of Equity
Interests of any of the Issuer's Restricted Subsidiaries (to the extent such
Equity Interests are held by the Issuer or another Restricted Subsidiary of the
Issuer), in the case of either clause (i) or (ii), whether in a single
transaction or a series of related transactions that (x) have a fair market
value in excess of $1.0 million or (y) generate net proceeds in excess of $1.0
million. Notwithstanding the foregoing, the following shall not be deemed to
constitute Asset Sales: (i) sales of accounts receivable, equipment and related
assets (including contract rights) of the type specified in the definition of
"Qualified Securitization Transaction" to a Securitization Entity for the fair
market value thereof, including cash in an amount at least equal to 75% of the
fair market value thereof as determined in accordance with GAAP; (ii) transfers
of accounts receivable, equipment and related assets (including contract rights)
of the type specified in the definition of "Qualified Securitization
Transaction" (or a fractional undivided interest therein) by a Securitization
Entity in a Qualified
2
<PAGE>
Securitization Transaction (for the purposes of this clause (ii), Purchase Money
Notes shall be deemed to be cash); (iii) a transfer of assets by the Issuer to a
Restricted Subsidiary or by a Restricted Subsidiary to the Issuer or to another
Restricted Subsidiary; (iv) a disposition of inventory held for sale in the
ordinary course of business or obsolete, worn out or damaged property or
equipment in the ordinary course of business; (v) an issuance of Equity
Interests by a Restricted Subsidiary to the Issuer or to another Restricted
Subsidiary; (vi) a Restricted Payment or Permitted Investment that is permitted
by Section 4.10; (vii) the sale or discount, in each case without recourse, of
accounts receivable arising in the ordinary course of business, but only in
connection with the compromise or collection thereof; (viii) the grant in the
ordinary course of business of any non-exclusive license of patents, trademarks,
registrations therefor and other similar intellectual property; and (ix) sales
of accounts receivable for cash at fair market value, and any sale, conveyance
or transfer of accounts receivable in the ordinary course of business to an
Accounts Receivable Subsidiary or to third parties that are not Affiliates of
the Issuer or any Subsidiary of the Issuer.
"Asset Sale Offer" has the meaning provided in Section 4.16(c).
"Asset Sale Offer Date" has the meaning provided in Section 4.16(c).
"Asset Sale Offered Price" has the meaning provided in Section
4.16(c).
"Asset Sale Pari Passu Offer" has the meaning provided in Section
4.16(c).
"Attributable Debt" in respect of a Sale and Lease-Back Transaction
means, at the time of determination, the present value (discounted at the rate
of interest implicit in such transaction, determined in accordance with GAAP) of
the obligation of the lessee for net rental payments during the remaining term
of the lease included in such Sale and Lease-Back Transaction (including any
period for which such lease has been extended or may, at the option of the
lessor, be extended).
"Authenticating Agent" has the meaning provided in Section 2.02.
"Authorized Officer" means, with respect to any Person (other than any
Agent), each of the Chairman of the Board, the Chief Executive Officer, the
President, the Chief Financial Officer, any Vice President, the Treasurer, the
Secretary or Clerk or any Assistant Secretary or Assistant Clerk of such Person,
or any other officer designated as an Authorized Officer by the Board of
Directors (or similar governing body of such Person) in a writing delivered to
the Trustee, or with respect to a Person (other than any Agent) organized as a
partnership, limited liability partnership or limited liability limited
partnership, the general partner or managing member of such Person, as the case
may be.
3
<PAGE>
"Bankruptcy Law" means Title 11, United States Bankruptcy Code of
1978, as amended, or any similar United States federal, state or foreign law
relating to bankruptcy, insolvency, receivership, winding up, liquidation,
reorganization or relief of debtors, or any amendment to, succession to or
change in any such law.
"Board of Directors" means the board of directors, advisory committee,
management committee or similar governing body or any authorized committee
thereof responsible for the management of the business and affairs of any
Person.
"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 Issuer or a Restricted Subsidiary of the Issuer, as appropriate, and to be
in full force and effect, and delivered to the Trustee.
"Business Day" means a day that is not a Legal Holiday.
"Capital Lease Obligation" means, at the time any determination
thereof is to be made, the amount of the liability in respect of a capital lease
that would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate
stock, (ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership or limited
liability company, partnership or membership interests (whether general or
limited) and (iv) any other interest or participation that confers on a Person
the right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"Cash Equivalents" means (i) United States dollars, (ii) securities
issued or directly and fully guaranteed or insured by the United States
government or any agency or instrumentality thereof having maturities of not
more than one year from the date of acquisition, (iii) certificates of deposit
and Eurodollar time deposits with maturities of one year or less from the date
of acquisition, bankers' acceptances with maturities not exceeding one year and
overnight bank deposits, in each case with any lender party to the Senior Credit
Facility or with any domestic commercial bank having capital and surplus in
excess of $500.0 million and a Keefe Bank Watch Rating of "B" or better, (iv)
repurchase obligations with a term of not more than seven days for underlying
securities of the types described in clauses (ii) and (iii) above entered into
with any financial institution meeting the qualifications specified in clause
(iii) above, (v) commercial paper having the highest rating obtainable from
Moody's Investors Service, Inc. or Standard & Poor's Corporation and in each
case maturing within one year after the date of acquisition, (vi) marketable
direct obligations issued by any state of the United States or any political
subdivision, or public instrumentality of such state,
4
<PAGE>
in each case having maturities of not more than one year from the date of
acquisition and, at the time of acquisition thereof, having one of the two
highest ratings obtainable from either Moody's Investors Service, Inc. or
Standard & Poor's Corporation, and (vii) money market, mutual or similar funds
which invest substantially all of their assets in securities of the type
described in clauses (i) through (vi) above.
"Certificated Securities" has the meaning provided in Section 2.01.
"Change of Control" means the occurrence of any of the following: (i)
the sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Issuer and its Subsidiaries taken as a
whole to any "person" (as such term is used in Section 13(d)(3) of the Exchange
Act), or group of related persons, together with any Affiliates thereof (other
than Permitted Holders); (ii) the adoption by the Issuer of a plan relating to
the liquidation or dissolution of the Issuer; (iii) the first day on which a
majority of the members of the Board of Directors of the Issuer are not
Continuing Directors; or (iv) the consummation of any transaction (including,
without limitation, any merger or consolidation) the result of which is that any
"person" (as defined above) or group of related persons, together with any
Affiliates thereof (other than Permitted Holders) becomes the "beneficial owner"
(as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act),
directly or indirectly, of more than 50% (measured by voting power rather than
number of shares) of the Voting Stock of the Issuer.
"Change of Control Date" has the meaning provided in Section 4.15.
"Change of Control Offer" has the meaning provided in Section 4.15.
"Change of Control Payment" has the meaning provided in Section 4.15.
"Change of Control Payment Date" has the meaning provided in Section
4.15.
"Consolidated Cash Flow" means, with respect to any Person for any
period, the Consolidated Net Income of such Person for such period plus, without
duplication, (i) an amount equal to any extraordinary loss plus any net loss
realized in connection with an Asset Sale (to the extent such losses were
deducted in computing such Consolidated Net Income and without regard to the
$1.0 million threshold in the definition thereof), plus (ii) provision for taxes
based on income or profits of such Person and its Subsidiaries for such period,
to the extent that such provision for taxes was included in computing such
Consolidated Net Income, plus (iii) consolidated interest expense of such Person
and its Restricted Subsidiaries for such period (including, without limitation,
amortization of debt issuance costs and original issue discount, non-cash
interest payments, the interest component of any deferred payment obligations,
the interest component of all payments
5
<PAGE>
associated with Capital Lease Obligations, imputed interest with respect to
Attributable Debt, commissions, discounts and other fees and charges incurred in
respect of letter of credit or bankers' acceptance financings, and net payments
(if any) pursuant to Hedging Obligations) to the extent that any such expense
was deducted in computing such Consolidated Net Income, plus (iv) the
consolidated net interest expense of such Person and its Restricted Subsidiaries
that was capitalized during such period to the extent that any such expense was
deducted in computing such Consolidated Net Income, plus (v) depreciation,
amortization (including amortization of goodwill and other intangibles) and
other non-cash expenses (excluding any such non-cash expense to the extent that
it represents an accrual of or reserve for cash expenses in any future period or
amortization of a prepaid cash expense that was paid in a prior period) of such
Person and its Restricted Subsidiaries for such period to the extent that such
depreciation, amortization and other non-cash expenses were deducted in
computing such Consolidated Net Income, minus (vi) other non-recurring non-cash
items increasing such Consolidated Net Income for such period (which will be
added back to Consolidated Cash Flow in any subsequent period to the extent cash
is received in respect of such item in such subsequent period), in each case, on
a consolidated basis and determined in accordance with GAAP. Notwithstanding the
foregoing, "Consolidated Cash Flow" shall be calculated without giving effect to
amortization or depreciation of any amounts required or permitted by Accounting
Principles Board Opinion Nos. 16 (including non-cash write-ups and non-cash
charges relating to inventory and fixed assets, in each case arising in
connection with any acquisition permitted under this Indenture) and 17
(including non-cash charges relating to intangibles and goodwill arising in
connection with any such acquisition).
"Consolidated Fixed Charge Coverage Ratio" means with respect to any
Person for any period, the ratio of the Consolidated Cash Flow of such Person
for such period to the Consolidated Fixed Charges of such Person for such
period. In the event that the Issuer or any of its Restricted Subsidiaries
incurs, assumes, guarantees, repays or redeems any Debt (other than revolving
credit borrowings) or issues or redeems preferred stock subsequent to the
commencement of the period for which the Consolidated Fixed Charge Coverage
Ratio is being calculated but prior to the date on which the event for which the
calculation of the Consolidated Fixed Charge Coverage Ratio is made (the
"Calculation Date"), then the Consolidated Fixed Charge Coverage Ratio shall be
calculated giving pro forma effect to such incurrence, assumption, guarantee,
repayment or redemption of Debt, or such issuance or redemption of preferred
stock, as if the same had occurred at the beginning of the applicable four-
quarter reference period. In addition, for purposes of making the computation
referred to above, (i) acquisitions or Asset Sales that have been made by the
Issuer or any of its Restricted Subsidiaries, including through mergers or
consolidations and including any related financing transactions, during the
four-quarter reference period or subsequent to such reference period and on or
prior to the Calculation Date shall be deemed to have occurred on the first day
of the four-quarter reference period and Consolidated Cash Flow for such
reference period shall be calculated without giving effect to clause (iii) of
the proviso set forth in the definition of Consolidated Net Income, and (ii) the
Consolidated Cash Flow attributable to discontinued
6
<PAGE>
operations, as determined in accordance with GAAP, and operations or businesses
disposed of prior to the Calculation Date, shall be excluded, and (iii) the
Consolidated Fixed Charges attributable to discontinued operations, as
determined in accordance with GAAP, and operations or businesses disposed of
prior to the Calculation Date, shall be excluded, but only to the extent that
the obligations giving rise to such Consolidated Fixed Charges will not be
obligations of the referent Person or any of its Restricted Subsidiaries
following the Calculation Date. In calculating "Consolidated Fixed Charges" for
purposes of determining the denominator (but not the numerator) of this
"Consolidated Fixed Charge Coverage Ratio," (i) interest on Debt determined on a
fluctuating basis as of the Calculation Date and which will continue to be so
determined thereafter shall be deemed to have accrued at a fixed rate per annum
equal to the rate of interest on such Debt in effect on the Calculation Date,
(ii) if interest on any Debt actually incurred on the Calculation Date may be
optionally determined at an interest rate based upon a factor of a prime or
similar rate, a eurocurrency interbank offered rate or other rates, then the
interest rate in effect on the Calculation Date will be deemed to have been in
effect during the relevant four-quarter period reference, and (iii)
notwithstanding the foregoing, interest on Debt determined on a fluctuating
basis, to the extent such interest is covered by agreements relating to Interest
Swap Obligations, shall be deemed to accrue at the rate per annum resulting
after giving effect to the operation of such agreements.
"Consolidated Fixed Charges" means, with respect to any Person for any
period, the sum, without duplication, of (i) the consolidated interest expense
of such Person and its Restricted Subsidiaries for such period, whether paid or
accrued (including, without limitation, amortization of debt issuance costs
(other than those debt issuance costs incurred on the Issue Date in connection
with the Transactions) and original issue discount, non-cash interest payments,
the interest component of any deferred payment obligations, the interest
component of all payments associated with Capital Lease Obligations, imputed
interest with respect to Attributable Debt, commissions, discounts and other
fees and charges incurred in respect of letter of credit or bankers' acceptance
financings, and net payments (if any) pursuant to Hedging Obligations), and (ii)
the consolidated interest expense of such Person and its Restricted Subsidiaries
that was capitalized during such period, and (iii) any interest expense on Debt
of another Person that is guaranteed by such Person or one of its Restricted
Subsidiaries or secured by a Lien on assets of such Person or one of its
Subsidiaries (whether or not such guarantee or Lien is called upon), and (iv)
all dividend payments, whether or not in cash, on any series of preferred stock
of such Person or any of its Restricted Subsidiaries (other than dividend
payments on Equity Interests payable solely in Equity Interests (other than
Disqualified Stock) of the Issuer) paid or accrued during such period.
"Consolidated Net Income" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided that (i) the Net Income (but not loss) of any Person that is
not a Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid
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in cash to the referent Person or a Wholly Owned Restricted Subsidiary thereof,
(ii) the Net Income of any Restricted Subsidiary shall be excluded to the extent
that the declaration or payment of dividends or similar distributions by that
Restricted Subsidiary of that Net Income is not at the date of determination
permitted without any prior governmental approval (that has not been obtained)
or, directly or indirectly, by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Restricted Subsidiary or its shareholders,
provided that such Net Income shall not be so excluded in calculating
Consolidated Net Income (A) as a component of Consolidated Cash Flow for
purposes of calculating the Consolidated Fixed Charge Coverage Ratio in
determining whether (1) a Restricted Subsidiary can incur additional Debt or
issue preferred stock pursuant to the Consolidated Fixed Charge Coverage Ratio
test set forth in Section 4.12(a) or (2) the Issuer can incur $1.00 of
additional Debt pursuant to the Consolidated Fixed Charge Coverage Ratio test
set forth in Section 4.12(a) for purposes of (x) clause (ii) of Section 4.10(a),
(y) clause (iv) of Section 5.01 or (z) the definition of "Unrestricted
Subsidiary" or (B) for purposes of clause (iii) of Section 4.10(a) in
determining whether a Restricted Subsidiary may make a Restricted Investment,
(iii) the Net Income (or loss) of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition shall be
excluded, (iv) the cumulative effect of a change in accounting principles
adopted after the Issue Date shall be excluded, (v) any restoration to Net
Income of any contingency reserve of an extraordinary, nonrecurring or unusual
nature, except to the extent that provision for such reserve was made out of
Consolidated Net Income accrued at any time following the Issue Date, shall be
excluded, (vi) in the case of a successor to the referent Person by
consolidation or merger or as a transferee of the referent Person's assets, any
earnings of the successor corporation prior to such consolidation, merger or
transfer of assets shall be excluded, (vii) non-cash compensation charges
arising upon the issuance or exercise of employee stock options or Capital Stock
(other than Disqualified Stock) shall be excluded and (viii) all extraordinary
gains and extraordinary losses and any unusual or non-recurring charges recorded
or accrued in connection with the Transactions (as defined in the Final Offering
Memorandum) shall be excluded.
"Consolidated Net Worth" means, with respect to any Person as of any
date, the sum of (i) the consolidated equity of the ordinary shareholders of
such Person and its consolidated Subsidiaries as of such date and (ii) the
respective amounts reported on such Person's balance sheet as of such date with
respect to any series of preferred stock (other than Disqualified Stock) that by
its terms is not entitled to the payment of dividends unless such dividends may
be declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by such
Person upon issuance of such preferred stock, less (A) all write-ups (other than
write-ups resulting from foreign currency translations and write-ups of tangible
assets of a going concern business made within 12 months after the acquisition
of such business) subsequent to the date of this Indenture in the book value of
any asset owned by such Person or a consolidated Subsidiary of such Person, (B)
all investments as of such date in unconsolidated Subsidiaries and in Persons
that are not Subsidiaries (except, in each case, Permitted Investments)
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and (C) all unamortized debt discount and expense and unamortized deferred
charges as of such date, all of the foregoing determined in accordance with
GAAP.
"Consulting Agreement" means the Consulting Agreement between Globe
Manufacturing and Thomas Rodgers, Jr. as in effect on the date of this Indenture
or as thereafter amended in a manner that is not adverse to the Issuer or the
Holders of the Securities.
"Continuing Director" means, as of any date of determination, any
member of the Board of Directors of the Issuer who (i) was a member of such
Board of Directors on the date of this Indenture, (ii) was nominated for
election or elected to such Board of Directors with the approval of a majority
of the Continuing Directors who were members of such Board at the time of such
nomination or election or (iii) was nominated for election or elected to such
Board of Directors by or with the approval of the Permitted Holders.
"Credit Facilities" means, with respect to the Issuer or any
Subsidiary, one or more debt facilities (including, without limitation, the
Senior Credit Facility) or commercial paper facilities with banks or other
lenders providing for revolving credit loans, term loans, receivables financing
(including through the sale of receivables to such lenders or to special purpose
entities formed to borrow from such lenders against such receivables), bankers
acceptance or letters of credit, in each case, as amended, restated, modified,
renewed, refunded, replaced or refinanced in whole or in part from time to time.
Debt under Credit Facilities outstanding on the date on which Securities are
first issued and authenticated under this Indenture shall be deemed to have been
incurred on such date in reliance on the exception provided by clause (i) of the
definition of Permitted Debt.
"Currency Agreement" means any foreign exchange contract, currency
swap agreement or other similar agreement or arrangement designed to protect the
Issuer or any Restricted Subsidiary of the Issuer against fluctuations in
currency values.
"Custodian" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.
"Debt" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of the
purchase price of any property or representing any Hedging Obligations, except
any such balance that constitutes an accrued expense or trade payable, if and to
the extent any of the foregoing indebtedness (other than letters of credit and
Hedging Obligations) would appear as a liability upon a balance sheet of such
Person prepared in accordance with GAAP, as well as all Debt of others
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secured by a Lien on any asset of such Person (whether or not such Debt is
assumed by such Person) and, to the extent not otherwise included, the guarantee
by such Person of any Debt of any other Person (but excluding, with respect to
Debt of a Securitization Entity, any Standard Securitization Undertakings that
might be deemed to constitute guarantees). The amount of any Debt outstanding as
of any date shall be (i) the accrued or accreted value thereof, in the case of
any Debt that does not require current payments of interest, and (ii) the
principal amount thereof, together with any interest thereon that is more than
30 days past due, in the case of any other Debt. For purposes of calculating the
amount of Debt of a Securitization Entity outstanding as of any date, the face
or notional amount of any interest in receivables or equipment that is
outstanding as of such date shall be deemed to be Debt but any such interests
held by Affiliates of such Securitization Entity shall be excluded for purposes
of such calculation.
"Default" means any event that is or with the passage of time or the
giving of notice or both would be an Event of Default.
"Depositary" means, with respect to the Securities issued in the form
of one or more Global Securities, The Depository Trust Company or another Person
designated as Depositary by the Issuer, which must be a clearing agency
registered under the Exchange Act.
"Disqualified Stock" means any Capital Stock that, by its terms (or by
the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the holder thereof, in whole or in part, on or prior to the first
anniversary of the Stated Maturity of the Securities; provided, however, that
any Capital Stock that would constitute Disqualified Stock solely because the
holders thereof have the right to require the Issuer to repurchase such Capital
Stock upon the occurrence of a Change of Control or an Asset Sale shall not
constitute Disqualified Stock if the terms of such Capital Stock provide that
the Issuer may not repurchase or redeem any such Capital Stock pursuant to such
provisions unless such repurchase or redemption complies with Section 4.10.
"Employee Notes" has the meaning provided in Section 4.12.
"Equity Interests" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Equity Offering" means a bona fide underwritten sale to the public of
Equity Interests (other than Disqualified Stock) of the Issuer pursuant to a
registration statement (other than on Form S-8 or any other form relating to
securities issuable under any benefit plan of the Issuer) that is declared
effective by the Commission.
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"Executive Securities Agreement" means each of the Executive
Securities Agreements between the Issuer and the other signatory thereto as in
effect on the date of this Indenture or as thereafter amended in a manner that
is not adverse to the Holders of the Securities in any material respect.
"Existing Debt" means up to $500,000 in aggregate principal amount of
Debt of the Issuer and its Restricted Subsidiaries (other than Debt under the
Senior Credit Facility or Debt evidenced by the Senior Subordinated Notes) in
existence on the date of this Indenture, until such amounts are repaid.
"Event of Default" has the meaning provided in Section 6.01.
"Excess Proceeds" has the meaning provided in Section 4.16(b).
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated by the SEC thereunder.
"Exchange Securities" means the 14% Senior Discount Notes due 2009 of
the Issuer to be issued in exchange for the Initial Securities pursuant to the
Registration Rights Agreement or, with respect to Initial Securities issued
under this Indenture subsequent to the Issue Date pursuant to Section 2.02 and
Section 4.12, a registration rights agreement substantially similar to the
Registration Rights Agreement.
"Final Offering Memorandum" means the Offering Memorandum dated July
30, 1998, relating to the offering of the Securities on the Issue Date.
"Foreign Subsidiary" means any Subsidiary not organized or validly
existing under the laws of the United States or any state thereof or the
District of Columbia.
"Foreign Restricted Subsidiary" means any Foreign Subsidiary that is a
Restricted Subsidiary.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the Issue Date.
"Global Security" means a security evidencing all or a part of the
Securities issued to the Depositary in accordance with Section 2.01 and bearing
the legend prescribed in Exhibit B.
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"Globe Manufacturing" means Globe Manufacturing Corp., an Alabama
corporation, and its successors and assigns
"guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any Debt.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under Interest Swap Agreements and Currency
Agreements.
"Holder" or "Securityholder" means the Person in whose name a Security
is registered on the Registrar's books.
"IAI Securities" means Securities resold by the Initial Purchaser to
an Institutional Accredited Investor.
"Indenture" means this Indenture, as amended or supplemented from time
to time in accordance with the terms hereof.
"Initial Purchaser" means BancAmerica Robertson Stephens.
"Initial Securities" means the 14% Senior Discount Notes due 2009 of
the Issuer issued on the Issue Date.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or (7)
under the Securities Act.
"interest" means interest payable on the Securities under this
Indenture and interest payable under the Registration Rights Agreement.
"Interest Payment Date" means the Stated Maturity of an installment of
interest on the Securities.
"Interest Swap Agreements" means any interest rate swap agreement,
interest rate cap agreement, interest rate floor agreement, interest rate collar
agreement, treasury rate-lock agreement or other similar agreement or
arrangement designed to protect the Issuer or any Restricted Subsidiary of the
Issuer from fluctuations in interest rates.
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"Interest Swap Obligations" means the obligations of any Person
pursuant to any Interest Swap Agreement with any other Person.
"Investments" means, with respect to any Person, all investments by
such Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Debt or other obligations), advances or
capital contributions (excluding commission, travel and similar advances to
officers and employees and extensions of trade credit made in the ordinary
course of business), purchases or other acquisitions for consideration of Debt,
Equity Interests or other securities, together with all items that are or would
be classified as investments on a balance sheet prepared in accordance with
GAAP.
"Issue Date" means August 6, 1998, the date of original issuance of
the Securities.
"Issuer" has the meaning provided in the preamble.
"Legal Holiday" has the meaning provided in Section 13.07.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"Limited Originator Recourse" means a reimbursement obligation of the
Issuer or a Restricted Subsidiary in connection with a drawing on a letter of
credit, revolving loan commitment, cash collateral account or other such credit
enhancement issue to support Debt of a Securitization Entity under a facility
for the financing of trade receivables and the warehousing of equipment loans
and leases; provided that the available amount of any such form of credit
enhancement at any time shall not exceed 10.0% of the principal amount of such
Debt at such time.
"Management Agreement" means the Management Agreement between Globe
Manufacturing and CHS Management III, L.P., dated as of July 31, 1998, as in
effect on the date of this Indenture or as thereafter amended in a manner that
is not adverse to the Issuer or the Holders of the Securities.
"Maturity Date" means August 1, 2009.
"Net Income" means, with respect to any Person, the net income (loss)
of such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock
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dividends, excluding, however, (i) any gain (but not loss), together with any
related provision for taxes on such gain (but not loss), realized in connection
with (a) any Asset Sale (including, without limitation, dispositions pursuant to
Sale and Lease-Back Transactions) or (b) the disposition of any securities by
such Person or any of its Restricted Subsidiaries or the extinguishment of any
Debt of such Person or any of its Restricted Subsidiaries and (ii) any
extraordinary or nonrecurring gain (but not loss), together with any related
provision for taxes on such extraordinary or nonrecurring gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by the
Issuer or any of its Restricted Subsidiaries in respect of any Asset Sale
(including, without limitation, any cash and Cash Equivalents received upon the
sale or other disposition of any non-cash consideration received in any Asset
Sale), net of (i) the direct costs relating to such Asset Sale (including,
without limitation, legal, accounting and investment banking fees, and sales
commissions) and any relocation expenses incurred as a result thereof, (ii)
taxes paid or payable as a result thereof (after taking into account any
available tax credits or deductions and any tax sharing arrangements), (iii) any
reserve for adjustment in respect of the sale price of such asset or assets
established in accordance with GAAP, or against any liabilities associated with
the Asset Sale, or the assets subject thereto, and retained by the Issuer or any
Restricted Subsidiary, and (iv) amounts required to be applied to the repayment
of Debt secured by a Lien on the asset or assets that were the subject of such
Asset Sale, or to the satisfaction of contractual obligations either existing at
the date of this Indenture, or entered into after the date of this Indenture in
connection with the payment of deferred purchase price of the properties or
assets that were the subject of such Asset Sale.
"Non-Recourse Debt" means Debt (i) as to which neither the Issuer nor
any of its Restricted Subsidiaries (A) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute Debt),
(B) is directly or indirectly liable (as guarantor or otherwise) or (C)
constitutes the lender and (ii) no default with respect to which (including any
rights that the holders thereof may have to take enforcement action against an
Unrestricted Subsidiary) would permit (upon notice, lapse of time or both) any
holder of any other Debt (other than the Securities being offered hereby) of the
Issuer or any of its Restricted Subsidiaries to declare a default on such other
Debt or cause the payment thereof to be accelerated or payable prior to its
Stated Maturity.
"Non-U.S. Person" means a Person who is not a "U.S. Person."
"Obligations" means any principal, premium, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Debt.
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"Officers' Certificate" means with respect to any Person, a
certificate signed by the Chairman, Vice Chairman, Chief Executive Officer, the
President or any Vice President and the Chief Financial Officer, Controller or
the Treasurer of such Person that shall comply with applicable provisions of
this Indenture.
"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee complying with the requirements of Section
13.05, as they relate to the giving of an Opinion of Counsel.
"Pari Passu Debt" shall mean any Debt of the Issuer that is pari passu
in right of payment to the Securities.
"Pari Passu Debt Amount" shall have the definition set forth under
Section 4.16(c).
"Paying Agent" has the meaning provided in Section 2.03, except that,
during the continuance of a Default or Event of Default and for the purposes of
Articles Three and Eight and Sections 4.15 and 4.16, the Paying Agent shall not
be the Issuer or any Affiliate of the Issuer.
"Payment Blockage Notice" has the meaning provided in Section
10.02(a).
"Payment Blockage Period" means a period commencing on the date of
receipt by the Trustee of a Payment Blockage Notice and ending on the earliest
of the dates referred to in clauses (1), (2), (3) or (4) of clause (B) of the
second sentence of Section 10.02(a).
"Payment Default" has the meaning provided in Section 6.01.
"Permitted Debt" has the meaning provided in Section 4.12(b).
"Permitted Holders" means (i) Code, Hennessy & Simmons, Inc., (ii)
Code Hennessy & Simmons LLC, (iii) Code, Hennessy & Simmons III, L.P. and (iv)
their respective affiliates.
"Permitted Investments" means: (i) any Investment in the Issuer or in
a Restricted Subsidiary of the Issuer that is engaged in the same or a similar
line of business as the Issuer and its Restricted Subsidiaries (or reasonable
extensions or expansions thereof); (ii) any Investment in Cash Equivalents;
(iii) any Investment by the Issuer or any Restricted Subsidiary of the Issuer in
a Person, if as a result of such Investment (A) such Person becomes a Restricted
Subsidiary of the Issuer that is engaged in the same or a similar line of
business as the Issuer and its Restricted Subsidiaries (or reasonable extensions
or expansions thereof) or (B) such Person is merged, consolidated or
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amalgamated with or into, or transfers or conveys substantially all of its
assets to, or is liquidated into, the Issuer or a Restricted Subsidiary of the
Issuer that is engaged in the same or a similar line of business as the Issuer
and its Restricted Subsidiaries (or reasonable extensions or expansions
thereof); (iv) any Investment made as a result of the receipt of non-cash
consideration from an Asset Sale that was made pursuant to and in compliance
with Section 4.16; (v) any acquisition of assets solely in exchange for the
issuance of Equity Interests (other than Disqualified Stock) of the Issuer; (vi)
Investments made in exchange for accounts receivable arising in the ordinary
course of business which have not been collected for 180 days and which are, in
the good faith of the Issuer, substantially uncollectible; provided that any
such Investments in excess of $500,000 shall be approved by the Board of
Directors (evidenced by a Board Resolution set forth in an Officers' Certificate
delivered to the Trustee); (vii) loans and advances to employees of the Issuer
and its Restricted Subsidiaries in the ordinary course of business for bona fide
business purposes not to exceed $1.0 million in the aggregate at any one time
outstanding; (viii) Investments in Permitted Joint Ventures and Investments in
suppliers to the Issuer and its Restricted Subsidiaries in an aggregate amount
when taken together with all other Investments pursuant to this clause (viii)
does not exceed the greater of $10.0 million or 10% of Total Assets at any one
time outstanding; (ix) Hedging Obligations entered into in the ordinary course
of business and otherwise in compliance with this Indenture; (x) other
Investments in any Person having an aggregate fair market value (measured on the
date each such Investment was made and without giving effect to subsequent
changes in value), when taken together with all other Investments made pursuant
to this clause (x) that are at the time outstanding, not to exceed $10.0
million; (xi) Investments in securities of trade creditors or customers received
pursuant to any plan of reorganization or similar arrangement upon the
bankruptcy or insolvency of such trade creditors or customers; (xii) guarantees
by the Issuer or any Restricted Subsidiary of Debt otherwise permitted to be
incurred under this Indenture; (xiii) any Investment by the Issuer or a Wholly
Owned Subsidiary of the Issuer in a Securitization Entity or any Investment by a
Securitization Entity in any other Person in connection with a Qualified
Securitization Transaction; provided that any Investment in a Securitization
Entity is in the form of a Purchase Money Note or an Equity Interest; and (xiv)
Investments received by the Issuer or its Restricted Subsidiaries as
consideration for asset sales, including Asset Sales; provided that in the case
of an Asset Sale, such Asset Sale is effected in compliance with Section 4.16;
and (xv) Investments by Foreign Subsidiaries of the Issuer in currencies of
countries in which such subsidiaries conduct business, provided that such
currencies are freely convertible into United States dollars. For purposes of
calculating the aggregate amount of Permitted Investments permitted to be
outstanding at any one time pursuant to clauses (viii) and (x) of the preceding
sentence, (i) to the extent the consideration for any such Investment consists
of Equity Interests (other than Disqualified Stock) of the Issuer, the value of
the Equity Interests so issued will be ignored in determining the amount of such
Investment and (ii) the aggregate amount of such Investments made by the Issuer
and its Restricted Subsidiaries on or after the date of this Indenture will be
decreased (but not below zero) by an amount equal to the lesser of (A) the cash
return of capital to the Issuer or a Restricted Subsidiary with respect to such
Investment that is sold for cash or otherwise liquidated or repaid for
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cash (less the cost of disposition, including applicable taxes, if any) and (B)
the initial amount of such Investment.
"Permitted Joint Venture" means any Person which is, directly or
indirectly through its Subsidiaries or otherwise, engaged principally in the
principal business of the Issuer, or a reasonably related business, and the
Capital Stock of which is owned by the Issuer and one or more Persons other than
the Issuer or any Affiliate of the Issuer.
"Permitted Liens" means (i) Liens to secure obligations in respect of
workers compensation, unemployment, social security, statutory obligations,
surety or appeal bonds or other obligations of a like nature incurred in the
ordinary course of business, (ii) Liens for taxes, assessments or governmental
charges or claims that are not yet delinquent or that are being contested in
good faith by appropriate proceedings promptly instituted and diligently
conducted, (iii) Liens in favor of the Issuer, (iv) carriers', warehousemen's,
mechanics', landlords', materialmen's, repairmen's or other like Liens arising
in the ordinary course of business in respect of obligations not overdue for a
period in excess of 30 days or which are being contested in good faith by
appropriate proceedings promptly instituted and diligently prosecuted; provided
that any reserve or other appropriate provision as shall be required to conform
with GAAP shall have been made therefor, (v) Liens securing the Senior Credit
Facility, (vi) Liens on property of a Person existing at the time such Person is
merged into or consolidated with the Issuer; provided that such Liens were in
existence prior to the contemplation of such merger or consolidation and do not
extend to any assets other than those of the Person merged into or consolidated
with the Issuer, (vii) Liens on property existing at the time of acquisition
thereof by the Issuer; provided that such liens were in existence prior to the
contemplation of such acquisition, (viii) purchase money Liens to finance
property or assets of the Issuer acquired in the ordinary course of business;
provided, however, that (A) the related Purchase Money Obligations shall not
exceed the cost of such property or assets and shall not be secured by any
property or assets of the Issuer other than the property or assets so acquired
and (B) the Lien securing such Debt shall be created within 90 days of such
acquisition, (ix) Liens existing on the date of this Indenture, (x) judgment
Liens not giving rise to an Event of Default, (xi) easements, rights-of-way,
zoning and similar restrictions and other similar encumbrances or title defects
incurred or imposed, as applicable, in the ordinary course of business and
consistent with industry practices which, in the aggregate, are not substantial
in amount, and which do not in any case materially detract from the value of the
property subject thereto (as such property is used by the Issuer) or interfere
with the ordinary conduct of business of the Issuer; provided, however, that any
such Liens are not incurred in connection with any borrowing of money or
commitment to loan any money to or to extend any credit, (xii) Liens on assets
transferred to a Securitization Entity or on assets of a Securitization Entity,
in either case incurred in connection with a Qualified Securitization
Transaction, (xiii) Liens incurred in the ordinary course of business of the
Issuer with respect to obligations that do not exceed $5.0 million at any one
time outstanding and that (A) are not incurred in connection with the borrowing
of money or the obtaining of advances or credit (other than trade
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credit in the ordinary course of business) and (B) do not in the aggregate
materially detract from the value of property or materially impair the use
thereof in the operation of business by the Issuer, (xiv) any interest or title
of a lessor under any Capital Lease Obligation, (xv) Liens upon specific items
of inventory or other goods and proceeds of any Person securing such Person's
obligations in respect of bankers' acceptances issued or created for the account
of such Person to facilitate the purchase, shipment or storage of such inventory
or other goods, (xvi) Liens securing reimbursement obligations with respect to
commercial letters of credit which encumber documents and other property
relating to such letters of credit and products and proceeds thereof, (xvii)
Liens encumbering deposits made to secure obligations arising from statutory,
regulatory, contractual or warranty requirements of the Issuer, including rights
of offset and set-off, (xviii) Liens securing Hedging Obligations, (xix) leases
or subleases granted to others that do not materially interfere with the
ordinary course of business of the Issuer, (xx) Liens arising from filing
Uniform Commercial Code financing statements regarding operating leases entered
into in the ordinary course of business and (xxi) Liens in favor of customs and
revenue authorities arising as a matter of law to secure payments of customer
duties in connection with the importation of goods.
"Permitted Refinancing Debt" means any Debt of the Issuer or any of
its Restricted Subsidiaries or any Disqualified Stock issued in exchange for, or
the net proceeds of which are used to extend, refinance, renew, replace, defease
or refund other Debt of the Issuer or any of its Restricted Subsidiaries;
provided that: (i) the principal amount (or accrued value, if applicable) of
such Permitted Refinancing Debt does not exceed the principal amount of (or
accrued value, if applicable), plus accrued interest on, the Debt so extended,
refinanced, renewed, replaced, defeased or refunded (plus the amount of
reasonable fees and expenses incurred in connection therewith); (ii) such
Permitted Refinancing Debt has a final maturity date later than the final
maturity date of, and has a Weighted Average Life to Maturity equal to or
greater than the Weighted Average Life to Maturity of, the Debt being extended,
refinanced, renewed, replaced, defeased or refunded; (iii) if the Debt being
extended, refinanced, renewed, replaced, defeased or refunded is subordinated in
right of payment to the Securities, such Permitted Refinancing Debt has a final
maturity date later than the final maturity date of, and is subordinated in
right of payment to the Securities on terms at least as favorable to the Holders
of Securities, as applicable, as those contained in the documentation governing
the Debt being extended, refinanced, renewed, replaced, defeased or refunded;
and (iv) such Debt is incurred either by the Issuer or by the Restricted
Subsidiary who is the obligor on the Debt being extended, refinanced, renewed,
replaced, defeased or refunded or is Disqualified Stock.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, limited liability company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
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"Preferred Stock" of any Person means any Equity Interest of such
Person that has preferential rights to any other Equity Interest of such Person
with respect to dividends or redemptions or upon liquidation.
"principal" of any Debt (including the Securities) means the principal
amount of such Debt plus the premium, if any, on such Debt.
"Private Exchange Securities" shall have the meaning provided in the
Registration Rights Agreement.
"Private Placement Legend" means the legend initially set forth on the
Securities in the form set forth in Exhibit A-1.
"pro forma" means, with respect to any calculation made or required to
be made pursuant to the terms of this Indenture, a calculation in accordance
with Article 11 of Regulation S-X under the Securities Act, as in effect on the
Issue Date.
"Purchase Money Notes" means a promissory note of a Securitization
Entity evidencing a line of credit, which may be irrevocable, from the Issuer or
any Subsidiary of the Issuer in connection with a Qualified Securitization
Transaction to a Securitization Entity which note shall be repaid from cash
available to the Securitization Entity, other than amounts required to be
established as reserves pursuant to agreements, amounts paid to investors in
respect of interest, principal and other amounts owing to such investors and
amounts paid in connection with the purchase of newly generated receivables or
newly acquired equipment.
"Purchase Money Obligations" of a Person means Debt of such Person
incurred in connection with the purchase, construction or improvement of
property, plant or equipment used in the business of such Person (whether
through the direct purchase of the assets or the Equity Interests of any Person
owning such assets).
"Qualified Institutional Buyer" or "QIB" shall have the meaning
specified in Rule 144A under the Securities Act.
"Qualified Securitization Transaction" means any transaction or series
of transactions pursuant to which the Issuer or any of its Restricted
Subsidiaries may sell, convey or otherwise transfer to (i) a Securitization
Entity (in the case of a transfer by the Issuer or any of its Restricted
Subsidiaries) and (ii) any other Person (in the case of a transfer by a
Securitization Entity), or may grant a security interest in, any receivables or
equipment loans (whether now existing or arising or acquired in the future) of
the Issuer or any of its Restricted Subsidiaries, and any assets related thereto
including, without limitation, all collateral securing such receivables and
equipment
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loans, all contracts and contract rights and all guarantees or other obligations
in respect of such receivables and equipment loans, proceeds of such receivables
and equipment loans and other assets (including contract rights) which are
customarily transferred or in respect of which security interests are
customarily granted in connection with asset securitization transaction
involving receivables and equipment (collectively, "transferred assets");
provided that in the case of any such transfer by the Issuer or any of its
Restricted Subsidiaries, the transferor receives cash or Purchase Money Notes in
an amount which (when aggregated with the cash and Purchase Money Notes received
by the Issuer and its Restricted Subsidiaries upon all other such transfers of
transferred assets during the ninety days preceding such transfer) is at least
equal to 75.0% of the aggregate face amount of all receivables so transferred
during such day and the ninety preceding days.
"Redemption Date" means, with respect to any Securities, the Maturity
Date of such Security or the earlier date on which such Security is to be
redeemed by the Issuer pursuant to the terms of the Securities.
"Redemption Price" shall have the meaning provided in Section 3.01.
"Registrar" has the meaning provided in Section 2.03.
"Registration Agreement" means the Registration Agreement among the
Issuer and the other signatories thereto as in effect on the date of this
Indenture or as thereafter amended in a manner that is not disadvantageous to
the Holders of the Securities in any material respect.
"Registration Rights Agreement" means the Registration Rights
Agreement dated as of the date hereof among the Issuer and the Initial
Purchaser.
"Regulation S" means Regulation S under the Securities Act.
"Related Person" means with respect to any Person (i) any Affiliate of
such Person, (ii) any individual or other Person who directly or indirectly is
the registered or beneficial owner of 5% or more of any class of Capital Stock
of such Person or warrants, rights, options or other rights to acquire more than
5% of any class of Capital Stock of such Person, (iii) any relative of such
individual by blood, marriage or adoption not more remote than first cousin and
(iv) any officer or director of such Person.
"Related Person Transaction" has the meaning provided in Section 4.11.
"Representative" means the indenture trustee or other trustee, agent
or representative in respect of any Designated Senior Debt; provided that if,
and for so long as, any Designated Senior Debt lacks such a representative, then
the Representative for such Designated Senior Debt shall at
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all times constitute the holders of a majority in outstanding principal amount
of such Designated Senior Debt.
"Required Filing Dates" has the meaning provided in Section 4.08.
"Restricted Domestic Subsidiary" means a Restricted Subsidiary
organized and validly existing under the laws of the United States or any state
thereof or the District of Columbia.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Payment" means: (i) any dividend or any other payment or
distribution on account of the Issuer's or any of its Restricted Subsidiaries'
Equity Interests or to the direct or indirect holders of the Issuer's or any of
its Restricted Subsidiaries' Equity Interests in their capacity as such (other
than (A) dividends or distributions payable in Equity Interests (other than
Disqualified Stock) of the Issuer or such Restricted Subsidiary or (B) dividends
or distributions payable to the Issuer or any Wholly Owned Restricted
Subsidiary); (ii) any payment to purchase, redeem or otherwise acquire or retire
for value any Equity Interests of the Issuer, any direct or indirect parent of
the Issuer or any Restricted Subsidiary of the Issuer (other than any Equity
Interests owned by the Issuer or any Wholly Owned Restricted Subsidiary); (iii)
any payment to purchase, redeem, defease or otherwise acquire or retire for
value any Subordinated Debt of the Issuer or a Restricted Subsidiary, except a
payment of interest or principal at Stated Maturity; (iv) any payment in respect
of Employee Notes other than payments in the form of additional Employee Notes
or Equity Interests (other than Disqualified Stock) of the Issuer; and (v) any
Restricted Investment.
"Restricted Security" has the meaning set forth in Rule 144(a)(3)
under the Securities Act; provided, that the Trustee or the Registrar shall be
entitled to request and conclusively rely upon an Opinion of Counsel with
respect to whether any Security is a Restricted Security.
"Restricted Subsidiary" of any Person means any Subsidiary of such
Person which at the time of determination is not an Unrestricted Subsidiary.
"Rule 144A" means Rule 144A under the Securities Act.
"Sale and Lease-Back Transaction" means any arrangement with any
Person providing for the leasing by the Issuer or any Restricted Subsidiary of
the Issuer of any real or tangible personal property, which property has been or
is to be sold or transferred by the Issuer or such Restricted Subsidiary to such
Person in contemplation of such leasing.
"SEC" means the Securities and Exchange Commission.
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"Securities" means the Issuer's 14% Senior Discount Notes due 2009, as
amended or supplemented from time to time in accordance with the terms hereof,
that are issued pursuant to this Indenture.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
"Securitization Entity" means a Wholly Owned Subsidiary of the Issuer
(or another Person in which the Issuer or any Restricted Subsidiary of the
Issuer makes an Investment and to which the Issuer or any Restricted Subsidiary
of the Issuer transfers receivables or equipment and related assets) that
engages in no activities other than in connection with the financing of
receivables or equipment and that is designated by the Board of Directors of the
Issuer (as provided below) as a Securitization Entity (i) no portion of the Debt
or any other Obligations (contingent or otherwise) of which (A) is guaranteed by
the Issuer or any Restricted Subsidiary of the Issuer (other than the
Securitization Entity) in any way other than pursuant to Standard Securitization
Undertakings or Limited Originator Recourse, (B) is recourse to or obligates the
Issuer or any Restricted Subsidiary of the Issuer (other than the Securitization
Entity) in any way other than pursuant to Standard Securitization Undertakings
or Limited Originator Recourse or (C) subjects any property or asset of the
Issuer or any Restricted Subsidiary of the Issuer (other than the Securitization
Entity), directly or indirectly, contingently or otherwise, to the satisfaction
thereof, other than pursuant to Standard Securitization Undertakings or Limited
Originator Recourse, (ii) with which neither the Issuer nor any Restricted
Subsidiary of the Issuer has any material contract, agreement, arrangement or
understanding other than on terms no less favorable to the Issuer or such
Restricted Subsidiary than those that might be obtained at the time from Persons
that are not Affiliates of the Issuer, other than fees payable in the ordinary
course of business in connection with servicing receivables of such entity and
(iii) to which neither the Issuer nor any Restricted Subsidiary of the Issuer
has any obligation to maintain or preserve such entity's financial condition or
cause such entity to achieve certain levels of operating results. Any such
designation by the Board of Directors of the Issuer shall be evidenced by the
filing with the Trustee a Board Resolution of the Issuer giving effect to such
designation and an Officer's Certificate certifying that such designation
complied with the foregoing conditions.
"Security Amount" has the meaning provided in Section 4.16(c).
"Securityholder" or "Holder" means the Person in whose name a Security
is registered on the Registrar's books.
"Securityholders Agreement" means the Securityholders Agreement among
the Issuer and the other signatories thereto as in effect on the date of this
Indenture or as thereafter amended in a manner that is not disadvantageous to
the Holders of the Securities in a material respect.
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"Senior Credit Facility" means the Credit Agreement dated as of July
31, 1998, among the Issuer, Globe Manufacturing, the lenders party thereto in
their capacity as such, Bank of America National Trust and Savings Association,
as administrative agent, Merrill Lynch, Pierce, Fenner & Smith, Inc., as
syndication agent, and BancAmerica Robertson Stephens, as arranger, together
with the related documents thereto (including, without limitation, any guarantee
agreements and security documents), in each case as such agreements may be
amended (including any amendment and restatement thereof), supplemented or
otherwise modified from time to time, including any agreement extending the
maturity of, refinancing, replacing or otherwise restructuring (including,
without limitation, increasing the amount of available borrowings thereunder or
adding Subsidiaries of the Issuer as additional borrowers or guarantors
thereunder) all or any portion of the indebtedness under such agreement or any
successor or replacement agreement, whether by the same or any other agent,
lender or group of lenders, whether contained in one or more agreements.
"Senior Debt" means, with respect to any Person, the principal of,
premium (if any) and accrued and unpaid interest (including interest accruing on
or after the filing of any petition in bankruptcy or for reorganization of such
Person, regardless of whether or not a claim for post-filing interest is allowed
in such proceedings) on, and fees and other amounts owing in respect of, Debt of
such Person, whether outstanding on the Issue Date or thereafter incurred,
unless in the instrument creating or evidencing the same or pursuant to which
the same is outstanding it is provided that such obligations are subordinated in
right of payment to the Securities; provided, however, that Senior Debt shall
not include (i) any obligation of the Issuer to any Subsidiary, (ii) any
liability for Federal, state, local or other taxes owed or owing by the Issuer,
(iii) any accounts payable or other liability to trade creditors arising in the
ordinary course of business (including guarantees thereof or instruments
evidencing such liabilities), (iv) any Debt or obligation of the Issuer (and any
accrued and unpaid interest in respect thereof) that by its terms is subordinate
or junior in any respect to any other Debt or obligation of the Issuer,
including any Subordinated Debt, (v) any payment obligations with respect to any
Equity Interests, or (vi) any Debt incurred in violation of this Indenture.
"Significant Subsidiary" means any Restricted Subsidiary of the Issuer
that would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of
Regulation S-X, promulgated pursuant to the Act, as such Regulation is in effect
on the Issue Date. Any group of Restricted Subsidiaries of the Issuer that,
taken together, would constitute a Significant Subsidiary, shall be deemed to be
a Significant Subsidiary for purposes of Article Six.
"Standard Securitization Undertakings" means representations,
warranties, covenants and indemnitees entered into by the Issuer or any
Subsidiary of the Issuer that are reasonably customary in receivables or
equipment loan transactions.
"Stated Maturity" means, with respect to any installment of interest
or principal on any series of Debt, the date on which such payment of interest
or principal was scheduled to be paid
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in the original documentation governing such Debt, and shall not include any
contingent obligations to repay, redeem or repurchase any such interest or
principal prior to the date originally scheduled for the payment thereof.
"Subordinated Debt" means any Debt of the Issuer which is by its terms
subordinated in right of payment to the Securities.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (A) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (B)
the only general partners of which are such Person or one or more Subsidiaries
of such Person (or any combination thereof). Unless otherwise indicated,
references in this Indenture to a Subsidiary shall mean a Subsidiary of the
Issuer.
"Tax Sharing Agreement" means the Tax Sharing Agreement between the
Issuer and Globe Manufacturing as in effect on the date of this Indenture or as
thereafter amended in a manner that is not adverse to the Issuer or the Holders
of Securities.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. (SS) 77aaa-
77bbbb), as amended, as in effect on the date on which this Indenture is
qualified under the TIA, except as otherwise provided in Section 9.03.
"Total Assets" means, with respect to any date of determination, the
total assets of the Issuer and its Restricted Subsidiaries shown on the Issuer's
consolidated balance sheet prepared in accordance with GAAP on the last day of
the fiscal quarter prior to the date of determination.
"Transfer Amount" has the meaning provided in Section 2.16.
"Treasury Rate" means the yield to maturity at the time of computation
of United States Treasury securities with a constant maturity (as compiled by,
and published in, the most recent Federal Reserve Statistical Release H.15 (519)
which has become publicly available at least two Business Days prior to the date
fixed for redemption of the Securities following a Change of Control (or, if
such Statistical Release is no longer published, any publicly available source
of similar market data)) most nearly equal to the period from the redemption
date to August 1, 2003; provided, however, that if the period from the
redemption date to August 1, 2003 is not equal to the constant maturity of a
United States Treasury security for which a weekly average yield is given, the
Treasury Rate shall be obtained by linear interpolation (calculated to the
nearest one-twelfth of a year) from
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the weekly average yields of United States Treasury securities for which such
yields are given, except that if the period from the redemption date to August
1, 2003 is less than one year, the weekly average yield on actually traded
United States Treasury securities adjusted to a constant maturity of one year
shall be used.
"Trust Officer" means any officer or assistant officer of the Trustee
assigned by the Trustee to administer its corporate trust matters or, in the
case of a successor trustee, an officer assigned to the department, division or
group performing the corporate trust work of such successor.
"Trustee" means the party named as such in this Indenture until a
successor replaces it in accordance with the provisions of this Indenture and
thereafter means such successor.
"Unrestricted Securities" means one or more Securities that do not and
are not required to bear the Private Placement Legend.
"Unrestricted Subsidiary" of any Person means (i) any Subsidiary of
such Person that as of the time of determination shall be or continue to be
designated an Unrestricted Subsidiary in the manner provided below and (ii) any
Subsidiary of an Unrestricted Subsidiary. The Board of Directors of the Issuer
may designate any Subsidiary (including any newly acquired or newly formed
Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary owns any
Capital Stock of the Issuer or any Restricted Subsidiary or holds any Lien on
any property of the Issuer or any other Subsidiary of the Issuer that is not a
Subsidiary of the Subsidiary to be so designated; provided that (i) the Issuer
certifies to the Trustee that such designation complies with the provisions of
Section 4.10 and (ii) each Subsidiary to be so designated and each of its
Subsidiaries has not at the time of designation, and does not thereafter,
create, incur, issue, assume, guarantee or otherwise become directly or
indirectly liable with respect to, any indebtedness pursuant to which the lender
has recourse to any of the assets of the Issuer or any of its Restricted
Subsidiaries. The Board of Directors of the Issuer may designate any
Unrestricted Subsidiary to be a Restricted Subsidiary only if (i) immediately
after giving effect to such designation, the Issuer is able to incur at least
$1.00 of additional Debt pursuant to the Consolidated Fixed Charge Coverage
Ratio test set forth in Section 4.12(a) and (ii) immediately before and
immediately after giving effect to such designation, no Default or Event of
Default shall have occurred and be continuing. Any such designation by the Board
of Directors shall be evidenced to the Trustee by promptly filing with the
Trustee a copy of the Board Resolution giving effect to such designation and an
Officers' Certificate certifying that such designation complied with the
foregoing provisions.
"U.S. Government Obligations" means direct obligations of, and
obligations guaranteed by, the United States of America for the payment of which
the full faith and credit of the United States of America is pledged.
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"U.S. Legal Tender" means such coin or currency of the United States
of America as at the time of payment shall be legal tender for the payment of
public and private debts.
"U.S. Person" has the meaning given in Regulation S under the
Securities Act.
"Voting Stock" of any Person as of any date means the Capital Stock of
such Person that is at the time entitled to vote in the election of the Board of
Directors, managers, trustees or other governing body, as applicable, of such
Person.
"Weighted Average Life to Maturity" means, when applied to any Debt at
any date, the number of years obtained by dividing (i) the sum of the products
obtained by multiplying (A) the amount of each then remaining installment,
sinking fund, serial maturity or other required payments of principal including
payment at final maturity, in respect thereof, by (B) the number of years
(calculated to the nearest one-twelfth) that will elapse between such date and
the making of such payment, by (ii) the then outstanding principal amount of
such Debt.
"Wholly Owned Restricted Subsidiary" of any Person means any
Restricted Subsidiary of such Person that is a Wholly Owned Subsidiary of such
Person.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such
Person all of the outstanding Capital Stock or other ownership interests of
which (other than directors' qualifying shares) shall at the time be owned by
such Person, by one or more Wholly Owned Subsidiaries of such Person or by such
Person and one or more Wholly Owned Subsidiaries of such Person.
SECTION 1.02. Incorporation by Reference of TIA.
Whenever this Indenture refers to a provision of the TIA, such
provision is incorporated by reference in, and made a part of, this Indenture.
The following TIA terms used in this Indenture have the following meanings:
"SEC" means the SEC.
"indenture securities" means the Securities.
"indenture securityholder" means a Holder or a Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
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"obligor" on the indenture securities means the Issuer or any other
obligor on the Securities.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule and not
otherwise defined herein have the meanings assigned to them therein.
SECTION 1.03. Rules of Construction.
Unless the context otherwise requires:
(a) a term has the meaning assigned to it;
(b) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP as in effect on the Issue Date;
(c) "or" is not exclusive;
(d) words in the singular include the plural, and words in the plural
include the singular;
(e) "herein," "hereof" and other words of similar import refer to this
Indenture as a whole and not to any particular Article, Section or other
subdivision; and
(f) all references to Articles, Sections and Exhibits shall mean,
unless the clearly indicates otherwise, the Articles and Sections hereof
and the Exhibits attached hereto, the terms of which Exhibits are hereby
incorporated into this Indenture;
(g) all references herein to payments of principal, premium, if any,
and interest on the Securities shall be deemed to include any applicable
Liquidated Damages that may become payable in respect of the Securities.
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ARTICLE TWO
THE SECURITIES
SECTION 2.01. Form and Dating.
The Securities and the Exchange Securities, and the notation relating
to the Trustee's certificate of authentication shall be substantially in the
form of Exhibits A-1 and A-2, respectively. The Securities may have notations,
legends or endorsements required by law, stock exchange rule, depository rule or
usage. The Issuer and the Trustee shall approve the form of the Securities and
any notation, legend or endorsement on them. Each Security shall be dated the
date of its issuance and shall show the date of its authentication.
The terms and provisions contained in the Securities, annexed hereto
as Exhibits A-1 and A-2, shall constitute, and are hereby expressly made, a part
of this Indenture and, to the extent applicable, the Issuer and the Trustee, by
their execution and delivery of this Indenture, expressly agree to such terms
and provisions and to be bound thereby.
Securities offered and sold in reliance on Rule 144A or in reliance on
any other exemption from registration under the Securities Act may be issued
initially in the form of one or more permanent Global Securities in registered
form, substantially in the form set forth in Exhibit A-1 ("Global Securities"),
deposited with, or on behalf of, the Depositary and registered in the name of
Cede & Co. or such other nominee, as nominee of the Depositary, and shall bear
the legend set forth on Exhibit B-1. The aggregate principal amount of any
Global Security may from time to time be increased or decreased by adjustments
made on the records of the Depositary and the Registrar, as the custodian for
the Depositary.
Securities issued in exchange for interests in a Global Security
pursuant to Section 2.15 and Securities offered and sold in reliance on any
exemption from registration under the Securities Act may be issued in the form
of certificated securities in registered form in substantially the form set
forth in Exhibit A-1 (the "Certificated Securities").
SECTION 2.02. Execution and Authentication.
Two Authorized Officers shall sign, or one Authorized Officer shall
sign and one Authorized Officer (each of whom shall, in each case, have been
duly authorized by all requisite corporate actions) shall attest to, the
Securities for the Issuer by manual or facsimile signature.
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If an Authorized Officer whose signature is on a Security was an
Authorized Officer at the time of such execution but no longer holds that office
or position at the time the Trustee authenticates the Security, the Security
shall nevertheless be valid.
A Security shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the Security. The
signature shall be conclusive evidence that the Security has been authenticated
under this Indenture.
The Trustee shall authenticate (i) Initial Securities for original
issue in the aggregate principal amount at maturity not to exceed $49,086,000 in
one or more series, (ii) Private Exchange Securities from time to time for issue
only in exchange for a like principal amount of Initial Securities and (iii)
Unrestricted Securities from time to time only in exchange for a like principal
amount of Initial Securities in each case upon a written order of the Issuer in
the form of an Officers' Certificate of the Issuer. Each such written order
shall specify the amount of Securities to be authenticated and the date on which
the Securities are to be authenticated, whether the Securities are to be Initial
Securities, Private Exchange Securities or Unrestricted Securities and whether
the Securities are to be issued as Certificated Securities or Global Securities
and such other information as the Trustee may reasonably request. The aggregate
principal amount at maturity of Securities outstanding at any time may not
exceed $49,086,000, except as provided in Section 2.07.
In the event that the Issuer shall issue and the Trustee shall
authenticate any Securities issued under this Indenture subsequent to the Issue
Date pursuant to clauses (i) and (iii) of the first sentence of the immediately
preceding paragraph, the Issuer shall use its reasonable efforts to obtain the
same "CUSIP" number for such Securities as is printed on the Securities
outstanding at such time; provided, however, that if any series of Securities
issued under this Indenture subsequent to the Issue Date is determined, pursuant
to an Opinion of Counsel of the Issuer in a form reasonably satisfactory to the
Trustee, to be a different class of security than the Securities outstanding at
such time for federal income tax purposes, the Issuer may obtain a "CUSIP"
number for such Securities that is different than the "CUSIP" number printed on
the Securities then outstanding. Notwithstanding the foregoing, all Securities
issued under this Indenture shall vote and consent together on all matters (as
to which any of such Securities may vote or consent) as one class and no series
of Securities will have the right to vote or consent as a separate class on any
matter.
The Trustee may appoint an authenticating agent (an "Authenticating
Agent") reasonably acceptable to the Issuer to authenticate Securities. Unless
otherwise provided in the appointment, an Authenticating Agent may authenticate
Securities whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
Authenticating Agent has the same rights as an Agent to deal with the Issuer and
Affiliates of the Issuer.
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The Securities shall be issuable in fully registered form only,
without coupons, in denominations of $1,000 and any integral multiple thereof.
SECTION 2.03. Registrar and Paying Agent.
The Issuer shall maintain an office or agency in the county where the
principal corporate office of the Trustee is located or in such other locations
as the Issuer shall determine, where (a) Securities may be presented or
surrendered for registration of transfer or for exchange ("Registrar"), (b)
Securities may be presented or surrendered for payment ("Paying Agent") and (c)
notices and demands to or upon the Issuer in respect of the Securities and this
Indenture may be served. The Registrar shall keep a register of the Securities
and of their transfer and exchange. The Issuer, upon notice to the Trustee, may
have one or more co-Registrars and one or more additional paying agents
reasonably acceptable to the Trustee. The term "Paying Agent" includes any
additional paying agent. The Issuer upon notice to the Trustee may change any
Registrar or Paying Agent without notice to any Holder.
The Issuer shall enter into an appropriate agency agreement with any
Agent not a party to this Indenture, which agreement shall incorporate the
provisions of the TIA and implement the provisions of this Indenture that relate
to such Agent. The Issuer shall notify the Trustee, in advance, of the name and
address of any such Agent. If the Issuer fails to maintain a Registrar or Paying
Agent, the Trustee shall act as such.
The Issuer initially appoints the Trustee as Registrar, Paying Agent
and agent for service of demands and notices in connection with the Securities,
until such time as the Trustee has resigned or a successor has been appointed.
Any of the Registrar, the Paying Agent or any other Agent may resign upon 30
days' notice to the Issuer.
SECTION 2.04. Paying Agent To Hold Assets in Trust.
The Issuer shall require each Paying Agent other than the Trustee to
agree in writing that such Paying Agent shall hold in trust for the benefit of
the Holders or the Trustee all assets held by the Paying Agent for the payment
of principal of, premium or Liquidated Damages, if any, or interest on, the
Securities (whether such assets have been distributed to it by the Issuer or any
other obligor on the Securities), and the Issuer and the Paying Agent shall
notify the Trustee of any default by the Issuer (or any other obligor on the
Securities) in making any such payment. The Issuer, upon written direction to
the Paying Agent, at any time may require a Paying Agent to distribute all
assets held by it to the Trustee and account for any assets disbursed and the
Trustee may at any time during the continuance of any Payment Default, upon
written request to a Paying Agent, require such Paying Agent to distribute all
assets held by it to the Trustee and to account for any assets distributed. Upon
distribution to the Trustee of all assets that shall have been delivered by the
Issuer
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(or any other obligor on the Securities) to the Paying Agent and the completion
of any accounting required to be made hereunder, the Paying Agent shall have no
further liability for such assets.
SECTION 2.05. Securityholder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
the Holders. If the Trustee is not the Registrar, the Issuer shall furnish to
the Trustee five Business Days before each Interest Payment Date and at such
other times as the Trustee may request in writing a list as of the applicable
record date and in such form as the Trustee may reasonably require of the names
and addresses of the Holders, which list may be conclusively relied upon by the
Trustee.
SECTION 2.06. Transfer and Exchange.
Subject to the provisions of Sections 2.15 and 2.16, when Securities
are presented to the Registrar or a co-Registrar with a request to register the
transfer of such Securities or to exchange such Securities for an equal
principal amount of Securities of other authorized denominations, the Registrar
or co-Registrar shall register the transfer or make the exchange as requested if
its requirements for such transaction are met; provided, however, that the
Securities surrendered for transfer or exchange shall be duly endorsed or
accompanied by a written instrument of transfer in form satisfactory to the
Issuer and the Registrar or co-Registrar, duly executed by the Holder thereof or
his attorney duly authorized in writing. To permit registration of transfers and
exchanges, the Issuer shall execute and the Trustee shall authenticate
Securities at the Registrar's or co-Registrar's written request. No service
charge shall be made for any registration of transfer or exchange, but the
Issuer may require payment of a sum sufficient to cover any transfer tax or
similar governmental charge payable in connection therewith (other than any such
transfer taxes or other governmental charge payable upon exchanges or transfers
pursuant to Sections 2.02, 2.10, 3.01(ii), 3.08, 4.15, 4.16, or 9.05). The
Registrar or co-Registrar shall not be required to register the transfer of or
exchange of any Security (i) during a period beginning at the opening of
business 15 days before the mailing of a notice of redemption of Securities and
ending at the close of business on the day of such mailing, (ii) selected for
redemption in whole or in part pursuant to Article Three, except the unredeemed
portion of any Security being redeemed in part and (iii) during a Change of
Control Offer or an Asset Sale Offer if such Security is tendered pursuant to
such Change of Control Offer or Asset Sale Offer and not withdrawn.
Prior to the registration of any transfer by a Holder, the Issuer, the
Trustee and any agent of the Issuer shall treat the person in whose name the
Security is registered as the owner thereof for all purposes whether or not the
Security shall be overdue, and neither the Issuer, the Trustee nor any such
agent shall be affected by notice to the contrary. Any Holder of the Global
Security shall, by acceptance of such Global Security, agree that transfers of
beneficial interests in
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such Global Security may be effected only through a book-entry system maintained
by the Holder of such Global Security (or its agent), and that ownership of a
beneficial interest in the Global Security shall be required to be reflected in
a book-entry system.
SECTION 2.07. Replacement Securities.
If a mutilated Security is surrendered to the Trustee or if the Holder
of a Security claims that the Security has been lost, destroyed or wrongfully
taken, the Issuer shall issue and the Trustee shall authenticate a replacement
Security if the Trustee's requirements are met. Such Holder must provide an
indemnity bond or other indemnity sufficient, in the judgment of the Issuer and
the Trustee, to protect the Issuer, the Trustee or any Agent from any loss which
any of them may suffer if a Security is replaced. The Issuer may charge such
Holder for its reasonable out-of-pocket expenses in replacing a Security,
including reasonable fees and expenses of counsel. Every replacement Security
issued pursuant to this Section 2.07 shall constitute an obligation of the
Issuer.
SECTION 2.08. Outstanding Securities.
Securities outstanding at any time are all the Securities that have
been authenticated by the Trustee or the Authenticating Agent except those
canceled by the Trustee, those delivered to it for cancellation and those
described in this Section as not outstanding. Subject to Section 2.09, a
Security does not cease to be outstanding because the Issuer or any of its
Affiliates holds the Security.
If a Security is replaced pursuant to Section 2.07 (other than a
mutilated Security surrendered for replacement), it ceases to be outstanding
unless the Trustee receives proof satisfactory to it that the replaced Security
is held by a bona fide purchaser. A mutilated Security ceases to be outstanding
upon surrender of such Security and replacement thereof pursuant to Section
2.07.
If the principal amount of any Security is considered paid under
Section 4.01, it ceases to be outstanding and interest ceases to accrue.
If on a Redemption Date, a Change of Control Payment Date, an Asset
Sale Offer Date or the Maturity Date, the Paying Agent holds U.S. Legal Tender
or U.S. Government Obligations sufficient to pay all of the principal, premium,
if any, and interest due on the Securities payable on that date and is not
prohibited from paying such U.S. Legal Tender or U.S. Government Obligations to
the Holders thereof pursuant to the terms of this Indenture, then on and after
that date such Securities cease to be outstanding and interest on them ceases to
accrue.
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SECTION 2.09. Treasury Securities.
In determining whether the Holders of the required aggregate principal
amount at maturity of Securities have concurred in any direction, waiver,
consent or notice, and for purposes of determining the amount of Securities
outstanding at the time of a redemption made in accordance with paragraph
6(a)(ii) of the Securities, Securities owned by the Issuer or an Affiliate of
the Issuer shall be considered as though they are not outstanding, except that
for the purposes of determining whether the Trustee shall be protected in
relying on any direction, waiver or consent, only Securities which the Trustee
actually knows are so owned shall be so considered. The Issuer shall notify the
Trustee, in writing, when it or any of its Affiliates repurchases or otherwise
acquires Securities, of the aggregate principal amount at maturity of such
Securities so repurchased or otherwise acquired. The Trustee may require an
Officers' Certificate listing Securities owned by the Issuer, a Subsidiary of
the Issuer or any Affiliate of the Issuer.
SECTION 2.10. Temporary Securities.
Until definitive Securities are ready for delivery, the Issuer may
prepare and the Trustee shall authenticate temporary Securities upon receipt of
a written order of the Issuer in the form of an Officers' Certificate. The
Officers' Certificate shall specify the amount of temporary Securities to be
authenticated and the date on which the temporary Securities are to be
authenticated. Temporary Securities shall be substantially in the form of
definitive Securities but may have variations that the Issuer considers
appropriate for temporary Securities. Without unreasonable delay, the Issuer
shall prepare and execute, and the Trustee shall authenticate upon receipt of a
written order of the Issuer pursuant to Section 2.02, definitive Securities in
exchange for temporary Securities.
SECTION 2.11. Cancellation.
The Issuer at any time may deliver Securities to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Securities surrendered to them for transfer, exchange or payment. The
Trustee or, at the direction of the Trustee, the Registrar or the Paying Agent,
and no one else, shall cancel and, at the written direction of the Issuer, shall
dispose of and deliver evidence of such disposal of (but shall not be required
to destroy) all Securities surrendered for transfer, exchange, payment or
cancellation. Subject to Section 2.07, the Issuer may not issue new Securities
to replace Securities that the Issuer has paid or delivered to the Trustee for
cancellation. If the Issuer shall acquire any of the Securities, such
acquisition shall not operate as a redemption or satisfaction of the Debt
represented by such Securities unless and until the same are surrendered to the
Trustee for cancellation pursuant to this Section 2.11.
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SECTION 2.12. Defaulted Interest.
The Issuer will pay interest on overdue principal or Accreted Value,
as applicable, from time to time on demand at the rate of interest then borne by
the Securities. The Issuer shall, to the extent lawful, pay interest on overdue
installments of interest, (without regard to any applicable grace periods) from
time to time on demand at the rate of interest then borne by the Securities.
Interest will be computed on the basis of a 360-day year comprised of twelve 30-
day months, and, in the case of a partial month, the actual number of days
elapsed.
If the Issuer defaults in a payment of interest on the Securities, it
shall pay the defaulted interest, plus (to the extent lawful) any interest
payable on the defaulted interest to the Persons who are Holders on a subsequent
special record date, which date shall be the fifteenth day next preceding the
date fixed by the Issuer for the payment of defaulted interest or the next
succeeding Business Day if such date is not a Business Day. Prior to such
subsequent special record date, the Issuer shall have deposited with the Paying
Agent in immediately available funds money sufficient to make cash payments due
on such day in a timely manner which permits the Paying Agent to remit payment
to the Holders on such day. At least 15 days before the subsequent special
record date, the Issuer shall mail to each Holder, with a copy to the Trustee
and the Agents, a notice that states the subsequent special record date, the
payment date and the amount of defaulted interest and interest payable on such
defaulted interest, if any, to be paid. Notwithstanding the foregoing, the
Issuer may make payment of any defaulted interest in any other lawful manner not
inconsistent with the requirements of any securities exchange on which the
Securities may be listed, and upon such notice as may be required by such
exchange.
SECTION 2.13. CUSIP Number.
The Issuer in issuing the Securities may use a "CUSIP" number, and if
so, the Trustee shall use the CUSIP number in notices of redemption or exchange
as a convenience to Holders; provided that no representation is hereby deemed to
be made by the Trustee as to the correctness or accuracy of the CUSIP number
printed in the notice or on the Securities, and that reliance may be placed only
on the other identification numbers printed on the Securities. The Issuer shall
promptly notify the Trustee of any change in the CUSIP number.
SECTION 2.14. Deposit of Moneys.
Prior to 11:00 a.m. (New York City time) on each Interest Payment
Date, Maturity Date, Redemption Date, Change of Control Payment Date and Asset
Sale Offer Date, the Issuer shall have deposited with the Paying Agent in
immediately available funds money sufficient to make cash payments, if any, due
on such Interest Payment Date, Maturity Date, Redemption Date, Change of Control
Payment Date or Asset Sale Offer Date, as the case may be, in a timely manner
which
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permits the Paying Agent to remit payment to the Holders on such Interest
Payment Date, Maturity Date, Redemption Date, Change of Control Payment Date or
Asset Sale Offer Date, as the case may be.
SECTION 2.15. Book-Entry Provisions for Global Securities.
(a) The Global Securities initially shall (i) be registered in the
name of Cede & Co., as the nominee of The Depository Trust Company, (ii) be
delivered to the Registrar as custodian for such Depositary and (iii) bear the
legend set forth in Exhibit B.
Members of, or participants in, the Depositary ("Agent Members") shall
have no rights under this Indenture with respect to any Global Security held on
their behalf by the Depositary, or the Registrar as its custodian, or under the
Global Security, and the Depositary may be treated by the Issuer, the Trustee
and any agent of the Issuer or the Trustee as the absolute owner of the Global
Security for all purposes whatsoever. Notwithstanding the foregoing, nothing
herein shall prevent the Issuer, the Trustee or any agent of the Issuer or the
Trustee from giving effect to any written certification, proxy or other
authorization furnished by the Depositary or impair, as between the Depositary
and its Agent Members, the operation of customary practices governing the
exercise of the rights of a Holder of any Security.
(b) Transfers of Global Securities shall be limited to transfers in
whole, but not in part, to the Depositary, its successors or their respective
nominees. Interests of beneficial owners in the Global Securities may be
transferred or exchanged for Certificated Securities in accordance with the
rules and procedures of the Depositary and the provisions of Section 2.16. In
addition, Certificated Securities shall be transferred to all beneficial owners
in exchange for their beneficial interests in Global Securities if (i) the
Issuer notifies the Registrar that the Depositary is unwilling or unable to
continue as Depositary for any Global Security and a successor depositary is not
appointed by the Issuer within 90 days of such notice or (ii) the Issuer, at its
option, notifies the Registrar in writing that it elects to cause the issuance
of Securities in definitive form under this Indenture.
(c) In connection with any transfer or exchange of a portion of the
beneficial interest in any Global Security to beneficial owners pursuant to
paragraph (b), the Registrar shall (if one or more Certificated Securities are
to be issued) reflect on its books and records the date and a decrease in the
principal amount of the Global Security in an amount equal to the principal
amount of the beneficial interest in the Global Security to be transferred, and
the Issuer shall execute, and the Trustee shall authenticate and cause to be
delivered, one or more Certificated Securities of like tenor and amount.
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(d) In connection with the transfer of Global Securities as an
entirety to beneficial owners pursuant to paragraph (b) of this Section 2.15,
the Global Securities shall be deemed to be surrendered to the Trustee for
cancellation, and the Issuer shall execute, and the Trustee shall authenticate
and cause to be delivered to each beneficial owner identified by the Depositary
in exchange for its beneficial interest in the Global Securities, an equal
aggregate principal amount of Certificated Securities of authorized
denominations.
(e) Any Certificated Security constituting a Restricted Security
delivered in exchange for an interest in a Global Security pursuant to paragraph
(c) or (d) shall, except as otherwise provided by paragraphs (a)(i)(x) and (z)
of Section 2.16, bear the Private Placement Legend.
(f) The Holder of any Global Security may grant proxies and otherwise
authorize any person, including Agent Members and persons that may hold
interests through Agent Members, to take any action which a Holder is entitled
to take under this Indenture or the Securities.
SECTION 2.16. Special Transfer Provisions.
(a) Transfers to Non-QIB Institutional Accredited Investors and Non-
U.S. Persons and other Transfers Exempt under the Securities Act. The following
provisions shall apply (x) with respect to the registration of any proposed
transfer of a Security constituting a Restricted Security to any Institutional
Accredited Investor which is not a QIB or to any Non-U.S. Person and (y) with
respect to the registration of any proposed transfer pursuant to another
available exemption from the registration requirements of the Securities Act:
(i) the Registrar shall register the transfer of any Securities
constituting a Restricted Security, whether or not such Security bears the
Private Placement Legend, if (x) the requested transfer is after the second
anniversary of the original issue date with respect thereto; provided,
however, that neither the Issuer nor any Affiliate of the Issuer has held
any beneficial interest in such security, or portion thereof, at any time
on or prior to the second anniversary of such issue date or (y)(1) in the
case of a transfer to an Institutional Accredited Investor which is not a
QIB (excluding Non-U.S. Persons), the proposed transferee has delivered to
the Registrar a certificate substantially in the form of Exhibit C hereto
or (2) in the case of a transfer to a Non-U.S. Person, the proposed
transferor has delivered to the Registrar a certificate substantially in
the form of Exhibit D or (3) in the case of a transfer pursuant to another
available exemption from the registration requirements of the Securities
Act, the proposed transferee has delivered to the Registrar a certificate
in form and substance reasonably acceptable to the Issuer and the Registrar
in connection with such transfer, together, in the case of clause (1),
clause (2) or clause (3) with such other certifications, legal opinions or
other information as the Issuer, the Trustee or the Registrar may
reasonably
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require to confirm that such transfer is being made pursuant to an
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act, or (z) the Trustee and Registrar have
received both an Opinion of Counsel and an Officers' Certificate directing
transfer without a Private Placement Legend; and
(ii) the Registrar shall register the transfer of any Securities
constituting a Restricted Security, whether or not such Security bears the
Private Placement Legend, if the proposed transferor is an Agent Member
holding a beneficial interest in a Global Security, upon, receipt by the
Registrar of (x) the certificate, if any, required by paragraph (i) above
and (y) instructions given in accordance with the Depositary'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 Certificated
Securities) a decrease in the principal amount of the Global Security in an
amount equal to the principal amount of the beneficial interest in the Global
Security to be transferred (the "Transfer Amount"), (b) if the Securities to be
transferred are to be evidenced by Certificated Securities, the Issuer shall
execute and the Trustee shall authenticate upon receipt of a written order of
the Issuer in the form of an Officers' Certificate, and cause to be delivered
one or more Certificated Securities in an aggregate principal amount equal to
the Transfer Amount and (c) if the Securities to be transferred are to be
evidenced by an interest in a Global Security, upon receipt of instructions
given in accordance with the Depositary'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 Security in which the transferee will hold its
beneficial interest in an amount equal to the Transfer Amount.
If the Securities to be transferred consist of IAI Securities, the
following shall apply: (x) if such IAI Securities are proposed to be transferred
to an Institutional Accredited Investor which is not a QIB, (i) upon the
registration of such transfer such Securities shall continue to be IAI
Securities, and (ii) the Certificated Securities authenticated and delivered in
connection with such transfer shall be in denominations of $100,000 and any
integral multiple of $1,000 above that amount; and (y) if such IAI Securities
are proposed to be transferred to a Non-U.S. Person, (i) upon the registration
of such transfer such Securities shall cease to be IAI Securities, (ii) the
Certificated Securities authenticated and delivered in connection with such
transfer shall not contain the restriction on minimum denominations of $100,000
and (iii) such Certificated Securities shall be in denominations of $1,000 and
any integral multiple thereof.
(b) Transfers to QIBs. The following provisions shall apply with
respect to the registration of any proposed transfer of a Security constituting
a Restricted Security to a QIB (excluding transfers to Non-U.S. Persons):
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(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
the form of Security stating, or has otherwise advised the Issuer and the
Registrar in writing, that the sale has been made in compliance with the
provisions of Rule 144A to a transferee who has signed the certification
provided for on the form of Security stating, or has otherwise advised the
Issuer and the Registrar in writing, that it is purchasing the Security for
its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a 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 Issuer as it has requested pursuant to Rule 144A
or has determined not to request such information and that it is aware that
the Issuer and the transferor are relying upon its foregoing
representations in order to claim the exemption from registration provided
by Rule 144A; if the Trustee or the Issuer shall so request, such proposed
transferor shall have delivered an Opinion of Counsel, an Officers'
Certificate and such other information as the Trustee or the Issuer may
reasonably require in connection with such proposed transfer; and
(ii) if the proposed transferee is an Agent Member, and the
Securities to be transferred consist of Certificated Securities which after
transfer are to be evidenced by an interest in the Global Security, upon
receipt by the Registrar of instructions given in accordance with the
Depositary'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 Security in an amount equal to the principal amount of the
Certificated Securities to be transferred, and the Trustee shall cancel the
Certificated Securities so transferred; and
(iii) if the proposed transferee is an Agent Member, and the
Securities to be transferred consist of a beneficial interest in a Global
Security which after transfer is to continue to be evidenced by an interest
in a Global Security, upon receipt by the Registrar of instructions given
in accordance with the Depositary's and the Registrar's procedures, the
Registrar shall reflect on its books and records (A) the date, (B) a
decrease in the principal amount of the Global Security in which the
transferor owns the beneficial interest to be transferred in an amount
equal to the principal amount of the beneficial interest to be transferred
and (C) an increase in the principal amount of the Global Security in which
the transferee will hold its beneficial interest in a like amount; and
(iv) if the Securities to be transferred consist of IAI Securities,
upon the registration of such transfer according to this Section 2.16 such
Securities shall cease to be IAI Securities and may be evidenced by
Certificated Securities or interests in a Global Security in denominations
of $1,000 and any integral multiple thereof.
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(c) Private Placement Legend. Upon the transfer, exchange or
replacement of Securities not bearing the Private Placement Legend, the
Registrar shall deliver Securities that do not bear the Private Placement
Legend. Upon the transfer, exchange or replacement of Securities bearing the
Private Placement Legend, the Registrar shall deliver only Securities that bear
the Private Placement Legend unless (i) the circumstances contemplated by
paragraph (a)(i) of this Section 2.16 exist, (ii) there is delivered to the
Issuer, the Registrar and the Trustee an Opinion of Counsel reasonably
satisfactory to the Issuer, the Registrar 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 Securities have been sold pursuant to an effective registration statement
under the Securities Act.
(d) General. By its acceptance of any Security bearing the Private
Placement Legend, each Holder of such a Security acknowledges the restrictions
on transfer of such Security set forth in this Indenture and in the Private
Placement Legend and agrees that it will transfer such Security only as provided
in this Indenture and such Security.
The Registrar shall retain copies of all letters, notices and other
written communications received pursuant to Section 2.15 or this Section 2.16.
The Issuer 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 written notice to the Registrar.
SECTION 2.17. Liquidated Damages under Registration Rights Agreement.
Under certain circumstances, the Issuer shall be obligated to pay
certain Liquidated Damages to the Holders, all as set forth in Section 4 of the
Registration Rights Agreement (or, with respect to any additional registration
rights agreement entered into in connection with Initial Securities issued
subsequent to the Issue Date pursuant to Section 2.02, the applicable section).
The terms thereof are incorporated herein by reference.
ARTICLE THREE
REDEMPTION
SECTION 3.01. Optional Redemption.
Optional Redemption. (i) The Securities will be redeemable at the
option of the Issuer, in whole or in part, at any time and from time to time on
or after August 1, 2003, upon not less than 30 nor more than 60 days notice, at
the Redemption Prices (expressed as percentages of principal amount at maturity)
set forth below (the "Redemption Price"), plus accrued and unpaid
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interest and Liquidated Damages, if any, thereon to the applicable Redemption
Date, if redeemed during the 12-month period beginning on August 1 of the years
indicated below:
<TABLE>
<CAPTION>
Redemption
Year Price
---- ----------
<S> <C>
2003 ................................... 107.000%
2004 ................................... 104.667%
2005 ................................... 102.333%
2006 and thereafter........................ 100.000%
</TABLE>
(ii) At any time prior to August 1, 2001, the Issuer may on any one
or more occasions redeem from the net proceeds of one or more Equity Offerings
up to an aggregate of 35.0% in aggregate principal amount at maturity of the
Securities at a redemption price of 114% of the Accreted Value thereof, together
with Liquidated Damages, if any, to the redemption date; provided that at least
65% of the aggregate principal amount at maturity of the Securities remains
outstanding immediately after the occurrence of such redemption.
(iii) At any time prior to August 1, 2003, the Securities may be
redeemed, in whole but not in part, at the option of the Issuer at any time
within 180 days after a Change of Control, at a redemption price equal to the
sum of (i) 100% of the Accreted Value thereof, together with Liquidated Damages,
if any, to the redemption date, plus (ii) the Applicable Premium.
If less than all of the Securities are to be redeemed at any time, selection of
Securities for redemption will be made by the Trustee on a pro rata basis, by
lot or by such method as the Trustee shall deem fair and appropriate; provided
that no Securities of $1,000 or less shall be redeemed in part. Notices of
redemption shall be mailed by first class mail at least 30 but not more than 60
days before the redemption date to each Holder of Securities to be redeemed at
its registered address. Notices of redemption may not be conditional. If any
Security is to be redeemed in part only, the notice of redemption that relates
to such Security shall state the portion of the principal amount thereof to be
redeemed. A new Security in principal amount equal to the unredeemed portion
thereof will be issued in the name of the Holder thereof upon cancellation of
the original Security. Securities called for redemption become due on the date
fixed for redemption. On and after the redemption date, interest ceases to
accrue on the Securities or portions of them called for redemption.
SECTION 3.02. Applicability of Article.
Redemption of Securities at the election of the Issuer or otherwise,
as permitted or required by any provision of this Indenture, shall be made in
accordance with such provision and this Article.
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SECTION 3.03. Election To Redeem; Notice to Trustee.
The election of the Issuer to redeem any Securities pursuant to
Section 3.01(a) shall be evidenced by an Officers' Certificate. In case of any
redemption at the election of the Issuer pursuant to Section 3.01(a), the Issuer
shall, at least 45 days prior to the Redemption Date fixed by the Issuer (unless
a shorter notice period shall be satisfactory to the Trustee), notify the
Trustee in writing of such Redemption Date and of the principal amount of
Securities to be redeemed.
SECTION 3.04. Selection by Trustee of Securities To Be Redeemed.
In the event that less than all of the Securities are to be redeemed
at any time, selection of such Securities for redemption will be made by the
Trustee in compliance with the requirements of the principal national securities
exchange, if any, on which the Securities are listed or, if the Securities 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 that
no Securities of a principal amount of $1,000 or less shall be redeemed in part.
If any Security is to be redeemed in part only, a new Security 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 Security. On and after the
Redemption Date, if the Issuer does not default in the payment of the Redemption
Price, interest will cease to accrue on Securities or portions thereof called
for redemption.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to redemption of Securities shall relate, in
the case of any Security redeemed or to be redeemed only in part, to the portion
of the principal amount of such Security which has been or is to be redeemed.
SECTION 3.05. Notice of Redemption.
Notice of redemption shall be mailed by first-class mail, postage
prepaid, mailed at least 30 but no more than 60 days before the Redemption Date.
All notices of redemption shall state:
(a) the Redemption Date;
(b) the Redemption Price;
(c) if less than all outstanding Securities are to be redeemed, the
identification of the particular Securities to be redeemed;
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(d) in the case of a Security to be redeemed in part, the principal
amount at maturity of such Security to be redeemed and that after the
Redemption Date upon surrender of such Security, a new Security or
Securities in the aggregate principal amount at maturity equal to the
unredeemed portion thereof will be issued;
(e) that Securities called for redemption must be surrendered to the
Paying Agent to collect the Redemption Price;
(f) that on the Redemption Date the Redemption Price will become due
and payable upon each such Security or portion thereof, and that (unless
the Issuer shall default in payment of the Redemption Price) interest
thereon shall cease to accrue on and after said date;
(g) the place or places where such Securities are to be surrendered
for payment of the Redemption Price;
(h) the CUSIP number, if any, relating to such Securities; and
(i) the paragraph or section of the Securities or this Indenture
pursuant to which the Securities are being redeemed.
Notice of redemption of Securities to be redeemed shall be given by
the Issuer or, as otherwise requested by the Issuer in writing, by the Trustee
in the name and at the expense of the Issuer.
The notice if mailed in the manner herein provided shall be
conclusively presumed to have been given, whether or not the Holder receives
such notice. In any case, failure to give such notice by mail or any defect in
the notice to the Holder of any Security designated for redemption as a whole or
in part shall not affect the validity of the proceedings for the redemption of
any other Security.
SECTION 3.06. Deposit of Redemption Price.
On or prior to 11:00 a.m. (New York City time) on any Redemption Date,
the Issuer shall deposit or cause to be deposited with the Trustee or with a
Paying Agent (or, if the Issuer is acting as its own Paying Agent, segregate and
hold in trust as provided in Section 2.04) an amount of money in same day funds
sufficient to pay the Redemption Price of, and Liquidated Damages, if any, and
accrued interest on, all the Securities or portions thereof which are to be
redeemed on that date.
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SECTION 3.07. Securities Payable on Redemption Date.
Notice of Redemption having been given as aforesaid, the Securities so
to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified and from and after such date (unless the
Issuer shall default in the payment of the Redemption Price) such Securities
shall cease to bear interest. Upon surrender of any such Security for redemption
in accordance with said notice, such Security shall be paid by the Issuer at the
Redemption Price; provided, that installments of interest whose Stated Maturity
is on or prior to the Redemption Date shall be payable to the Holders of such
Securities, or one or more predecessor Securities, registered as such on the
relevant record dates according to the terms and the provisions of the
Securities.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal and premium and Liquidated
Damages, if any, shall, until paid, bear interest from the Redemption Date at
the rate then borne by such Security.
SECTION 3.08. Securities Redeemed in Part.
Any Security which is to be redeemed only in part shall be surrendered
to the Paying Agent at the office or agency maintained for such purpose pursuant
to Section 2.03 (with, if the Issuer, the Registrar or the Trustee so requires,
due endorsement by, or a written instrument of transfer in form satisfactory to,
the Issuer, the Registrar or the Trustee duly executed by the Holder thereof or
such Holder's attorney duly authorized in writing), and the Issuer shall
execute, and the Trustee shall authenticate and cause to be delivered to the
Holder of such Security without service charge, a new Security or Securities, of
any authorized denomination as requested by such Holder in aggregate principal
amount at maturity equal to, and in exchange for, the portion of the principal
of the Security so surrendered that is not redeemed.
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Securities.
The Issuer shall pay the principal of and premium, if any, and
interest on the Securities on the dates and in the manner provided in this
Indenture and in the Securities. An installment of principal of or premium, if
any, or interest on the Securities shall be considered paid on the date it is
due if the Trustee or Paying Agent holds at 11:00 a.m. (New York City time) on
that date U.S. Legal Tender designated for and sufficient to pay the installment
in full and is not
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prohibited from paying such money to the Holders pursuant to the terms of this
Indenture or otherwise. Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months. The Issuer shall pay all Liquidated Damages,
if any, in the same manner on the dates and in the amounts set forth in the
Registration Rights Agreement.
SECTION 4.02. Maintenance of Office or Agency.
The Issuer shall maintain the office or agency required under Section
2.03. The Issuer shall give prior notice to the Trustee of the location, and any
change in the location, of such office or agency. If at any time the Issuer
shall fail to maintain any such required office or agency or shall fail to
furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the address of the Trustee set
forth in Section 13.02.
SECTION 4.03. Corporate Existence.
Except as otherwise permitted by Article Four or Article Five, the
Issuer shall do or cause to be done all things reasonably necessary to preserve
and keep in full force and effect its corporate or other existence and the
corporate or other existence of each of its Restricted Subsidiaries in
accordance with the respective organizational documents of each such Restricted
Subsidiary and the material rights (charter and statutory) and franchises of the
Issuer and each of its Restricted Subsidiaries; except for any such existence,
material right or franchise which are not in the aggregate reasonably likely to
have a material adverse effect on the financial condition or results of
operations of the Issuer and its Restricted Subsidiaries, taken as a whole.
SECTION 4.04. Payment of Taxes and Other Claims.
The Issuer shall pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (i) all material taxes, assessments and
governmental charges (including withholding taxes and any penalties, interest
and additions to taxes) levied or imposed upon it or any of its Restricted
Subsidiaries or properties of it or any of its Restricted Subsidiaries and (ii)
all material lawful claims for labor, materials, supplies and services that, if
unpaid, might by law become a Lien upon the property of it or any of its
Restricted Subsidiaries; provided, however, that there shall not be required to
be paid or discharged any such tax, assessment, claim or charge, the amount,
applicability or validity of which is being contested in good faith by
appropriate proceedings and for which adequate provision has been made or where
the failure to effect such payment or discharge would not result in a material
adverse effect on the financial condition or results of operations of the Issuer
and its Restricted Subsidiaries, taken as a whole.
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SECTION 4.05. Maintenance of Properties and Insurance.
(a) The Issuer shall, and shall cause each of its Restricted
Subsidiaries to, maintain its material properties in normal condition (subject
to ordinary wear and tear) and make all reasonably necessary repairs, renewals
or replacements thereto as in the judgment of the Issuer may be reasonably
necessary to the conduct of the business of the Issuer and its Restricted
Subsidiaries; provided, however, that nothing in this Section 4.05 shall prevent
the Issuer or any of its Restricted Subsidiaries from discontinuing the
operation and maintenance of any of its properties, if such properties are no
longer reasonably necessary in the conduct of their respective businesses.
(b) The Issuer shall provide or cause to be provided, for itself and
each of its Restricted Subsidiaries, insurance (including appropriate self-
insurance) against loss or damage of the kinds that, in the reasonable, good
faith opinion of the Issuer are reasonably adequate and appropriate for the
conduct of the business of the Issuer and its Restricted Subsidiaries.
SECTION 4.06. Compliance Certificate; Notice of Default.
(a) The Issuer shall deliver to the Trustee, within 120 days after
the end of the Issuer's fiscal year, an Officers' Certificate (provided,
however, that one of the signatories to each such Officers' Certificate shall be
the Issuer's principal executive officer, principal financial officer or
principal accounting officer) stating that a review of its activities and the
activities of its Restricted Subsidiaries during the preceding fiscal year has
been made under the supervision of the signing officers with a view to
determining whether a Default or Event of Default has occurred and further
stating, as to each such officer signing such certificate, that to the best of
his knowledge, no Default or Event of Default occurred during such year and at
the date of such certificate there is no Default or Event of Default that has
occurred and is continuing or, if such signers do know of such Default or Event
of Default, the certificate shall describe the Default or Event of Default and
its status with particularity. The Officers' Certificate shall also notify the
Trustee should the Issuer elect to change the manner in which it fixes its
fiscal year end.
(b) (i) If any Default or Event of Default has occurred and is
continuing or (ii) if any Holder seeks to exercise any remedy hereunder with
respect to a claimed Default under this Indenture or the Securities, the Issuer
shall deliver to the Trustee by registered or certified mail or by facsimile
transmission followed by hard copy by registered or certified mail an Officers'
Certificate specifying such event, notice or other action within five Business
Days of the actual knowledge by an Authorized Officer of such occurrence.
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SECTION 4.07. Compliance with Laws.
The Issuer shall comply, and shall cause each of its Subsidiaries to
comply, with all applicable statutes, rules, regulations, orders and
restrictions of the United States of America and each other country in which the
Issuer or any of its Subsidiaries conducts business, all states and
municipalities thereof, and the SEC and any other governmental department,
board, regulatory authority, bureau, agency and instrumentality of the
foregoing, in respect of the conduct of their respective businesses and the
ownership of their respective properties, except for such noncompliances as are
not in the aggregate reasonably likely to have a material adverse effect on the
financial condition or results of operations of the Issuer and its Restricted
Subsidiaries, taken as a whole.
SECTION 4.08. Reports.
Whether or not the Issuer is then subject to Section 13 or 15(d) of
the Exchange Act, the Issuer will file with the SEC, so long as any Securities
are outstanding, the annual reports (including a "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and, with respect to
the annual financial statements, a report thereon by the Issuer's independent
accountants), quarterly reports (including a "Management's Discussion and
Analysis of Financial Condition and Results of Operations") and other periodic
reports which the Issuer would have been required to file with the SEC pursuant
to such Section 13 or 15(d) if the Issuer were so subject, and such documents
shall be filed with the SEC on or prior to the respective dates (the "Required
Filing Dates") by which the Issuer would have been required so to file such
documents if the Issuer were so subject. The Issuer will also in any event, so
long as any Securities are outstanding and whether or not the filing of such
documents by the Issuer with the SEC is prohibited under the Exchange Act,
within 15 days of each Required Filing Date, (a) transmit by mail to all Holders
of Securities, as their names and addresses appear in the Registrar's books,
without cost to such Holders and (b) file with the Trustee, copies of the annual
reports, quarterly reports and other periodic reports which the Issuer would
have been required to file with the SEC pursuant to Section 13 or 15(d) of the
Exchange Act if the Issuer were subject to such Section 13 or 15(d). The Issuer
will also comply with any other periodic reporting provisions pursuant to TIA
(S) 314(a). Delivery of such reports, information and documents to the Trustee
is for informational purposes only and the Trustee's receipt of such shall not
constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Issuer's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
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SECTION 4.09. Waiver of Stay, Extension or Usury Laws.
The Issuer will not (to the extent that it may lawfully do so) at any
time insist upon, plead, or in any manner whatsoever claim or take the benefit
or advantage of, any stay or extension law or any usury law or other law that
would prohibit or forgive the Issuer from paying all or any portion of the
principal of, premium or Liquidated Damages, if any, or interest on the
Securities as contemplated herein, wherever enacted, now or at any time
hereafter in force, or which may affect the obligations or the performance of
this Indenture; and (to the extent that it may lawfully do so) the Issuer hereby
expressly waives all benefit or advantage of any such law, and covenants that it
will not hinder, delay or impede the execution of any power herein granted to
the Trustee, but will suffer and permit the execution of every such power as
though no such law had been enacted.
SECTION 4.10. Limitation on Restricted Payments.
(a) The Issuer will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, make any Restricted Payment, unless, at
the time of and immediately after giving effect to the proposed Restricted
Payment, (i) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; (ii) the Issuer would, at
the time of such Restricted Payment and after giving pro forma effect thereto as
if such Restricted Payment had been made at the beginning of the applicable
four-quarter period, have been permitted to incur at least $1.00 of additional
Debt pursuant to the Consolidated Fixed Charge Coverage Ratio test set forth in
Section 4.12(a); and (iii) such Restricted Payment, together with the aggregate
amount of all other Restricted Payments made by the Issuer and its Restricted
Subsidiaries after the Issue Date (including Restricted Payments permitted by
clauses (i) and (v) of Section 4.10(b) and excluding the Restricted Payments
permitted by the other clauses therein), is less than or equal to the sum of (A)
50% of the Consolidated Net Income of the Issuer (or if Consolidated Net Income
shall be a loss, minus 100% of such loss) earned during the period beginning on
the first day of the first fiscal quarter immediately following the Issue Date
and ending on the last day of the fiscal quarter immediately preceding the date
the Restricted Payment is made (the "Reference Date") (treating such period as a
single accounting period) plus (B) 100% of the aggregate net proceeds (including
the fair market value of property other than cash) received by the Issuer from
any Person (other than a Subsidiary of the Issuer) from the issuance and sale
subsequent to the Issue Date of Equity Interests of the Issuer (other than
Disqualified Stock) or from the issue or sale of Disqualified Stock or debt
securities of the Issuer that have been converted into such Equity Interests
(other than Equity Interests (or Disqualified Stock or convertible debt
securities) sold to a Subsidiary of the Issuer); plus (C) without duplication of
any amounts included in clause (B) above, 100% of the aggregate net cash
proceeds of any equity contribution received by the Issuer from a holder of the
Issuer's Capital Stock (excluding, in the case of clauses (B) and (C), any net
cash proceeds from an Equity Offering to the extent used to redeem the
Securities and any net cash proceeds received by
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the Issuer from the sale of Equity Interests of the Issuer or equity
contribution which has been financed, directly or indirectly using funds (1)
borrowed from the Issuer or any of its Subsidiaries, unless and until and to the
extent such borrowing is repaid or (2) contributed, extended, guaranteed or
advanced by the Issuer or by any of its Subsidiaries), plus (D) to the extent
that any Restricted Investment that was made after the Issue Date is sold by
Issuer or any Restricted Subsidiary for cash or otherwise liquidated or repaid
for cash, the lesser of (1) the fair market value of such Restricted Investment
as of the date of such Restricted Investment or (2) the cash return of capital
with respect to such Restricted Investment (less the cost of disposition, if
any), to the extent any such amount was not otherwise included in Consolidated
Net Income, plus (E) 50% of any dividends received by the Issuer or a Restricted
Subsidiary after the Issue Date from an Unrestricted Subsidiary of the Issuer,
to the extent that such dividends were not otherwise included in Consolidated
Net Income of the Issuer for such period, plus (F) to the extent that any
Unrestricted Subsidiary is redesignated as a Restricted Subsidiary after the
Issue Date, the fair market value of the Investment made by the Issuer or any of
its Restricted Subsidiaries in such Subsidiary as of the date of such
redesignation, plus (G) $2.0 million.
For purposes of this Section 4.10(a), the fair market value of property other
than cash shall be determined in good faith by the Board of Directors and
evidenced by an Officers' Certificate filed with the Trustee, except that in the
event the value of any non-cash consideration shall be $10.0 million or more,
the value shall be determined based on an opinion or appraisal issued by an
accounting, appraisal or investment banking firm of national standing.
(b) The provisions of Section 4.10(a) will not prohibit (i) the
payment of any dividend or the consummation of any irrevocable redemption within
60 days after the date of declaration thereof or giving of irrevocable
redemption notice, if at said date of declaration or giving of notice such
payment or redemption would have complied with the provisions of this Indenture;
(ii) if no Default or Event of Default shall have occurred and be continuing,
the redemption, repurchase, retirement or other acquisition of any Equity
Interests of the Issuer or any Restricted Subsidiary of the Issuer or any
Subordinated Debt of the Issuer or any Restricted Subsidiary, in each case in
exchange for, or out of the net proceeds of, the substantially concurrent sale
(other than to a Restricted Subsidiary of the Issuer) of other Equity Interests
of the Issuer (other than any Disqualified Stock); provided, however, that the
amount of any such net proceeds that are utilized for any such redemption,
repurchase, retirement or other acquisition shall be excluded from clauses (iii)
(B) and (iii) (C) of Section 4.10(a); (iii) the redemption, repurchase,
refinancing or defeasance of Subordinated Debt in exchange for, or with the net
cash proceeds from, an incurrence of Permitted Refinancing Debt; (iv) if no
Default or Event of Default shall have occurred and be continuing, the payment
in an amount up to $1.0 million in any period of four consecutive quarters to
fund repurchases of Equity Interests therein or Debt of the Issuer issued in
connection with such Equity Interests (including, without limitation, any
payments of principal, premium or interest in respect of Employee Notes) held by
Persons who have ceased to be bona fide officers or employees of the
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Issuer or one of its Restricted Subsidiaries, provided that any unused amount
thereof may be carried forward to subsequent periods so long as the total amount
of such Restricted Payments shall not exceed $5.0 million in the aggregate (and
shall be increased by the amount of any net cash proceeds (after deducting any
premiums) to the Issuer from (A) sales of Equity Interests of the Issuer to
management employees subsequent to the Issue Date and (B) any ''key-man'' life
insurance policies which are used to make such redemptions and repurchases); (v)
repurchases of Equity Interests deemed to occur upon the exercise of stock
options if such Equity Interests represent a portion of the exercise price
thereof; and (vi) payments to the Issuer to fund the Transactions (as such term
is defined in and as described in the Final Offering Memorandum).
(c) The Board of Directors of the Issuer may designate any Restricted
Subsidiary to be an Unrestricted Subsidiary if such designation would not cause
a Default or an Event of Default. For purposes of making such determination, all
outstanding Investments by the Issuer and its Restricted Subsidiaries (except to
the extent repaid in cash) in the Subsidiary so designated will be deemed to be
Restricted Payments at the time of such designation and will reduce the amount
available for Restricted Payments under Section 4.10(a). All such outstanding
Investments will be deemed to constitute Investments in an amount equal to the
greater of (i) the net book value of such Investments at the time of such
designation and (ii) the fair market value of such Investments at the time of
such designation. Such designation will only be permitted if such Restricted
Payment would be permitted at such time and if such Restricted Subsidiary
otherwise meets the definition of an Unrestricted Subsidiary.
SECTION 4.11. Limitation on Transactions with Related Persons.
The Issuer will not, nor will it permit any of its Restricted
Subsidiaries to, directly or indirectly (i) sell, lease, transfer or otherwise
dispose of any of its property to, (ii) purchase any property from, (iii) make
any Investment in, or (iv) enter into or amend any contract, agreement or
understanding with, or for the benefit of, any of its Related Persons (each a
"Related Person Transaction"), other than Related Person Transactions that are
no less favorable to the Issuer or such Restricted Subsidiary than those that
could be obtained in a comparable arm's length transaction by the Issuer or such
Restricted Subsidiary from an unrelated party; provided that the Issuer delivers
to the Trustee (A) with respect to any Related Person Transaction (or series of
Related Person Transactions which are similar or part of a common plan)
involving aggregate payments in excess of $5.0 million, a resolution of the
Board of Directors set forth in an Officers' Certificate certifying that such
Related Person Transaction complies with the preceding sentence and such Related
Person Transaction was approved by a majority of the disinterested members of
the Board of Directors of the Issuer and (B) with respect to any Related Person
Transaction (or series of Related Person Transactions which are similar or part
of a common plan) involving aggregate payments in excess of $10.0 million, an
affirmative opinion as to the fairness to the Issuer or such Restricted
Subsidiary, as the case may be, from a financial point of view issued by a
nationally recognized accounting,
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appraisal, investment banking or consulting firm that is, in the judgment of the
Board of Directors of the Issuer, independent and qualified to render such
opinion. The foregoing restrictions shall not apply to: (i) any transactions
between Wholly Owned Restricted Subsidiaries of the Issuer, or between the
Issuer and any Wholly Owned Restricted Subsidiary of the Issuer, if such
transaction is not otherwise prohibited by the terms of this Indenture; (ii)
Restricted Payments permitted under Section 4.10; (iii) customary directors'
fees, indemnification and similar arrangements, employee salaries, bonuses or
employment agreements, compensation or employee benefit arrangements and
incentive arrangements with any officer, director or employee of the Issuer or
any Restricted Subsidiary entered into in the ordinary course of business
(including customary benefits thereunder); (iv) transactions undertaken pursuant
to the Executive Securities Agreement, Registration Agreement, Securityholders
Agreement or any similar agreement entered into after the date of this Indenture
to the extent the terms of any such new agreement are not disadvantageous to the
Holders of the Securities in any material respect; (v) the issue and sale by the
Issuer to its shareholders of Equity Interests other than Disqualified Stock;
(vi) the incurrence of intercompany Debt permitted pursuant to Section 4.12;
(vii) the pledge of Equity Interests of Unrestricted Subsidiaries to support the
Debt thereof; (viii) transactions that are permitted by Section 5.01; (ix)
transactions effected as a part of a Qualified Securitization Transaction; (x)
transactions with customers, clients, suppliers, joint venture partners or
purchasers or sellers of goods and services, in each case in the ordinary course
of business (including, without limitation, pursuant to joint venture
agreements) and otherwise in compliance with the terms of this Indenture which
are on terms at least as favorable as might reasonably have been obtained at
such time from an unaffiliated party; (xi) payments made pursuant to the
Consulting Agreement and the Tax Sharing Agreement; (xii) subject to the
limitation set forth in the following sentence, payments made pursuant to the
Management Agreement; and (xiii) transactions undertaken pursuant to the Asset
Drop Down (as defined in the Final Offering Memorandum). Without limiting the
foregoing after the occurrence and during the continuance of an Event of
Default, the Issuer will not, nor will it permit any of its Restricted
Subsidiaries to, directly or indirectly, make any payment to any Related Person
in respect of management, advisory or similar services, including, without
limitation, any payment pursuant to the Management Agreement; provided, that the
foregoing shall not limit the ability of the Issuer or any Restricted Subsidiary
to enter into transactions described in clauses (iii), (iv) and (xi) above.
SECTION 4.12. Limitation on Incurrence of Debt and Issuance of Preferred Stock.
(a) The Issuer will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable, contingently or otherwise,
with respect to (collectively, "incur") any Debt (including Acquired Debt) and
the Issuer will not issue any Disqualified Stock and will not permit any of its
Restricted Subsidiaries to issue any shares of preferred stock; provided,
however, that if no Default or Event of Default shall have occurred and be
continuing at the time or as a consequence thereof, the Issuer may incur Debt
(including Acquired Debt) or issue shares of Disqualified Stock
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and any Restricted Subsidiary may incur Debt (including Acquired Debt) or issue
preferred stock if the Consolidated Fixed Charge Coverage Ratio for the Issuer's
most recently ended four full fiscal quarters for which financial statements are
available immediately preceding the date on which such additional Debt is
incurred or such Disqualified Stock or preferred stock is issued would have been
at least 1.75 to 1.0, determined on a pro forma basis (including a pro forma
application of the net proceeds therefrom), as if the additional Debt had been
incurred, or the Disqualified Stock or preferred stock had been issued, as the
case may be, at the beginning of such four-quarter period.
(b) The provisions of Section 4.12(a) will not apply to the
incurrence of any of the following items of Debt (collectively, "Permitted
Debt"):
(i) the incurrence by the Issuer or any of the Restricted
Subsidiaries of Debt under the Senior Credit Facility (or if the
Senior Credit Facility has matured or been terminated or repaid in
whole or in part, any other Credit Facility) in an aggregate principal
amount at any time outstanding not to exceed $165.0 million, which
amount shall be reduced by (A) any required permanent repayments
pursuant to the provisions of Section 4.16 (which are accompanied by a
corresponding permanent commitment reduction thereunder), (B) the
aggregate amount of any Debt constituting Limited Originator Recourse
outstanding pursuant to clause (xi) below and (C) the principal amount
of Debt outstanding pursuant to clause (x) below;
(ii) (A) the incurrence by the Issuer and its Restricted
Subsidiaries of Existing Debt and (B) the incurrence by Globe
Manufacturing of Debt represented by the Senior Subordinated Notes
outstanding on the Issue Date (and any notes issued in exchange
therefore) and any guarantee by any Restricted Subsidiary of such
notes;
(iii) the incurrence by the Issuer of Debt represented by the
Securities;
(iv) the incurrence by the Issuer or any of its Restricted
Subsidiaries of Permitted Refinancing Debt in exchange for, or the net
proceeds of which are used to refund, refinance or replace, Debt that
was permitted by this Indenture to be incurred;
(v) the incurrence by the Issuer or any of its Restricted
Subsidiaries of intercompany Debt between or among the Issuer and any
of its Restricted Subsidiaries; provided, however, that (A) if the
Issuer is the obligor on such Debt, such Debt is expressly
subordinated to the prior payment in full in cash of all Obligations
with respect to the Securities and (B) (1) any subsequent issuance or
transfer (other than any bona fide pledge under the Senior Credit
Facility) of Equity
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Interests that results in any such Debt being held by a Person other
than the Issuer or a Restricted Subsidiary and (2) any sale or other
transfer (other than any bona fide pledge under the Senior Credit
Facility) of any such Debt to a Person that is not either the Issuer
or a Restricted Subsidiary shall be deemed, in each case, to
constitute an incurrence of such Debt by the Issuer or such
Subsidiary, as the case may be;
(vi) the incurrence by the Issuer or any of its Restricted
Subsidiaries of Hedging Obligations that are incurred for the purpose
of fixing or hedging interest rate risk with respect to any floating
rate Debt that is permitted by the terms of this Indenture to be
outstanding or for the purpose of fixing or hedging currency exchange
risk with respect to any currency exchanges;
(vii) Capitalized Lease Obligations and Purchase Money
Obligations of the Issuer and its Restricted Subsidiaries not to
exceed $5.0 million in aggregate principal amount (or accrued value,
as applicable) at any time outstanding;
(viii) Guarantees by the Issuer of Debt of any Restricted
Subsidiaries otherwise permitted by this Section 4.12 and guarantees
by any of the Issuer's Restricted Subsidiaries of Debt of the Issuer
or any of the Issuer's Restricted Subsidiaries;
(ix) Debt of the Issuer or any Restricted Subsidiary in
respect of performance bonds, bankers' acceptances, trade letters of
credit, workers' compensation or self-insurance, surety bonds and
guarantees provided by the Issuer or any Restricted Subsidiary in the
ordinary course of business;
(x) Debt of Foreign Restricted Subsidiaries incurred for
working capital purposes in an aggregate principal amount outstanding
at any one time not to exceed the sum of 85% of the net book value of
such Subsidiaries' accounts receivable determined in accordance with
GAAP and 60% of the net book value of their inventory determined in
accordance with GAAP and guarantees by Foreign Restricted Subsidiaries
of such Debt (which Debt shall reduce the aggregate Debt permitted
pursuant to clause (i) above in the manner contemplated thereby);
(xi) the incurrence by (A) a Securitization Entity of Debt in
a Qualified Securitization Transaction that is Non-Recourse Debt with
respect to the Issuer and its other Restricted Subsidiaries (except
for Standard Securitization Undertakings and Limited Originator
Recourse) or (B) the Issuer or any Restricted Subsidiary of Debt
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constituting Limited Originator Recourse (which Debt shall reduce the
aggregate Debt permitted pursuant to clause (i) above in the manner
contemplated thereby);
(xii) Debt arising from agreements of the Issuer or a
Restricted Subsidiary of the Issuer providing for indemnification,
adjustment of purchase price, earn-out or other similar obligations,
in each case, incurred or assumed in connection with the disposition
of any business, assets or a Restricted Subsidiary of the Issuer,
other than guarantees of Debt incurred by any Person acquiring all or
any portion of such business, assets or Restricted Subsidiary for the
purpose of financing such acquisition;
(xiii) the incurrence by the Issuer of Subordinated Debt to
repurchase Equity Interests in the Issuer from Persons who have ceased
to be bona fide officers or employees of the Issuer or one or more of
its Restricted Subsidiaries ("Employee Notes"); provided that the
instrument governing any such Employee Note shall expressly provide
that any payments in respect of such note may be made only to the
extent permitted in accordance with Section 4.10; and
(xiv) the incurrence by the Issuer or any of its Restricted
Subsidiaries of additional Debt in an aggregate principal amount (or
accrued value, as applicable) at any time outstanding, including all
Permitted Refinancing Debt incurred to refund, refinance or replace
any other Debt incurred pursuant to this clause (xiv), not to exceed
$40.0 million (which amount may, but need not, be incurred in whole or
in part under the Senior Credit Facility).
(c) For purposes of determining compliance with this Section 4.12, in
the event that an item of Debt meets the criteria of more than one of the
categories of Permitted Debt described in clauses (i) through (xiii) of Section
4.12(b) or is entitled to be incurred pursuant to Section 4.12(a), the Issuer
shall, in its sole discretion, classify such item of Debt in any manner that
complies with this Section 4.12 and such item of Debt will be treated as having
been incurred pursuant to only one of such clauses of Section 4.12(b) or
pursuant to Section 4.12(a). Accrual of interest, the accretion of accrued value
and the payment of interest in the form of additional Debt will not be deemed to
be an incurrence of Debt for purposes of this Section 4.12.
SECTION 4.13. Payment Restrictions Affecting Restricted Subsidiaries.
The Issuer will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to (i) (A) pay dividends or make any other distributions
to the Issuer or any of its Restricted Subsidiaries (1) on its Capital Stock or
(2) with
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respect to any other interest or participation in, or measured by, its profits,
or (B) pay any indebtedness owed to the Issuer or any of its Restricted
Subsidiaries, (ii) make loans or advances to the Issuer or any of its Restricted
Subsidiaries or (iii) transfer any of its properties or assets to the Issuer or
any of its Restricted Subsidiaries, except for such encumbrances or restrictions
existing under or by reason of (A) Existing Debt, (B) the Senior Credit Facility
as in effect on the date of this Indenture, and any amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements or
refinancings thereof, provided that such amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacement or
refinancings are not materially more restrictive taken as a whole with respect
to such dividend and other payment restrictions than those contained in the
Senior Credit Facility as in effect on the date of this Indenture (as determined
by the Board of Directors of the Issuer in its reasonable and good faith
judgment), (C) (1) this Indenture and the Securities and (2) the Senior
Subordinated Note Indenture and the Senior Subordinated Notes, (D) applicable
law, (E) any instrument governing Debt or Capital Stock of a Person acquired by
the Issuer or any of its Restricted Subsidiaries as in effect at the time of
such acquisition (except to the extent such Debt was incurred or such
encumbrance or restriction was established in connection with or in
contemplation of such acquisition), which encumbrance or restriction is not
applicable to any Person, or the properties or assets of any Person, other than
the Person, or the property or assets of the Person, so acquired, provided that,
in the case of Debt, such Debt was permitted by the terms of this Indenture to
be incurred, (F) customary non-assignment provisions in leases and other
agreements entered into in the ordinary course of business and consistent with
past practices, restricting assignment or restricting transfers of non-cash
assets, (G) Purchase Money Obligations for property acquired in the ordinary
course of business and other Liens permitted by this Indenture, in each case
that impose restrictions of the nature described in clause (iii) above on the
property so acquired (or subject to such Liens), (H) Debt permitted under clause
(x) of Section 4.12(b), (I) Permitted Refinancing Debt, provided that the
restrictions contained in the agreements governing such Permitted Refinancing
Debt are not materially more restrictive taken as a whole than those contained
in the agreements governing the Debt being refinanced (as determined by the
Board of Directors of the Issuer in its reasonable and good faith judgment), (J)
contracts for the sale of assets or Equity Interests to the extent that any such
contract imposes restrictions of the nature described in clause (iii) above on
the property to be sold, (K) any pledge by the Issuer or a Restricted Subsidiary
of the Equity Interests of an Unrestricted Subsidiary to support the Debt
thereof, (L) secured Debt otherwise permitted to be incurred pursuant to Section
4.17 that limits the right of the debtor to dispose of the assets securing such
Debt, (M) provisions with respect to the disposition or distribution of assets
or property in joint venture agreements and other similar agreements entered
into in the ordinary course of business, (N) restrictions on cash or other
deposits or net worth imposed by customers under contracts entered into in the
ordinary course of business, (O) any Debt or other contractual requirements of a
Securitization Entity in connection with a Qualified Securitization Transaction;
provided that such restrictions apply only to such Securitization Entity, (P)
other Debt of a Restricted Subsidiary that is permitted to be incurred
subsequent to the date of this Indenture pursuant to Section 4.12; provided that
any
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such restrictions are ordinary and customary with respect to the type of Debt or
preferred stock being incurred or issued (under the relevant circumstances), or
(Q) any encumbrances or restrictions imposed by any amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements or
refinancings of the contracts, instruments or obligations referred to in clauses
(A) through (P) above, provided that such amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements or
refinancings are, in the good faith judgment of the Board of Directors of the
Issuer, not materially more restrictive with respect to such dividend and other
payment restrictions than those contained in the dividend or other payment
restrictions prior to such amendment, modification, restatement, renewal,
increase, supplement, refunding, replacement or refinancing.
SECTION 4.14. [Intentionally Omitted.]
SECTION 4.15. Change of Control.
(a) Upon the occurrence of a Change of Control, each Holder of
Securities may require the Issuer to repurchase all or a portion of such
Holder's Securities pursuant to the offer described in Section 4.15(b) (the
"Change of Control Offer") at an offer price in cash on or prior to August 1,
2003, equal to 101% of the Accreted Value thereof, together with Liquidated
Damages, if any, to the date of repurchase and thereafter at a price in cash
equal to 101% of the aggregate principal amount at maturity thereof plus accrued
and unpaid interest thereon, if any, to the date of repurchase (the "Change of
Control Payment"). Prior to the mailing of the notice referred to in Section
4.15(b), but in any event within 90 days following the date on which a Change of
Control occurs, the Issuer covenants to (i) repay in full in cash all
outstanding Senior Debt under the Senior Credit Facility (and terminate all
commitments thereunder) and all other Senior Debt the terms of which require
repayment upon a Change of Control, or (ii) obtain the requisite consents under
the Senior Credit Facility and all such other Senior Debt to permit the
repurchase of the Securities as provided in this Section 4.15. The Issuer shall
first comply with the covenant in the immediately preceding sentence before it
shall be required to repurchase the Securities pursuant to the provisions
described in this Section 4.15; provided that the Issuer's failure to comply
with such covenant resulting in a failure to mail the notice referred to in
Section 4.15(b) shall constitute an Event of Default under Section 6.01(3) and
not under Section 6.01(2).
(b) Within 30 days following the date upon which a Change of Control
occurs (the "Change of Control Date"), the Issuer shall send, by first class
mail, a notice to each Holder of the Securities, with a copy to the Trustee,
which notice shall govern the terms of the Change of Control Offer. The notice
to the Holders shall contain all instructions and materials necessary to enable
such Holders to tender the Securities pursuant to the Change of Control Offer.
Such notice shall state:
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(1) that a Change of Control has occurred and that such Holder
has the right to require the Issuer to repurchase all or a portion
(equal to $1,000 principal amount or an integral multiple thereof) of
such Holder's Securities at a purchase price in cash, on or prior to
August 1, 2003, equal to 101% of the Accreted Value thereof, together
with Liquidated Damages, if any, to the date of repurchase and
thereafter at a price in cash equal to 101% of the aggregate principal
amount at maturity thereof, plus accrued and unpaid interest to the
date of purchase (the "Change of Control Payment Date"), which shall
be a Business Day, specified in such notice, that is not earlier than
30 days or later than 60 days from the date such notice is mailed;
(2) the amount of Liquidated Damages or accrued and unpaid
interest, as the case may be, as of the Change of Control Payment
Date;
(3) that any Security not tendered will continue to accrete or
accrue interest, as the case may be;
(4) that, unless the Issuer defaults in the payment of the
purchase price for the Securities payable pursuant to the Change of
Control Offer, any Securities accepted for payment pursuant to the
Change of Control Offer shall cease to accrete or accrue interest, as
the case may be, after the Change of Control Payment Date;
(5) that Holders electing to have Securities purchased pursuant
to a Change of Control Offer will be required to surrender the
Securities, with the forms entitled "Option of Holder to Elect
Purchase" on the reverse of the Securities completed, to the Paying
Agent at the address specified in the notice prior to the close of
business on the third Business Day prior to the Change of Control
Payment Date;
(6) that Holders will be entitled to withdraw their election if
the Paying Agent receives, not later than five Business Days prior to
the Change of Control Payment Date, a facsimile transmission or letter
setting forth the name of the Holder, the principal amount and
certificate number of the Security or Securities the Holder delivered
for purchase and a statement that such Holder is withdrawing his
election to have such Security or Securities purchased;
(7) that Holders whose Securities are purchased only in part
will be issued new Securities in a principal amount equal to the
unpurchased portion of the Securities surrendered, provided that each
new Security will be in a principal amount of $1,000 or an integral
multiple thereof; and
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(8) such other information as may be required by applicable laws
and regulations.
(c) On the Change of Control Payment Date, the Issuer will, to the
extent lawful, (i) accept for payment all Securities or portions thereof
properly tendered pursuant to the Change of Control Offer, (ii) deposit with the
Trustee an amount equal to the Change of Control Payment in respect of all
Securities or portions thereof so tendered , and (iii) deliver or cause to be
delivered to the Trustee the Securities so accepted pursuant to such Change of
Control Offer together with an Officers' Certificate stating the aggregate
principal amount of Securities or portions thereof being purchased by the
Issuer. The Paying Agent shall promptly mail to each Holder of Securities or
portions thereof accepted for payment an amount equal to the Change of Control
Payment for such Securities or portion thereof, and the Trustee shall promptly
authenticate and mail (or cause to be transferred by book entry) to such Holder
of Securities accepted for payment in part a new Security or Securities equal in
principal amount to any unpurchased portion of such Holder's Securities,
provided that each such new Security will be in a principal amount of $1,000 or
an integral multiple thereof, and any Security not accepted for payment in whole
or in part shall be promptly returned to the Holder of such Security. On and
after a Change of Control Payment Date, value will cease to accrete or interest
will cease to accrue, as the case may be, on the Securities or portions thereof
accepted for payment, unless the Issuer defaults in the payment of the purchase
price therefor. The Issuer will announce the results of the Change of Control
Offer to Holders of the Securities on or as soon as practicable after the Change
of Control Payment Date.
(d) The Issuer will not be required to make a Change of Control Offer
upon a Change of Control if (i) a third party makes the Change of Control Offer
in the manner, at the times and otherwise in compliance with the requirements
set forth in this Section 4.15 applicable to a Change of Control Offer made by
the Issuer and purchases all Securities validly tendered and not withdrawn under
such Change of Control Offer or (ii) all of the Securities have been called for
redemption pursuant to the provisions of Section 3.01.
(e) The Issuer will comply with the requirements of Rule 14e-l under
the Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of the Securities pursuant to a Change of Control Offer. To the
extent the provisions of any such rule conflict with the provisions of this
Section 4.15, the Issuer shall comply with the provisions of such rule and be
deemed not to have breached its obligations under this Section 4.15.
SECTION 4.16. Limitation on Asset Sales.
(a) The Issuer will not, and will not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless (i) the Issuer (or the
Restricted Subsidiary, as the case may be)
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receives consideration at the time of such Asset Sale at least equal to the fair
market value (evidenced by a resolution of the Board of Directors of the Issuer
set forth in an Officers' Certificate delivered to the Trustee) of the assets or
Equity Interests issued or sold or otherwise disposed of and (ii) at least 75%
of the consideration therefor received by the Issuer or such Restricted
Subsidiary is in the form of cash, Cash Equivalents or properties and assets to
be used in the Issuer's business or Equity Interests in a Person that becomes a
Restricted Subsidiary and is received at the time of such disposition; provided
that the amount of any Senior Debt (as shown on the most recent consolidated
balance sheet of the Issuer) of the Issuer or any Restricted Subsidiary that is
assumed by the transferee of any such assets pursuant to a customary novation
agreement or other agreement that releases or indemnifies the Issuer or such
Restricted Subsidiary from further liability shall be deemed to be cash for
purposes of this Section 4.16(a).
(b) Within 365 days after the receipt of any Net Proceeds from an
Asset Sale, the Issuer or such Restricted Subsidiary may apply such Net Proceeds
at its option, (i) to permanently repay, reduce, or secure letters of credit in
respect of, indebtedness under the Senior Credit Facility or Senior Debt of the
Issuer or any Wholly Owned Restricted Subsidiary (and to correspondingly reduce
commitments with respect thereto in the case of revolving borrowings), and/or
(ii) to the acquisition of a controlling interest in another business, the
making of a capital expenditure or Permitted Investment or the acquisition of
other assets, in each case, for use in the same or a similar line of business as
the Issuer or any Restricted Subsidiary was engaged in on the date of such Asset
Sale or reasonable extensions thereof. Pending the final application of any such
Net Proceeds, the Issuer or such Restricted Subsidiary may temporarily reduce
indebtedness under the Senior Credit Facility (or any alternative or subsequent
revolving credit agreement where borrowings thereunder constitute Senior Debt)
or otherwise invest such Net Proceeds in any manner that is not prohibited by
this Indenture. Any Net Proceeds from Asset Sales that are not applied or
invested as provided in the first sentence of this Section 4.16(b) will be
deemed to constitute "Excess Proceeds."
(c) Within 15 days after the date on which the aggregate amount of
Excess Proceeds exceeds $10.0 million, the Issuer will be required to make an
offer (an "Asset Sale Offer") to all Holders of Securities and holders of any
other Pari Passu Debt outstanding with provisions requiring the Issuer to make
an offer to purchase or redeem such indebtedness with the proceeds from any
Asset Sale as follows: (i) the Issuer will make a written offer to purchase from
all Holders of the Securities in accordance with the procedures set forth in
this Indenture in the maximum principal amount (expressed as a multiple of
$1,000) of Securities that may be purchased out of an amount (the "Security
Amount") equal to the product of such Excess Proceeds multiplied by a fraction,
the numerator of which is the outstanding principal amount of the Securities,
and the denominator of which is the sum of the outstanding principal amount of
the Securities and such Pari Passu Debt (subject to proration in the event such
amount is less than the aggregate Asset Sale Offered Price of all Securities
tendered), and (ii) to the extent required by such Pari Passu Debt to
permanently reduce the principal amount of such Pari Passu Debt, the Issuer will
make an offer to
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purchase or otherwise repurchase or redeem Pari Passu Debt (an "Asset Sale Pari
Passu Offer") in an amount (the "Pari Passu Debt Amount") equal to the excess of
the Excess Proceeds over the Security Amount; provided that in no event will the
Issuer be required to make an Asset Sale Pari Passu Offer in a Pari Passu Debt
Amount exceeding the principal amount of such Pari Passu Debt plus the amount of
any premium required to be paid to repurchase such Pari Passu Debt. The offer
price for the Securities will be payable in cash in an amount equal to (a) 100%
of the Accreted Value thereof, together with Liquidated Damages, if any, at the
date such Asset Sale Offer is consummated, if consummated on or prior to August
1, 2003 and (b) 100% of the principal amount of the Securities, plus accrued and
unpaid interest, if any, to the date such Asset Sale Offer is consummated, if
consummated after August 1, 2003, in each case, in accordance with the
procedures set forth in this Indenture. The date on which any Asset Sale is
consummated is herein referred to as the "Asset Sale Offer Date" and the offer
price applicable to any Asset Sale Offer is herein referred to as the "Asset
Sale Offer Price." To the extent that the aggregate Asset Sale Offered Price of
the Securities tendered pursuant to the Asset Sale Offer is less than the
Security Amount relating thereto or the aggregate amount of Pari Passu Debt that
is purchased in an Asset Sale Pari Passu Offer is less than the Pari Passu Debt
Amount, the Issuer may use any remaining Excess Proceeds for any purpose not
otherwise prohibited by this Indenture. If the aggregate principal amount of
Securities and Pari Passu Debt surrendered by holders thereof exceeds the amount
of Excess Proceeds, the Trustee shall select the Securities to be purchased on a
pro rata basis. Upon the completion of the purchase of all the Securities
tendered pursuant to an Asset Sale Offer and the completion of a Pari Passu
Offer, the amount of Excess Proceeds, if any, shall be reset at zero.
(d) If the Issuer becomes obligated to make an Asset Sale Offer
pursuant to Section 4.16(c), the Securities and the Pari Passu Debt shall be
purchased by the Issuer, at the option of the holders thereof, in whole or in
part in integral multiples of $1,000, on a date that is not earlier than 30 days
and not later than 60 days from the date the notice of the Asset Sale Offer is
given to holders, or such later date as may be necessary for the Issuer to
comply with the requirements under the Exchange Act.
(e) The Issuer will comply with the requirements of Rule 14e-1 under
the Exchange Act and any other applicable securities laws or regulations in
connection with an Asset Sale Offer. To the extent that the provisions of any
securities laws or regulations conflict with this Section 4.16, the Issuer shall
comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations under this Section 4.16 by virtue
thereof.
SECTION 4.17. Limitation on Liens.
The Issuer will not directly or indirectly create, incur, assume or
suffer to exist any Lien (other than Permitted Liens) that secures Debt or trade
payables unless (i) in the case of Liens securing Subordinated Debt, the
Securities are secured on a senior basis to the obligations so secured
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until such time as such obligations are no longer secured by a Lien and (ii) in
the case of Liens securing obligations under Pari Passu Debt, the Securities are
equally and ratably secured with the obligations so secured until such time as
such obligations are no longer secured by a Lien.
SECTION 4.18. [Intentionally Omitted.]
SECTION 4.19. Conduct of Business of the Issuer and Its Restricted Subsidiaries.
The Issuer and its Restricted Subsidiaries will not engage in any
businesses which are not the same, similar or related to the businesses in which
the Issuer and its Restricted Subsidiaries are engaged as of the Issue Date (or
any reasonable extension or expansion thereof), except to such extent as would
not be material to the Issuer and its Restricted Subsidiaries taken as a whole.
SECTION 4.20. [Intentionally Omitted.]
SECTION 4.21. Rule 144A Information Requirement.
The Issuer will furnish to the Holders or beneficial holders of the
Securities and prospective purchasers of Securities designated by the Holders of
Securities, upon their request, the information required to be delivered
pursuant to Rule 144A(d)(4) under the Securities Act for so long as is required
for an offer or sale of the Securities to qualify for an exemption under Rule
144A.
SECTION 4.22. Issuance and Sale of Capital Stock of Restricted Subsidiaries.
The Issuer (i) will not, and will not permit any of its Restricted
Subsidiaries to, transfer, convey, sell, lease or otherwise dispose of any
Capital Stock of any Restricted Subsidiary to any Person (other than to the
Issuer or a Wholly Owned Restricted Subsidiary) and (ii) will not permit any
Restricted Subsidiary to issue any of its Capital Stock to any Person other than
to the Issuer or a Wholly Owned Restricted Subsidiary, in each case unless the
Net Proceeds from such transfer, sale or other disposition are applied in
accordance with Section 4.16.
SECTION 4.23. Limitation on Sale and Lease-Back Transactions.
The Issuer will not, and will not permit any of its Restricted
Subsidiaries to, enter into any Sale and Lease-Back Transaction; provided that
the Issuer or any Restricted Subsidiaries may enter into a Sale and Lease-Back
Transaction if: (i) the Issuer, or such Restricted Subsidiary, if applicable,
could have (A) incurred Debt in an amount equal to the Attributable Debt
relating to such Sale and Lease-Back Transaction pursuant to the Consolidated
Fixed Charge Coverage Ratio test set forth in Section 4.12(a) and (B) incurred a
Lien to secure such Debt pursuant to Section 4.17; (ii)
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the gross cash proceeds of such Sale and Lease-Back Transaction are at least
equal to the fair market value (as determined in good faith by the Board of
Directors pursuant to a Board Resolution) of the property that is the subject of
such Sale and Lease-Back Transaction; and (iii) the transfer of assets in such
Sale and Lease-Back Transaction is permitted by, and the Issuer applies the
proceeds of such transaction in compliance with, Section 4.16.
SECTION 4.24. Payments for Consent.
Neither the Issuer 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, to any Holder of any Securities for or as an
inducement to any consent, waiver or amendment of any of the terms or provisions
of this Indenture or the Securities unless such consideration is offered to be
paid or agreed to be paid to all Holders of the Securities that consent, waive
or agree to amend in the time frame set forth in the solicitation documents
relating to such consent, waiver or agreement, which solicitation documents must
be mailed to all Holders of the Securities a reasonable length of time prior to
the expiration of the solicitation.
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. Merger, Consolidation or Sale of Assets.
The Issuer will not consolidate or merge with or into, or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially all
of the Issuer's consolidated properties or assets in one or more related
transactions, to another corporation or other Person unless: (i) the Issuer is
the surviving corporation or the Person (if other than the Issuer) formed by
such consolidation or into which the Issuer is merged or the Person that
acquires by conveyance, transfer or lease substantially all of the properties
and assets of the Issuer (the "Surviving Entity") shall be a corporation
organized and validly existing under the laws of the United States or any state
thereof or the District of Columbia; (ii) if the Issuer is not the surviving
corporation, the Surviving Entity assumes all the obligations of the Issuer
under the Securities and this Indenture pursuant to a supplemental indenture in
a form reasonably satisfactory to the Trustee; (iii) immediately after such
transaction, no Default or Event of Default exists; (iv) except in the case of a
merger of the Issuer with or into a Wholly Owned Restricted Subsidiary of the
Issuer or a merger entered into solely for the purpose of reincorporating the
Issuer in another jurisdiction, the Issuer or the Surviving Entity, as the case
may be, (A) will have Consolidated Net Worth immediately after the transaction
equal to or greater than the Consolidated Net Worth of the Issuer immediately
preceding the transaction and (B) will, at the time of such transaction and
after giving pro forma effect thereto as if such transaction had occurred
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at the beginning of the applicable four-quarter period, be permitted to incur at
least $1.00 of additional Debt pursuant to the Consolidated Fixed Charge
Coverage Ratio test set forth in Section 4.12(a); and (v) the Issuer or the
Surviving Entity, as the case may be, shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, sale, assignment transfer, lease, conveyance or other
disposition and, if a supplemental indenture is required in connection with such
transaction, such supplemental indenture comply with the applicable provisions
of this Indenture and that all conditions precedent in this Indenture relating
to such transaction have been satisfied.
SECTION 5.02. Successor Corporation Substituted.
Upon any consolidation, combination or merger or any transfer of all
or substantially all of the assets of the Issuer in accordance with Section
5.01, in which the Issuer is not the continuing corporation, the successor
Person formed by such consolidation or into which the Issuer is merged or to
which such sale, assignment, transfer or other disposition is made shall succeed
to, and be substituted for, and may exercise every right and power of, the
Issuer under this Indenture and the Securities with the same effect as if such
successor had been named as the Issuer herein.
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default.
Each of the following shall be an "Event of Default":
(1) the failure to pay interest on any Securities when such interest
becomes due and payable and the default continues for a period of 30 days;
(2) the failure to pay the principal of or premium, if any, on any
Securities when such principal or premium, if any, becomes due and payable,
at maturity, upon acceleration, upon optional or mandatory redemption, upon
required repurchase or otherwise (including the failure to make a payment
to repurchase Securities tendered pursuant to a Change of Control Offer or
an Asset Sales Offer) (whether or not such payment shall be prohibited by
Article Ten);
(3) the failure by the Issuer or any of its Restricted Subsidiaries
to conform or comply with any covenant, agreement or warranty contained in
Sections 4.15 or 4.16 or Article Five, or the corresponding provisions of
the Securities, for 30 days after notice
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thereof has been given to the Issuer by the Trustee or by the Holders of at
least 25% in aggregate principal amount at maturity of the then outstanding
Securities;
(4) the failure by the Issuer or any of its Restricted Subsidiaries
to conform or comply with any other covenant, agreement or warranty in the
Securities or this Indenture for 60 days after notice thereof has been
given to the Issuer by the Trustee or by the Holders of at least 25% in
aggregate principal amount at maturity of the then outstanding Securities;
(5) [Intentionally Omitted.]
(6) a default under any mortgage, indenture, agreement or instrument
under which there may be issued or by which there may be secured or
evidenced any Debt for money borrowed by the Issuer or any of its
Restricted Subsidiaries (other than a Securitization Entity) (or the
payment of which is guaranteed by the Issuer or any of its Restricted
Subsidiaries (other than a Securitization Entity)) whether such Debt or
guarantee now exists, or is created after the date of this Indenture, which
default (a) is caused by a failure to pay the principal amount of such Debt
at the final Stated Maturity thereof (giving effect to any applicable grace
periods and any extensions thereof) (a "Payment Default") or (b) results in
the acceleration of such Debt prior to its final Stated Maturity and, in
the case of either clause (a) or (b), the principal amount of any such
Debt, together with the principal amount of any other such Debt under which
there has been a Payment Default or the maturity of which has been so
accelerated, aggregates $7.5 million or more;
(7) the failure by the Issuer or any of its Significant Subsidiaries
to pay final judgments aggregating in excess of $7.5 million (to the extent
not covered by third party insurance as to which the insurance company has
acknowledged coverage), which judgments are not paid, discharged or stayed
for a period of 60 days after their entry;
(8) there shall have been the entry by a court of competent
jurisdiction of (a) a decree or order for relief in respect of the Issuer
or any of its Significant Subsidiaries in an involuntary case or proceeding
under any applicable Bankruptcy Law or (b) a decree or order adjudging the
Issuer or any of its Significant Subsidiaries bankrupt or insolvent, or
seeking reorganization, arrangement, adjustment or composition of or in
respect of the Issuer or any of its Significant Subsidiaries under any
applicable federal, state or foreign law, or appointing a custodian,
receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of the Issuer or any of its Significant Subsidiaries or of
substantially all of their respective properties, or ordering the winding
up or liquidation of their affairs, and any such decree or order for relief
shall continue to be in effect, or any such other decree or order shall be
unstayed and in effect, for a period of 60 days, provided that if any order
is dismissed on appeal then such Event of Default shall be deemed cured; or
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(9) (a) the Issuer or any of its Significant Subsidiaries commences a
voluntary case or proceeding under any applicable Bankruptcy Law or any
other case or proceeding to be adjudicated bankrupt or insolvent, (b) the
Issuer or any of its Significant Subsidiaries consents to the entry of a
decree or order for relief in respect of the Issuer or such Significant
Subsidiary in an involuntary case or proceeding under any applicable
Bankruptcy Law or to the commencement of any bankruptcy or insolvency case
or proceeding against it, (c) the Issuer or any of its Significant
Subsidiaries files a petition or answer or consent seeking reorganization
or relief under any applicable federal, state or foreign bankruptcy law,
(d) the Issuer or any of its Significant Subsidiaries (x) consents to the
filing of such petition or the appointment of or taking possession by, a
custodian, receiver, liquidator, assignee, trustee, sequestrator or other
similar official of the Issuer or such Significant Subsidiary or of
substantially all of their respective property, or (y) makes an assignment
for the benefit of creditors or (e) the Issuer or any of its Significant
Subsidiaries takes any corporate action in furtherance of any such actions
in this paragraph (9).
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Issuer with the
intention of avoiding payment of the premium that the Issuer would have had to
pay if the Issuer then had elected to redeem the Securities pursuant to the
optional redemption provisions of this Indenture, an equivalent premium shall
also become and be immediately due and payable to the extent permitted by law
upon the acceleration of the Securities. If an Event of Default occurs by reason
of any willful action (or inaction) taken (or not taken) by or on behalf of the
Issuer with the intention of avoiding the prohibition on redemption of the
Securities, then the premium specified in this Indenture shall also become
immediately due and payable to the extent permitted by law upon the acceleration
of the Securities. If an Event of Default occurs prior to August 1, 2003, by
reason of any willful action (or inaction) taken (or not taken) by or on behalf
of the Issuer with the intention of avoiding the prohibition on redemption of
the Securities prior to such date, then the amount payable for purposes of this
paragraph shall be the amount that would otherwise be due but for the provisions
of this sentence, plus the Applicable Premium determined as of the date of
payment.
SECTION 6.02. Acceleration.
If an Event of Default (other than an Event of Default specified in
paragraph (8) or (9) of Section 6.01 with respect to the Issuer, any Significant
Subsidiary or any group of Restricted Subsidiaries that, taken together, would
constitute a Significant Subsidiary) occurs and is continuing and has not been
waived pursuant to Section 6.04, the Trustee or the Holders of at least 25% in
aggregate principal amount at maturity of the Securities then outstanding may
declare (a) the Accreted Value of all the Securities, together with Liquidated
Damages, if any, if on or prior to August 1, 2003 or (b) the principal of, and
accrued but unpaid interest, if any, on all of the Securities, if after August
1, 2003, to be due and payable by notice in writing to the Issuer and the
Trustee
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specifying the respective Event of Default and that it is a "notice of
acceleration" (the "Acceleration Notice"), and the same shall become immediately
due and payable. In the event of a declaration of acceleration because an Event
of Default set forth in paragraph (6) of Section 6.01 has occurred and is
continuing, such declaration of acceleration shall be automatically annulled if
(i) the missed payments in respect of the applicable Debt have been paid or if
the holders of the Debt that is subject to acceleration have rescinded their
declaration of acceleration, in each case within 30 days thereof and (ii) all
existing Events of Default, except non-payment of principal or interest which
have become due solely because of the acceleration of the Securities, have been
cured or waived. If an Event of Default specified in paragraph (8) or (9) of
Section 6.01 occurs and is continuing with respect to the Issuer, any
Significant Subsidiary or any group of Restricted Subsidiaries that, taken
together, would constitute a Significant Subsidiary, (a) the Accreted Value of
all the Securities, together with Liquidated Damages, if any, if on or prior to
August 1, 2003 or (b) the principal of and accrued but unpaid interest on all of
the Securities if after August 1, 2003, shall ipso facto become and be
immediately due and payable without any declaration or other act on the part of
the Trustee or any Holder. The Holders of a majority in aggregate principal
amount at maturity of the Securities then outstanding (by written notice to the
Trustee and the Issuer) may rescind and cancel a declaration of acceleration and
its consequences if (i) the rescission would not conflict with any judgment or
decree of a court of competent jurisdiction, (ii) all existing Events of Default
have been cured or waived, except non-payment of the principal or interest on
the Securities which have become due solely by such declaration of acceleration,
(iii) to the extent the payment of such interest is lawful, interest (at the
same rate as specified in the Securities) on overdue installments of interest
and overdue payments of principal and premium, if any, which has become due
otherwise than by such declaration of acceleration, has been paid, and (iv) in
the event of the cure or waiver of a Default or Event of Default of the type
described in paragraphs (8) and (9) of Section 6.01, the Trustee shall have
received an Officers' Certificate and an Opinion of Counsel that such Default or
Event of Default has been cured or waived and the Trustee shall be entitled to
conclusively rely upon such Officers' Certificate and Opinion of Counsel. No
such rescission shall affect any subsequent Default or impair any right
consequent thereto.
SECTION 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy by proceeding at law or in equity to collect the
payment of principal of, premium or Liquidated Damages, if any, or interest on
the Securities or to enforce the performance of any provision of the Securities
or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Securityholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No
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remedy is exclusive of any other remedy. All available remedies are cumulative
to the extent permitted by law.
SECTION 6.04. Waiver of Past Defaults.
Prior to the declaration of acceleration of the Securities and subject
to Sections 6.07 and 9.02, the Holders of a majority in principal amount of the
outstanding Securities by notice to the Trustee may waive an existing Default or
Event of Default and its consequences, except (i) a Default or Event of Default
specified in Section 6.01(1) or (2) (which may only be waived with the consent
of each Holder of Securities affected) or (ii) in respect of any covenant or
provision hereunder which cannot be modified or amended without the consent of
the Holder of each Security outstanding.
SECTION 6.05. Control by Majority.
The Holders of a majority in aggregate principal amount at maturity of
the outstanding Securities may direct the time, method and place of conducting
any proceeding for any remedy available to the Trustee or exercising any trust
or power conferred on it, including, without limitation, any remedies provided
for in Section 6.03. Subject to Section 7.01, however, the Trustee may, in its
discretion, refuse to follow any direction that conflicts with any law or this
Indenture that the Trustee determines may be unduly prejudicial to the rights of
another Securityholder, or that may involve the Trustee in personal liability;
provided that the Trustee may take any other action deemed proper by the
Trustee, in its discretion, which is not inconsistent with such direction.
SECTION 6.06. Limitation on Suits.
A Holder may not pursue any remedy with respect to this Indenture or
the Securities unless:
(1) the Holder gives to the Trustee notice of a continuing Event of
Default;
(2) Holders of at least 25% in aggregate principal amount at maturity
of the outstanding Securities make a written request to the Trustee to
pursue the remedy;
(3) such Holders offer to the Trustee indemnity or security against
any loss, liability or expense to be incurred in compliance with such
request which is reasonably satisfactory to the Trustee;
(4) the Trustee does not comply with the request within 45 days after
receipt of the request and the offer of satisfactory indemnity or security;
and
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(5) during such 45-day period the Holders of a majority in aggregate
principal amount at maturity of the outstanding Securities do not give the
Trustee a direction which, in the opinion of the Trustee, is inconsistent
with the request.
A Holder may not use this Indenture to prejudice the rights of another
Holder or to obtain a preference or priority over such other Holder.
SECTION 6.07. Rights of Holders To Receive Payment.
Notwithstanding any other provision of this Indenture, the right of
any Holder of a Security to receive payment of principal of, premium and
Liquidated Damages, if any, and interest on such Security, on or after the
respective due dates expressed in such Security, or to bring suit for the
enforcement of any such payment on or after such respective dates, shall not be
impaired or affected without the consent of such Holder.
SECTION 6.08. Collection Suit by Trustee.
If an Event of Default in payment of principal, premium or interest
specified in paragraphs (1) or (2) of Section 6.01 occurs and is continuing, the
Trustee may recover judgment in its own name and as trustee of an express trust
against the Issuer or any other obligor on the Securities for the whole amount
of principal, premium and accrued interest remaining unpaid, together with
interest on overdue principal and, to the extent that payment of such interest
is lawful, interest on overdue installments of interest at the rate set forth in
the Securities and such further amount as shall be sufficient to cover the costs
and expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
SECTION 6.09. Trustee May File Proofs of Claim.
The Trustee 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, taxes,
disbursements and advances of the Trustee, its agents and counsel) and the
Securityholders allowed in any judicial proceedings relating to the Issuer or
any other obligor upon the Securities, any of their respective creditors or any
of their respective property and shall be entitled and empowered to collect and
receive any monies or other property payable or deliverable on any such claims
and to distribute the same, and any Custodian in any such judicial proceedings
is hereby authorized by each Securityholder 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 Securityholders, to pay to the Trustee any amount due to it for
the reasonable compensation, expenses, taxes, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.07. The Issuer's payment obligations under this Section
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6.09 shall be secured in accordance with the provisions of Section 7.07. Nothing
herein contained shall be deemed to authorize the Trustee to authorize or
consent to or accept or adopt on behalf of any Securityholder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.
SECTION 6.10. Priorities.
Subject to Article Ten, if the Trustee collects any money pursuant to
this Article Six, it shall pay out the money in the following order:
First: to the Trustee for amounts due under Sections 6.09 and 7.07;
Second: if the Holders are forced to proceed against the Issuer
directly without the Trustee, to Holders for their collection costs;
Third: to Holders for amounts due and unpaid on the Securities for
principal, premium and Liquidated Damages, if any, and interest, ratably,
without preference or priority of any kind, according to the amounts due
and payable on the Securities for principal, premium and Liquidated
Damages, if any, and interest, respectively; and
Fourth: to the Issuer or any other obligor on the Securities, as their
interests may appear, or as a court of competent jurisdiction may direct.
The Trustee, upon prior notice to the Issuer, may fix a record date
and payment date for any payment to Securityholders pursuant to this Section
6.10.
SECTION 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees and expenses, against any party litigant in the suit, having due
regard to the merits and good faith of the claims or defenses made by the party
litigant. This Section 6.11 does not apply to a suit by the Trustee, a suit by a
Holder pursuant to Section 6.07, or a suit by a Holder or Holders of more than
10% in aggregate principal amount at maturity of the outstanding Securities.
SECTION 6.12. Restoration of Rights and Remedies.
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If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture or any Security and such proceeding has
been discontinued or abandoned for any reason, or has been determined adversely
to the Trustee or to such Holder, then and in every such case the Issuer, the
Trustee and the Holders shall, subject to any determination in such proceeding,
be restored severally and respectively to their former positions hereunder, and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee.
(a) If a Default or an Event of Default actually known to the Trustee
has occurred and is continuing, the Trustee shall exercise such of the rights
and powers vested in it by this Indenture and use the same degree of care and
skill in its exercise thereof as a prudent person would exercise or use under
the circumstances in the conduct of its own affairs.
(b) Except during the continuance of a Default or an Event of Default
actually known to the Trustee:
(1) The Trustee need perform only those duties as are specifically set
forth in this Indenture and the TIA and no duties, covenants,
responsibilities or obligations shall be implied in this Indenture that are
adverse to the Trustee.
(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 (including Officers'
Certificates) or opinions (including Opinions of Counsel) furnished to the
Trustee and conforming to the requirements of this Indenture. However, as
to any certificates or opinions which are required by any provision of this
Indenture to be delivered or provided to the Trustee, the Trustee shall
examine the certificates and opinions to determine whether or not they
conform to the requirements of this Indenture, but not to verify the
contents thereof.
(c) Notwithstanding anything to the contrary herein contained, the
Trustee may not be relieved from liability for its own negligent action, its own
negligent failure to act, or its own willful misconduct, except that:
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(1) This paragraph does not limit the effect of paragraph (b) of this
Section 7.01.
(2) The Trustee shall not be liable for any error of judgment made in
good faith by a Trust Officer, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts.
(3) The Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.02, 6.04 or 6.05.
(d) No provision of this Indenture shall require the Trustee to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
(e) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section 7.01.
(f) The Trustee shall not be liable for interest on any money or
assets received by it except as the Trustee may agree in writing with the
Issuer. Assets held in trust by the Trustee need not be segregated from other
assets except to the extent required by law.
SECTION 7.02. Rights of Trustee.
Subject to Section 7.01:
(a) The Trustee may request and rely and shall be fully protected in
acting or refraining from acting upon any document believed by it to be
genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may consult
with counsel and may require an Officers' Certificate or an Opinion of
Counsel, which shall conform to Sections 13.04 and 13.05. The Trustee
shall not be liable for and shall be fully protected in respect of any
action it takes or omits to take in good faith in reliance on such
Officers' Certificate or Opinion of Counsel.
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(c) The Trustee may act through its attorneys and agents and shall not
be responsible for the misconduct or negligence of any agent or attorney
appointed with due care.
(d) The Trustee shall not be liable for any action that it takes or
omits to take in good faith which it reasonably believes to be authorized
or within its rights or powers.
(e) The Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate (including any
Officers' Certificate), statement, instrument, opinion (including any
Opinion of Counsel), notice, request, direction, consent, order, bond,
debenture, or other paper or document, but the Trustee, in its discretion,
may make such further inquiry or investigation into such facts or matters
as it may see fit and, if the Trustee shall determine to make such further
inquiry or investigation, it shall be entitled, upon reasonable notice to
the Issuer, to examine the books, records, and premises of the Issuer,
personally or by agent or attorney.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Holders of the Securities pursuant to the
provisions of this Indenture, unless such Holders shall have offered to the
Trustee reasonable security or indemnity against the costs, expenses and
liabilities which may be incurred by it in compliance with such request,
order or direction.
(g) The Trustee may consult with counsel of its selection, and the
advice or opinion of counsel with respect to legal matters relating to this
Indenture and the Securities shall be full and complete authorization and
protection from liability with respect to any action taken, omitted or
suffered by it hereunder in good faith and in accordance with the advice or
opinion of such counsel.
SECTION 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Securities and may otherwise deal with the Issuer, any
Subsidiary of the Issuer, or their respective Affiliates, with the same rights
it would have if it were not Trustee, subject to Section 7.10. Any Agent may do
the same with like rights. However, the Trustee must comply with Sections 7.10
and 7.11.
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SECTION 7.04. Disclaimer of Trustee.
The Trustee does not make any representation as to the validity,
effectiveness or adequacy of this Indenture or the Securities, and it shall not
be accountable for the Issuer's use of the proceeds from the Securities, the
Trustee shall not be responsible for the use or application of any money
received by any Paying Agent other than the Trustee, and it shall not be
responsible for any statement of the Issuer in this Indenture, the Securities
other than the Trustee's certificate of authentication or any document issued in
connection with the sale of the Securities.
SECTION 7.05. Notice of Default.
If a Default or an Event of Default occurs and is continuing and if it
is known to the Trustee, the Trustee shall mail to each Holder notice of the
uncured Default or Event of Default within 90 days after such Default or Event
of Default occurs. Except in the case of a Default or an Event of Default in
payment of principal of, or premium or Liquidated Damages, if any, or interest
on, any Security, including an accelerated payment and the failure to make
payment on the Change of Control Payment Date pursuant to a Change of Control
Offer or on the Asset Sale Offer Date pursuant to an Asset Sale Offer, and,
except in the case of a failure to comply with Article Five, the Trustee may
withhold the notice if and so long as its Board of Directors, the executive
committee of its Board of Directors or a committee of its directors and/or Trust
Officers in good faith determines that withholding the notice is in the interest
of the Holders. This Section 7.05 shall be in lieu of the proviso to (S)315(b)
of the TIA and such proviso to (S)315(b) of the TIA is hereby expressly excluded
from this Indenture and the Securities, as permitted by the TIA. The Trustee
shall not be deemed to have knowledge of a Default or Event of Default other
than (i) any Event of Default occurring pursuant to Section 6.01(1), 6.01(2) or
4.01; or (ii) any Default or Event of Default of which a Trust Officer shall
have received written notification or obtained actual knowledge.
SECTION 7.06. Reports by Trustee to Holders.
Within 60 days after May 15 of each year beginning with May 15, 1999,
the Trustee shall, to the extent that any of the events described in TIA (S)
313(a) occurred within the previous twelve months, but not otherwise, mail to
each Holder a brief report dated as of such date that complies with TIA (S)
313(a). The Trustee also shall comply with TIA (S)(S) 313(b) and 313(c).
A copy of each report at the time of its mailing to Holders shall be
mailed to the Issuer and filed with the SEC and each stock exchange, if any, on
which the Securities are listed.
The Issuer shall promptly notify the Trustee if the Securities become
listed on any stock exchange and the Trustee shall comply with TIA (S) 313(d).
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SECTION 7.07. Compensation and Indemnity.
The Issuer shall pay to the Trustee in its capacity as such from time
to time such compensation as may be agreed upon in writing by the Issuer and the
Trustee. The Trustee's compensation shall not be limited by any law on
compensation of a trustee of an express trust. Subject to the limitations set
forth in the following paragraph, the Issuer shall reimburse the Trustee upon
request for all reasonable out-of-pocket expenses, disbursements and advances
incurred or made by it in connection with the performance of its duties and the
discharge of its obligations under this Indenture. Such expenses shall include
the reasonable fees and expenses of the Trustee's agents and counsel.
The Issuer shall indemnify the Trustee and its agents, employees,
officers, stockholders and directors for and hold them harmless against any
loss, liability, damage, claim or expense incurred by them except for such loss,
liability, damage, claims or expenses or actions to the extent caused by any
negligence, bad faith or willful misconduct on any of their part, arising out of
or in connection with the acceptance or administration of this trust including
the reasonable costs and expenses of defending themselves against any claim or
liability in connection with the exercise or performance of any of their rights,
powers or duties hereunder. The Trustee shall notify the Issuer promptly of any
claim asserted against the Trustee, its agents, employees, officers,
stockholders or directors for which indemnity may be sought. The Issuer shall
defend the claim and the Trustee shall cooperate in the defense. The Trustee
may have separate counsel and the Issuer shall pay the reasonable fees and
expenses of one such counsel. The Issuer need not pay for any settlement made
without its written consent, which consent shall not be unreasonably withheld.
The Issuer need not reimburse any expense or indemnify against any loss or
liability to the extent incurred by the Trustee, its agents, employees,
officers, stockholders or directors through its negligence, bad faith or willful
misconduct.
To secure the Issuer's payment obligations in this Section 7.07, the
Trustee shall have a lien prior to the Securities on all assets or money held or
collected by the Trustee, in its capacity as Trustee, as the case may be, except
assets or money held in trust to pay principal of or interest on particular
Securities.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(8) or (9) occurs, such expenses and the
compensation for such services shall be paid to the extent allowed under any
Bankruptcy Law.
The provisions of this Section 7.07 shall survive the resignation or
removal of the Trustee, the discharge of the Issuer's obligations under Article
Eight or any rejection or the termination of this Indenture under any Bankruptcy
Law or otherwise.
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SECTION 7.08. Replacement of Trustee.
The Trustee may resign by so notifying the Issuer in writing. The
Holders of a majority in principal amount of the outstanding Securities may
remove the Trustee by so notifying the Issuer in writing and the Trustee and may
appoint a successor trustee. The Issuer may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the Trustee or
its property; or
(4) the Trustee 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 Issuer shall notify each Holder of such
event and shall promptly appoint a successor Trustee. Within one year after the
successor Trustee takes office, the Holders of a majority in principal amount of
the Securities may appoint a successor Trustee to replace the successor Trustee
appointed by the Issuer.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Issuer. Promptly after that, the
retiring Trustee shall transfer all property held by it as Trustee to the
successor Trustee, subject to the lien provided in Section 7.07, the resignation
or removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. A successor Trustee shall mail notice of its succession to each
Securityholder.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Issuer or the
Holders of at least 10% in aggregate principal amount at maturity of the
outstanding Securities may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Securityholder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this Section
7.08, the Issuer's obligations under Section 7.07 shall continue for the benefit
of the retiring Trustee.
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SECTION 7.09. Successor Trustee by Merger, etc.
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
Person, the resulting, surviving or transferee Person without any further act
shall, if such resulting, surviving or transferee Person is otherwise eligible
hereunder, be the successor Trustee; provided that such Person shall be
otherwise qualified and eligible under this Article Seven.
SECTION 7.10. Eligibility; Disqualification.
This Indenture shall always have a Trustee who satisfies the
requirement of TIA (S)(S) 310(a)(1) and 310(a)(2). The Trustee (or in the case
of a corporation included in a bank holding company system, the related bank
holding company) shall have a combined capital and surplus of at least
$100,000,000 as set forth in its most recent published annual report of
condition. In addition, if the Trustee is a corporation included in a bank
holding company system, the Trustee, independently of such bank holding company,
shall meet the capital requirements of TIA (S) 310(a)(2). The Trustee shall
comply with TIA (S) 310(b); provided, however, that there shall be excluded from
the operation of TIA (S) 310(b)(1) any indenture or indentures under which other
securities, or certificates of interest or participation in other securities, of
the Issuer are outstanding, if the requirements for such exclusion set forth in
TIA (S) 310(b)(1) are met. The provisions of TIA (S) 310 shall apply to the
Issuer and any other obligor of the Securities.
SECTION 7.11. Preferential Collection of Claims Against the Issuer.
The Trustee shall comply with TIA (S) 311(a), excluding any creditor
relationship listed in TIA (S) 311(b). A Trustee who has resigned or been
removed shall be subject to TIA (S) 311(a) to the extent indicated therein. The
provisions of TIA (S) 311 shall apply to the Issuer and any other obligor of the
Securities.
ARTICLE EIGHT
DISCHARGE OF THIS INDENTURE; DEFEASANCE
SECTION 8.01. Option to Effect Defeasance or Covenant Defeasance.
The Issuer may, at its option, at any time, with respect to the
Securities, elect to have either Section 8.02 or Section 8.03 be applied to all
Securities upon compliance with the conditions set forth below in this Article
Eight.
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SECTION 8.02. Defeasance and Discharge.
Upon the Issuer's exercise under Section 8.01 of the option applicable
to this Section 8.02, the Issuer shall be deemed to have been discharged from
its obligations with respect to all Securities on the date the conditions set
forth below are satisfied (hereinafter, "defeasance"). For this purpose, such
defeasance means that the Issuer shall be deemed to have paid and discharged the
entire amount of Debt represented by the Securities, which shall thereafter be
deemed to be "outstanding" until paid in full in cash only for the purposes of
Section 8.05 and the other Sections of this Indenture referred to in clauses (A)
and (B) below, and to have satisfied all its other obligations under such
Securities and this Indenture (and the Trustee, on demand of and at the expense
of the Issuer, shall execute proper instruments acknowledging the same), except
for the following which shall survive until the Securities are paid in full in
cash or otherwise terminated or discharged hereunder: (A) the rights of Holders
of Securities to receive solely from the trust fund described in Section 8.04
and as more fully set forth in such Section, payments in respect of the
principal of, and premium and Liquidated Damages, if any, and interest on such
Securities when such payments are due, (B) the Issuer's obligations with respect
to such Securities under Sections 2.03 through and including 2.11 and 2.14, (C)
the rights, powers, trusts, duties and immunities of the Trustee hereunder and
the Issuer's obligations in connection therewith and (D) this Article Eight.
Subject to compliance with this Article Eight, the Issuer may exercise its
option under this Section 8.02 notwithstanding the prior exercise of its option
under Section 8.03 with respect to the Securities.
SECTION 8.03. Covenant Defeasance.
Upon the Issuer's exercise under Section 8.01 of the option applicable
to this Section 8.03, the payment of the Securities may not be accelerated
pursuant to Section 6.02 upon, or as a result of, an Event of Default set forth
in Sections 6.01(3), (4), (5) or (6) with respect to the Securities on and after
the date the conditions set forth below are satisfied (hereinafter, "covenant
defeasance"), and the Securities shall thereafter be deemed to be not
"outstanding" for the purposes of any direction, waiver, consent or declaration
or act of Holders (and the consequences of any thereof) in connection with such
covenants, but shall continue to be deemed "outstanding" for all other purposes
hereunder (it being understood that such Securities shall not be deemed
outstanding for financial accounting purposes). Except as specified above, the
remainder of this Indenture and the Securities shall be unaffected by a covenant
defeasance.
SECTION 8.04. Conditions to Defeasance or Covenant Defeasance.
The following shall be the conditions to application of either Section
8.02 or Section 8.03 to the Securities:
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(a) The Issuer shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee satisfying the requirements
of Section 7.10 who shall agree to comply with the provisions of this
Article Eight applicable to it) as trust funds in trust for the purpose of
making the following payments, specifically pledged as security for, and
dedicated solely to, the benefit of the Holders of such Securities, (A)
cash in U.S. Dollars 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 one day
before the due date of any payment, cash in U.S. Dollars 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, (i) the principal of and premium and Liquidated Damages, if
any, and interest on the Securities on the Stated Maturity of such
principal or installment of principal and premium and Liquidated Damages,
if any, or interest and (ii) any mandatory sinking fund payments or
analogous payments applicable to the Securities on the day on which such
payments are due and payable in accordance with the terms of this Indenture
and of the Securities; provided that the Trustee shall have been
irrevocably instructed to apply such money or the proceeds of such U.S.
Government Obligations to said payments with respect to the Securities.
For this purpose, "U.S. Government Obligations" means securities that are
(x) direct obligations of the United States of America for the timely
payment of which its full faith and credit is pledged or (y) obligations of
a Person controlled or supervised by and acting as an agency or
instrumentality of the United States of America the timely 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 the
specific payment of principal of or interest on the U.S. Government
Obligation evidenced by such depository receipt.
(b) No Default or Event of Default with respect to the Securities
shall have occurred and be continuing on the date of such deposit or would
occur as a consequence thereof (other than a Default or Event of Default
resulting from the borrowing of funds to be applied to such deposit) or,
insofar as Section 6.01(8) or 6.01(9) is concerned, at any time during the
period ending on the 91st day after the date of such deposit (it being
understood that this condition shall not be deemed satisfied until the
expiration of such period).
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(c) No event or condition shall exist that, pursuant to the provisions
of Section 10.02 or 10.03, would prevent the Issuer from making payments of
the principal of and premium and Liquidated Damages, if any, or interest on
the Securities on the date of such deposit or at any time during the period
ending on the 91st day after the date of such deposit (it being understood
that this condition shall not be deemed satisfied until the expiration of
such period).
(d) Such defeasance or covenant defeasance shall not result in a
breach or violation of, or constitute a default under, any material
agreement or instrument to which the Issuer or any of its Restricted
Subsidiaries is a party or by which the Issuer or any of its Restricted
Subsidiaries is bound.
(e) In the case of an election under Section 8.02, the Issuer shall
have delivered to the Trustee an Opinion of Counsel in the United States
stating that (x) the Issuer has received from, or there has been published
by, the Internal Revenue Service a ruling or (y) otherwise since the date
hereof, there has been a change in the applicable federal income tax law,
in either case to the effect that, and based thereon such opinion shall
confirm that, the Holders of the Securities will not recognize income, gain
or loss for federal income tax purposes as a result of such defeasance and
will be subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such defeasance
had not occurred.
(f) In the case of an election under Section 8.03, the Issuer shall
have delivered to the Trustee an Opinion of Counsel in the United States to
the effect that the Holders of the Securities 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.
(g) In the case of an election under either Section 8.02 or 8.03, the
Issuer shall have delivered to the Trustee an Opinion of Counsel in the
United States to the effect that after the 91st day following the date of
such deposit, such trust funds will not be subject to the effect of any
applicable bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally.
(h) In the case of an election under either Section 8.02 or 8.03, the
Issuer shall represent to the Trustee that the deposit made by the Issuer
pursuant to its election under Section 8.02 or 8.03 was not made by the
Issuer with the intent of preferring the Holders
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over other creditors of the Issuer or with the intent of defeating,
hindering, delaying or defrauding creditors of the Issuer or others.
(i) The Issuer shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel in the United States, each stating
that all conditions precedent provided for relating to either the
defeasance under Section 8.02 or the covenant defeasance under Section 8.03
(as the case may be) have been complied with.
SECTION 8.05. Deposited Money and U.S. Government Obligations to Be Held in
Trust; Other Miscellaneous Provisions.
Subject to the provisions of Section 12 of the Securities, all money
and U.S. Government Obligations (including the proceeds thereof) deposited with
the Trustee or other qualifying trustee (collectively for purposes of this
Section 8.05, the "Trustee") pursuant to Section 8.04 in respect of the
Securities shall be held in trust and applied by the Trustee, in accordance with
the provisions of such Securities and this Indenture, to the payment, either
directly or through any Paying Agent, to the Holders of such Securities of all
sums due and to become due thereon in respect of principal and premium and
Liquidated Damages, if any, and interest, but such money need not be segregated
from other funds except to the extent required by law. Money and U.S.
Government Obligations so held in trust are not subject to Article Ten or
Article Twelve hereof.
The Issuer shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the cash or U.S. Government
Obligations deposited pursuant to Section 8.04 or the principal and interest
received in respect thereof other than any such tax, fee or other charge which
by law is for the account of the Holders of the Securities.
Anything in this Article Eight to the contrary notwithstanding, the
Trustee shall deliver or pay to the Issuer from time to time upon Issuer's
request together with an Officers' Certificate any money or U.S. Government
Obligations held by it as provided in Section 8.04 which are in excess of the
amount thereof which would then be required to be deposited to effect an
equivalent defeasance or covenant defeasance. If any money or U.S. Government
Obligations held by the Trustee for the payment of principal, premium or
Liquidated Damages, if any, or interest remains unclaimed on the first
anniversary of the Maturity Date of the Securities, the Trustee shall promptly,
or shall cause the prompt, return of such money or U.S. Government Obligations.
After the return of such money or U.S. Government Obligations, all liability of
the Trustee with respect to such money or U.S. Government Obligations shall
cease.
SECTION 8.06. Reinstatement.
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If the Trustee or Paying Agent is unable to apply any money in
accordance with Section 8.02 or 8.03, as the case may be, by reason of any order
or judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, then the Issuer's obligations under this
Indenture and the Securities shall be revived and reinstated as though no
deposit had occurred pursuant to Section 8.02 or 8.03, as the case may be, until
such time as the Trustee or Paying Agent is permitted to apply all such money in
accordance with Section 8.02 or 8.03, as the case may be; provided, however,
that, if the Issuer makes any payment of principal of or premium or Liquidated
Damages, if any, or interest on any Security following the reinstatement of its
obligations, the Issuer shall be subrogated to the rights of the Holders of such
Securities to receive such payment from the money held by the Trustee or Paying
Agent.
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders.
The Issuer, when authorized by a Board Resolution, and the Trustee,
together, may amend or supplement this Indenture or the Securities without
notice to or consent of any Holder:
(1) to cure any ambiguity, defect or inconsistency; provided that such
amendment or supplement does not, in the opinion of the Trustee, adversely
affect the rights of any of the Holders in any material respect;
(2) to comply with Article V of this Indenture;
(3) to provide for uncertificated Securities in addition to or in
place of certificated Securities;
(4) to make any change that would provide any additional rights or
benefits to the Holders of the Securities or that does not adversely affect
the legal rights under this Indenture of any such Holder;
(5) to comply with requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the Trust Indenture Act;
(6) to provide for the issuance of the Exchange Securities (which will
have terms identical in all material respects to the Securities issued on
the Issue Date except that the transfer restrictions contained in the
Securities issued on the Issue Date will be modified or
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eliminated, as appropriate), and which will be treated together with any
outstanding Securities issued on the Issue Date, as a single issue of
Securities;
(7) to surrender any right or power conferred on the Issuer in
accordance with the terms of this Indenture; or
(8) to secure the Securities in accordance with Section 4.17;
provided that the Issuer has delivered to the Trustee an Opinion of Counsel and
an Officers' Certificate, each stating that such amendment or supplement
complies with the provisions of this Section 9.01.
SECTION 9.02. With Consent of Holders.
Subject to Section 6.07, the Issuer, when authorized by a Board
Resolution, and the Trustee, together, with the written consent of the Holder or
Holders of at least a majority in aggregate principal amount at maturity of the
outstanding Securities may amend or supplement this Indenture or the Securities,
without notice to any other Holders. Subject to Sections 6.04 and 6.07, the
Holder or Holders of a majority in aggregate principal amount at maturity of the
outstanding Securities may waive compliance by the Issuer with any provision of
this Indenture or the Securities without notice to any other Holders.
Notwithstanding any other provision of this Indenture or the
Securities, no amendment, supplement or waiver, including a waiver pursuant to
Section 6.04, shall, directly or indirectly, without the consent of each Holder
of each Security affected thereby:
(1) reduce the principal amount of the Securities whose Holders must
consent to an amendment, supplement or waiver;
(2) reduce the principal of or change the fixed maturity of any
Security, or alter the provisions with respect to the redemption or
repurchase of the Securities in a manner adverse to the Holders of the
Securities (other than provisions relating to Section 4.15);
(3) reduce the rate of or change the time for payment of interest on
any Security;
(4) waive a Default or Event of Default in the payment of principal
of, premium or Liquidated Damages, if any, or interest on, the Securities
(except that Holders of at least a majority in aggregate principal amount
at maturity of the then outstanding Securities may (a) rescind an
acceleration of the Securities that resulted from a non-payment default,
and (b) waive the payment default that resulted from such acceleration);
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(5) make any Security payable in money other than that stated in the
Securities;
(6) make any change in the provisions of this Indenture relating to
waivers of past Defaults or the rights of Holders of Securities to receive
payments of principal of, or premium or Liquidated Damages, if any, or
interest on, the Securities;
(7) waive a redemption payment with respect to any Security (other
than a payment required by Section 4.15);
(8) make any change to the subordination provisions of this Indenture
that adversely affects Holders; or
(9) make any change in the foregoing amendment and waiver provisions.
It shall not be necessary for the consent of the Holders under this
Section 9.02 to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section 9.02
becomes effective (as provided in Section 9.04), the Issuer shall mail to the
Holders affected thereby a notice briefly describing the amendment, supplement
or waiver.
SECTION 9.03. Compliance with TIA.
Every amendment, waiver or supplement of this Indenture or the
Securities shall comply with the TIA as then in effect.
No amendment of this Indenture shall adversely affect in any material
respect the rights of any holder of Senior Debt under Article Ten without the
consent of such holder.
SECTION 9.04. Revocation and Effect of Consents.
Until an amendment, waiver or supplement becomes effective, a consent
to it by a Holder is a continuing consent by the Holder and every subsequent
Holder of a Security or portion of a Security that evidences the same debt as
the consenting Holder's Security, even if notation of the consent is not made on
any Security. Subject to the following paragraph, any such Holder or subsequent
Holder may revoke the consent as to his Security or portion of his Security by
notice to the Trustee or the Issuer received before the date on which the
Trustee receives an Officers' Certificate certifying that the Holders of the
requisite aggregate principal amount at maturity of
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Securities have consented (and not theretofore revoked such consent) to the
amendment, supplement or waiver (at which time such amendment, supplement or
waiver shall become effective).
The Issuer may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver, which record date shall be at least 30 days prior to the
first solicitation of such consent. If a record date is fixed, then
notwithstanding the last sentence of the immediately preceding paragraph, those
Persons who were Holders at such record date (or their duly designated proxies),
and only those Persons, shall be entitled to revoke any consent previously
given, whether or not such Persons continue to be Holders after such record
date. No such consent shall be valid or effective for more than 120 days after
such record date.
After an amendment, supplement or waiver becomes effective, it shall
bind every Holder, unless it makes a change described in any of clauses (1)
through (6) of Section 9.02, in which case, the amendment, supplement or waiver
shall bind only each Holder of a Security who has consented to it and every
subsequent Holder of a Security or portion of a Security that evidences the same
debt as the consenting Holder's Security; provided that any such waiver shall
not impair or affect the right of any Holder to receive payment of principal of,
premium or Liquidated Damages, if any, and interest on a Security, on or after
the respective due dates expressed in such Security, or to bring suit for the
enforcement of any such payment on or after such respective dates without the
consent of such Holder.
SECTION 9.05. Notation on or Exchange of Securities.
If an amendment, supplement or waiver changes the terms of a Security,
the Trustee may require the Holder of the Security to deliver it to the Trustee.
The Trustee may place an appropriate notation on the Security about the changed
terms and return it to the Holder. Alternatively, if the Issuer or the Trustee
so determine, the Issuer in exchange for the Security shall issue and the
Trustee shall authenticate a new Security that reflects the changed terms.
Failure to make the appropriate notation or issue a new Security shall not
affect the validity and effect of such amendment, supplement or waiver.
SECTION 9.06. Trustee To Sign Amendments, etc.
The Trustee shall execute any amendment, supplement or waiver
authorized pursuant to and adopted in accordance with this Article Nine;
provided that the Trustee may, but shall not be obligated to, execute any such
amendment, supplement or waiver which affects the Trustee's own rights, duties
or immunities under this Indenture. The Trustee shall be entitled to receive,
and shall be fully protected in relying upon, an Opinion of Counsel and an
Officers' Certificate each stating that the execution of any amendment,
supplement or waiver authorized pursuant to this Article Nine
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is authorized or permitted by this Indenture. Such Opinion of Counsel shall not
be an expense of the Trustee.
ARTICLE TEN
[Intentionally Omitted.]
ARTICLE ELEVEN
[Intentionally Omitted.]
ARTICLE TWELVE
[Intentionally Omitted.]
ARTICLE THIRTEEN
MISCELLANEOUS
SECTION 13.01. TIA Controls.
If any provision of this Indenture limits, qualifies, or conflicts
with another provision which is required to be included in this Indenture by the
TIA, the required provision shall control.
SECTION 13.02. Notices.
Any notices or other communications required or permitted hereunder
shall be in writing, and shall be sufficiently given if made by hand delivery,
by telecopier or first class mail, postage prepaid, addressed as follows:
if to the Issuer:
Globe Holdings, Inc.
456 Bedford Street
Fall River, Massachusetts 02720
Attention: Lawrence R. Walsh
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Facsimile: (508) 679-9458
with a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attention: Stephen L. Ritchie
Facsimile: (312) 861-2200
if to the Trustee:
Norwest Bank Minnesota, National Association
Norwest Center
Sixth & Marquette
Minneapolis, Minnesota 55479-0069
Attention: Corporate Trust Services
Facsimile: (612) 667-9825
The Issuer and the Trustee by written notice to each other such Person
may designate additional or different addresses for notices to such Person. Any
notice or communication to the Issuer or the Trustee shall be deemed to have
been given or made as of the date so delivered if personally delivered; when
receipt is acknowledged, if faxed; and five Business Days after mailing if sent
by registered or certified mail, postage prepaid (except that a notice of change
of address shall not be deemed to have been given until actually received by the
addressee).
Any notice or communication mailed to a Holder shall be mailed to him
by first class mail or other equivalent means at his address as it appears on
the registration books of the Registrar and shall be sufficiently given to him
if so mailed within the time prescribed.
Failure to mail a notice or communication to a Holder or any defect in
it shall not affect its sufficiency with respect to other Holders. If a notice
or communication is mailed in the manner provided above, it is duly given,
whether or not the addressee receives it.
SECTION 13.03. Communications by Holders with Other Holders.
Holders may communicate pursuant to TIA (S) 312(b) with other Holders
with respect to their rights under this Indenture or the Securities. The Issuer,
the Trustee, the Registrar and any other Person shall have the protection of TIA
(S) (S) 312(c).
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SECTION 13.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Issuer to the Trustee to take
any action under this Indenture, other than with respect to the authentication
of the Securities for original issuance on the Issue Date, the Issuer shall
furnish to the Trustee upon the Trustee's request:
(1) an Officers' Certificate, in form and substance reasonably
satisfactory to the Trustee, stating that, in the opinion of the signers,
all conditions precedent to be performed by the Issuer, if any, provided
for in this Indenture relating to the proposed action have been complied
with; and
(2) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent to be performed by the Issuer, if
any, provided for in this Indenture relating to the proposed action have
been complied with.
SECTION 13.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture, other than the Officers'
Certificate required by Section 4.06, shall include:
(1) a statement that the Person making such certificate or opinion has
read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he has made such
examination or investigation as is reasonably necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(4) a statement as to whether or not, in the opinion of each such
Person, such condition or covenant has been complied with; provided,
however, that with respect to matters of fact an Opinion of Counsel may
rely on an Officers' Certificate or certificates of public officials.
SECTION 13.06. Rules by Trustee, Paying Agent, Registrar.
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The Trustee may make reasonable rules in accordance with the Trustee's
customary practices for action by or at a meeting of Holders. The Paying Agent
or Registrar may make reasonable rules for its functions.
SECTION 13.07. Legal Holidays.
A "Legal Holiday" used with respect to a particular place of payment
is a Saturday, a Sunday or a day on which banking institutions in New York, New
York or at such place of payment are not required to be open. If a payment date
is a Legal Holiday at such place, payment may be made at such place on the next
succeeding day that is not a Legal Holiday, and no interest shall accrue for the
intervening period.
SECTION 13.08. Governing Law.
THIS INDENTURE AND THE SECURITIES 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 OTHER THAN SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW.
SECTION 13.09. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Issuer or any of its Subsidiaries. Any such indenture,
loan or debt agreement may not be used to interpret this Indenture.
SECTION 13.10. No Recourse Against Others.
A past, present or future director, officer, employee, incorporator,
shareholder or limited or general partner, as such, of the Issuer or any of its
Subsidiaries shall not have any liability for any obligations of the Issuer or
any of its Subsidiaries under the Securities or this Indenture or for any claim
based on, in respect of or by reason of such obligations or their creations.
Each Holder by accepting a Security waives and releases all such liability. Such
waiver and release are part of the consideration for the issuance of the
Securities.
SECTION 13.11. Successors.
All agreements of the Issuer in this Indenture and the Securities
shall bind its successors. All agreements of the Trustee in this Indenture shall
bind its successors.
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SECTION 13.12. Duplicate Originals.
All parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together shall represent the
same agreement.
SECTION 13.13. Severability.
In case any one or more of the provisions in this Indenture or in the
Securities shall be held invalid, illegal or unenforceable, in any respect for
any reason, the validity, legality and enforceability of any such provision in
every other respect and of the remaining provisions shall not in any way be
affected or impaired thereby, it being intended that all of the provisions
hereof shall be enforceable to the full extent permitted by law.
[signature page follows]
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SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed as of the date first written above.
ISSUER:
Globe Holdings, Inc., a Massachusetts corporation
By /s/ Thomas A. Rodgers, III
-----------------------------------------------
Name: Thomas A. Rodgers, III
Title: President
TRUSTEE:
Norwest Bank Minnesota, National Association
By /s/ Curtis D. Schwegman
-----------------------------------------------
Name: Curtis D. Schwegman
Title: Assistant Vice President
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EXHIBIT A-1
[Form of Security]
THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE SECURITY
EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER
MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER OR ANOTHER EXEMPTION UNDER THE
SECURITIES ACT. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE
BENEFIT OF THE ISSUER THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED ONLY (i) (a) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT), PURCHASING FOR ITS OWN ACCOUNT IN A TRANSACTION MEETING THE REQUIREMENTS
OF RULE 144A UNDER THE SECURITIES ACT, (b) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144 OF THE SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO
A FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 OF
REGULATION S UNDER THE SECURITIES ACT OR (d) IN ACCORDANCE WITH ANOTHER
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT PROVIDED THAT
IN THE CASE OF A TRANSFER PURSUANT TO CLAUSE (d) SUCH TRANSFER IS EFFECTED BY
THE DELIVERY TO THE TRANSFEREE OF DEFINITIVE SECURITIES REGISTERED IN ITS NAME
(OR ITS NOMINEE'S NAME) IN THE BOOKS MAINTAINED BY THE REGISTRAR, AND IS SUBJECT
TO THE RECEIPT BY THE REGISTRAR (AND THE ISSUER, IF ITS SO REQUESTS) OF A
CERTIFICATION OF THE TRANSFEROR AND AN OPINION OF COUNSEL TO THE EFFECT THAT
SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (ii) TO THE ISSUER OR
(iii) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY
STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE
HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER
FROM IT OF THE SECURITIES EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH
IN (A) ABOVE.
THIS SECURITY WAS ISSUED WITH "ORIGINAL ISSUE DISCOUNT" FOR FEDERAL INCOME TAX
PURPOSES. FOR THE ISSUE PRICE, AMOUNT OF ORIGINAL ISSUE
<PAGE>
DISCOUNT, ISSUE DATE AND YIELD TO MATURITY OF THIS SECURITY FOR FEDERAL INCOME
TAX PURPOSES, HOLDERS MAY CONTACT THE COMPANY'S REPRESENTATIVE, LAWRENCE R.
WALSH, VICE PRESIDENT, FINANCE AND ADMINISTRATION, AT (508) 674-3585.
THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE INITIALLY ISSUED AS PART OF AN
ISSUANCE OF UNITS (THE "UNITS"), EACH OF WHICH CONSIST OF $1,000 PRINCIPAL
AMOUNT AT MATURITY OF 14% SENIOR DISCOUNT NOTES DUE 2009 OF THE COMPANY AND ONE
WARRANT ("WARRANT") INITIALLY ENTITLING THE HOLDER THEREOF TO PURCHASE 1.4155
SHARES OF CLASS A COMMON STOCK, PAR VALUE $0.01 PER SHARE, OF THE COMPANY. PRIOR
TO THE EARLIEST TO OCCUR OF (I) THE DATE THAT IS SIX MONTHS FOLLOWING THE
INITIAL SALE OF THE UNITS, (II) THE COMMENCEMENT OF AN EXCHANGE OFFER (AS
DEFINED IN THE REGISTRATION RIGHTS AGREEMENT) WITH RESPECT TO THE SECURITIES,
(III) THE DATE A SHELF REGISTRATION STATEMENT (AS DEFINED IN THE REGISTRATION
RIGHTS AGREEMENT) WITH RESPECT TO THE SECURITIES IS DECLARED EFFECTIVE, (IV) A
CHANGE OF CONTROL (AS DEFINED IN THE INDENTURE), OR (V) SUCH DATE AS BANCAMERICA
ROBERTSON STEPHENS MAY, IN ITS SOLE DISCRETION, DEEM APPROPRIATE, THE SECURITIES
EVIDENCED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED OR EXCHANGED SEPARATE FROM.
BUT MAY BE TRANSFERRED OR EXCHANGED ONLY TOGETHER WITH, THE WARRANTS.
A-1-2
<PAGE>
Globe Holdings, Inc.
14% Senior Discount Note Due 2009
CUSIP No. _______
No. $
Globe Holdings, Inc., a Massachusetts corporation (the "Issuer"), for
value received, promises to pay to __________ or registered assigns, the
principal sum of __________ Dollars (which amount includes amortization of the
original issue discount) on August 1, 2009.
Interest Payment Dates: February 1 and August 1, commencing on
February 1, 2004
Record Dates: January 15 and July 15
Reference is made to the further provisions of this Security contained
herein, which will for all purposes have the same effect as if set forth at this
place.
IN WITNESS WHEREOF, the Issuer has caused this security to be signed
manually or by facsimile by its duly authorized officers.
Globe Holdings, Inc.,
a Massachusetts corporation
By
--------------------------------------
Name:
Title:
By
--------------------------------------
Name:
Title:
A-1-3
<PAGE>
Trustee's Certificate of Authentication
This is one of the 14% Senior Discount Notes due 2009 referred to in
the within-mentioned Indenture.
Date of Authentication:
Norwest Bank Minnesota, National
Association, as Trustee
By
-------------------------------------
Authorized Signatory
A-1-4
<PAGE>
(REVERSE OF SECURITY)
14% Senior Discount Note Due 2009
1. Accreted Value and Interest. (a) The Securities will accrete in value
until August 1, 2003 at a rate of 14% per annum, compounded semi-annually on
February 1 and August 1 of each year to an aggregate principal amount of
$49,086,000.
(b) Globe Holdings, Inc., a Massachusetts corporation (the "Issuer"),
promises to pay interest on the principal amount at maturity of this Security at
the rate per annum shown above. Interest will not accrue or be payable on this
Security prior to August 1, 2003. From August 1, 2003, interest on this Security
will accrue from the most recent date on which interest has been paid or, if no
interest has been paid, from August 1, 2003. The Issuer will pay interest semi-
annually in arrears on each Interest Payment Date, commencing February 1, 2004.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months.
The Issuer shall pay interest on overdue principal and on overdue
installments of interest from time to time in accordance with Section 2.12 of
the Indenture at the rate borne by the Securities to the extent lawful.
2. Method of Payment. The Issuer shall pay interest on the Securities
(except defaulted interest) to the Persons who are the registered Holders at the
close of business on the record date immediately preceding the Interest Payment
Date even if the Securities are canceled on registration of transfer or
registration of exchange after such record date. Holders must surrender
Securities to a Paying Agent to collect principal payments. The Issuer shall pay
principal, premium, if any, and interest in money of the United States that at
the time of payment is legal tender for payment of public and private debts
("U.S. Legal Tender"). However, the Issuer may pay principal, premium, if any,
and interest by its check payable in such U.S. Legal Tender unless a Holder of
Securities has given wire transfer instructions in which case the Issuer will be
required to make payment of principal, premium, if any, and interest by wire
transfer of immediately available funds to the accounts specified by such
Holder. The Issuer may deliver any such payments to the Paying Agent or to a
Holder at the Holder's registered address.
All references herein to payments of principal, premium, if any, and
interest on the Securities shall be deemed to include any applicable Liquidated
Damages that may become payable in respect of the Securities.
3. Paying Agent and Registrar. Initially, the Trustee will act as Paying
Agent and Registrar. The Issuer may change any Paying Agent, Registrar or co-
Registrar without notice to the
A-1-5
<PAGE>
Holders. The Issuer or any of its Subsidiaries may, subject to certain
exceptions, act as Registrar or co-Registrar.
4. Indenture. The Issuer issued the Securities under an Indenture dated
as of August 6, 1998 (the "Indenture"), between the Issuer and Norwest Bank
Minnesota, National Association, as trustee (the "Trustee"). This Security is
one of a duly authorized issue of Securities of the Issuer designated as its 14%
Senior Discount Notes due 2009 issued on the Issue Date (the "Initial
Securities"), limited (except as otherwise provided in the Indenture) in
aggregate principal amount to $49,086,000, which may be issued under the
Indenture. The Securities include the Initial Securities, the Private Exchange
Securities and the Unrestricted Securities, as defined below, issued in exchange
for the Initial Securities pursuant to the Registration Rights Agreement. The
Initial Securities, the Private Exchange Securities and the Unrestricted
Securities are treated as a single class of securities under the Indenture. The
terms of the Securities include those stated in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C.
(S)(S) 77aaa-77bbbb) (the "TIA"), as in effect on the date of the Indenture.
Notwithstanding anything to the contrary herein, the Securities are subject to
all such terms, and Holders of Securities are referred to the Indenture and the
TIA for a statement of them. The Securities are general unsecured obligations of
the Issuer. Each Holder, by accepting a Security, agrees to be bound by all
terms and provisions of the Indenture, as the same may be amended from time to
time in accordance with its terms.
5. Optional Redemption. (i) The Securities will be redeemable at the
option of the Issuer, in whole or in part, at any time and from time to time on
or after August 1, 2003, at the Redemption Prices (expressed as percentages of
principal amount at maturity) set forth below, plus accrued and unpaid interest
thereon to the applicable Redemption Date, if redeemed during the 12-month
period beginning on August 1, of the years indicated below:
Redemption
Year Price
---- ----------
2003 .......................................... 107.000%
2004 .......................................... 104.667%
2005 .......................................... 102.333%
2006 and thereafter............................ 100.000%
(ii) At any time prior to August 1, 2001, the Issuer may on any one
or more occasions redeem from the net proceeds of one or more Equity Offerings
up to an aggregate of 35.0% in aggregate principal amount at maturity of the
Securities at a redemption price of 114% of the Accreted Value thereof, together
with Liquidated Damages, if any, to the redemption date; provided that at least
65% of the aggregate principal amount at maturity of Securities remains
outstanding immediately after the occurrence of such redemption.
A-1-6
<PAGE>
(iii) At any time prior to August 1, 2003, the Securities may be
redeemed, in whole but not in part, at the option of the Issuer at any time
within 180 days a Change of Control, at a redemption price equal to the sum of
(i) 100% of the Accreted Value thereof, together with Liquidated Damages, if
any, to the redemption date, plus (ii) the Applicable Premium.
6. Notice of Redemption. Notice of redemption shall be mailed by first-
class mail, postage prepaid, mailed to such Holder's registered address, at
least 30 but not more than 60 days before the Redemption Date. Securities in
denominations larger than $1,000 may be redeemed in part.
7. Change of Control Offer. In the event of a Change of Control, upon the
satisfaction of the conditions set forth in the Indenture, the Issuer shall be
required to offer to repurchase all or a portion of the then outstanding
Securities pursuant to a Change of Control Offer at a purchase price, on or
prior to August 1, 2003, equal to 100% of the Accreted Value thereof, together
with Liquidated Damages, if any, to the date of repurchase, and thereafter,
equal to 101% of the principal amount at maturity thereof, plus accrued interest
to the date of repurchase. Holders of Securities which are the subject of such
an offer to repurchase shall receive an offer to repurchase and may elect to
have such Securities repurchased in accordance with the provisions of the
Indenture pursuant to and in accordance with the terms of the Indenture.
8. Limitation on Disposition of Assets. Under certain circumstances the
Issuer is required to apply the net cash proceeds from Asset Sales to offer to
repurchase Securities at a price equal to (a) 100% of the Accreted Value
thereof, together with Liquidated Damages, if any, at the date such Asset Sale
Offer is consummated, if consummated on or prior to August 1, 2003, and (b) 100%
of the aggregate principal amount thereof, plus accrued interest to the date of
repurchase, if consummated after August 1, 2003.
9. Denominations; Transfer; Exchange. The Securities are in registered
form, without coupons, in denominations of $1,000 and integral multiples of
$1,000. A Holder shall register the transfer of or exchange Securities in
accordance with the Indenture. The Registrar may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and to pay
certain transfer taxes or similar governmental charges payable in connection
therewith as permitted by the Indenture. The Registrar or co-Registrar shall not
be required to register the transfer of or exchange of any Security (i) during a
period beginning at the opening of business 15 days before the mailing of a
notice of redemption of Securities and ending at the close of business on the
day of such mailing, (ii) selected for redemption in whole or in part pursuant
to Article Three of the Indenture, except the unredeemed portion of any Security
being redeemed in part and (iii) during a Change of Control Offer or an Asset
Sale Offer if such Security is tendered pursuant to such Change of Control Offer
or Asset Sale Offer and not withdrawn.
A-1-7
<PAGE>
10. Persons Deemed Owners. The registered Holder of a Security shall be
treated as the owner of it for all purposes.
11. Unclaimed Money. If money for the payment of principal or interest
remains unclaimed for one year, the Trustee and the Paying Agent will pay the
money back to the Issuer. After that, all liability of the Trustee and such
Paying Agent with respect to such money shall cease.
12. Discharge Prior to Redemption or Maturity. If the Issuer at any time
deposits with the Trustee U.S. Legal Tender or U.S. Government Obligations
sufficient to pay the principal of and interest on the Securities to redemption
or maturity and complies with the other provisions of the Indenture relating
thereto, the Issuer will be discharged from certain provisions of the Indenture
and the Securities (including certain covenants, but excluding its obligation to
pay the principal of and interest on the Securities).
13. Amendment; Supplement; Waiver. Subject to certain exceptions, the
Indenture or the Securities may be amended or supplemented with the written
consent of the Holders of at least a majority in aggregate principal amount of
the Securities then outstanding, and any existing Default or Event of Default or
noncompliance with any provision may be waived with the written consent of the
Holders of a majority in aggregate principal amount of the Securities then
outstanding. Without notice to or consent of any Holder, the parties thereto may
amend or supplement the Indenture or the Securities to, among other things, cure
any ambiguity, defect or inconsistency, provide for uncertificated Securities in
addition to or in place of certificated Securities, provide for the assumption
of the Issuer's obligations to Holders of the Securities in the event of any
Disposition involving the Issuer in which the Issuer is not a Surviving Person,
comply with requirements of the SEC in order to effect or maintain the
qualification of the Indenture under TIA, provide for the issuance of Exchange
Securities or make any other change that does not adversely affect in any
material respect the legal rights under the Indenture of any Holder of a
Security.
14. Restrictive Covenants. The Indenture imposes certain limitations on
the ability of the Issuer and its Restricted Subsidiaries to, among other
things, incur additional Debt, make payments in respect of its Equity Interests
or certain Debt, enter into transactions with Related Persons, create dividend
or other payment restrictions affecting Restricted Subsidiaries and merge or
consolidate with any other Person, sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of its assets or adopt a plan of
liquidation. Such limitations are subject to a number of important
qualifications and exceptions. The Issuer must annually report to the Trustee on
compliance with such limitations.
15. Successors. When a successor assumes, in accordance with the
Indenture, all the obligations of its predecessor under the Securities and the
Indenture, the predecessor will be released from those obligations.
A-1-8
<PAGE>
16. Defaults and Remedies. If an Event of Default occurs and is
continuing, the Trustee or the Holders of at least 25% in aggregate principal
amount at maturity of Securities then outstanding may declare all the Securities
to be due and payable in the manner, at the time and with the effect provided in
the Indenture. Holders of Securities may not enforce the Indenture or the
Securities except as provided in the Indenture. The Trustee is not obligated to
enforce the Indenture or the Securities unless it has been offered indemnity or
security reasonably satisfactory to it. The Indenture permits, subject to
certain limitations therein provided, Holders of a majority in aggregate
principal amount at maturity of the Securities then outstanding to direct the
Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of Securities notice of any continuing Default or Event of Default
(except a Default in payment of principal or interest) if it determines in good
faith that withholding notice is in their interest.
17. Defeasance. The Indenture contains provisions (which provisions apply
to this Security) which provide that (a) the Issuer will be discharged from any
and all obligations in respect of the Securities and (b) the payment of the
Securities may not be accelerated upon certain Events of Default, in each case
upon compliance by the Issuer with certain conditions set forth therein.
18. Trustee Dealings with Issuer. The Trustee under the Indenture, in its
individual or any other capacity, may become the owner or pledgee of Securities
and may otherwise deal with the Issuer, Subsidiaries of the Issuer or their
respective Affiliates as if it were not the Trustee.
19. No Recourse Against Others. No past, present or future director,
officer, employee, incorporator, stockholder or limited or general partner of
the Issuer or any of its Subsidiaries shall have any liability for any
obligations of the Issuer or any of its Subsidiaries under the Securities or the
Indenture or for any claim based on, in respect of or by reason of such
obligations or their creations. Each Holder of a Security by accepting a
Security waives and releases all such liability. Such waiver and release are
part of the consideration for the issuance of the Securities.
20. Authentication. This Security shall not be valid until the Trustee or
authenticating agent manually signs the certificate of authentication on this
Security.
21. Governing Law. The laws of the State of New York shall govern this
Security and the Indenture, without regard to principles of conflict of law
other than Section 5-1401 of the New York General Obligations Law.
22. Abbreviations and Defined Terms. Customary abbreviations may be used
in the name of a Holder of a Security or an assignee, such as: TEN COM (=
tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint
tenants with right of survivorship and not as tenants in common), CUST (=
Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
A-1-9
<PAGE>
23. CUSIP Numbers. Pursuant to a recommendation promulgated by the
committee on Uniform Security Identification Procedures, the Issuer has caused
CUSIP numbers to be printed on the Securities as a convenience to the Holders of
the Securities. No representation is made as to the accuracy of such numbers as
printed on the Securities and reliance may be placed only on the other
identification numbers printed hereon.
24. Registration Rights.
Pursuant to the Registration Rights Agreement among the Issuer and the
Initial Purchaser on behalf of the Holders of the Securities, the Issuer will be
obligated to consummate an exchange offer pursuant to which the Holder of this
Security shall have the right to exchange this Security for the Issuer's 14%
Senior Discount Notes due 2009 (the "Unrestricted Securities") which will be
registered under the Securities Act, in like principal amount and having terms
identical in all material respects as the Initial Securities. The Holders of the
Initial Securities shall be entitled to receive certain Liquidated Damages 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. Liquidated Damages which may be payable pursuant to the
Registration Rights Agreement shall be payable in the same manner as set forth
herein with respect to the stated interest. The provisions of the Registration
Rights Agreement relating to such Liquidated Damages are incorporated herein by
reference and made a part hereof as if set forth herein in full.
25. Indenture. Each Holder, by accepting a Security, agrees to be bound
by all of the terms and provisions of the Indenture, as the same may be amended
from time to time. Capitalized terms used herein and not defined herein have the
meanings ascribed thereto in the Indenture.
The Issuer will furnish to any Holder of a Security upon written
request and without charge a copy of the Indenture, which has the text of this
Security in larger type. Requests may be made to:
Globe Holdings, Inc.
456 Bedford Street
Fall River, Massachusetts 02720
Attention: President
Facsimile: (508) 679-9458
A-1-10
<PAGE>
ASSIGNMENT FORM
I or we assign to and transfer this Security to
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
(please print or type name and address)
- -----------------------------------------------------------------------
(insert Social Security number or other identifying number of assignee)
and irrevocably appoint _____________ agent to transfer this Security on the
books of the Issuer. The agent may substitute another to act for him.
In connection with any transfer of this Security occurring prior to
the date which is the earlier of (i) the date of the declaration by the SEC of
the effectiveness of a registration statement under the Securities Act of 1933,
as amended (the "Act") covering resales of this Security (which effectiveness
shall not have been suspended or terminated at the date of the transfer) and
(ii) July 31, 2000 (or such later date which is two years following the last
date on which the Issuer or an affiliate of the Issuer held this Security or any
predecessor Security), the undersigned confirms that it has not utilized any
general solicitation or general advertising in connection with the transfer and
that:
[Check One]
[ ] (a) this Security is being transferred in compliance with the exemption
from registration under the Securities Act provided by Rule 144A
thereunder.
[ ] (b) this Security 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 Security and the Indenture.
A-1-11
<PAGE>
If none of the foregoing boxes is checked, the Trustee or Registrar shall not be
obligated to register this Security 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.
Dated: ______________ Signed: ___________________________
(Signed exactly as name appears on the
other side of this Security)
Signature Guarantee: __________________________________________
Participant in a recognized Signature Guarantee Medallion
Program (or other signature guarantor program reasonably
acceptable to the Trustee)
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing this
Security for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
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 Issuer 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 the
undersigned's foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
Date:
--------------------- --------------------------------------
NOTICE: To be executed by an executive
officer
A-1-12
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Security purchased by the Issuer pursuant to
Section 4.15 or 4.16 of the Indenture, check the appropriate Box:
Section 4.15 [ ]
Section 4.16 [ ]
If you wish to have a portion of this Security purchased by the Issuer
pursuant to Section 4.15 or 4.16 of the Indenture, state the amount you wish to
have purchased:
US$_________
Date: ________________ Your Signature: ________________________
(Sign exactly as your name appears on
the other side of this Security)
Signature Guarantee: ____________________________________________
Participant in a recognized Signature Guarantee Medallion
Program (or other signature guarantor program reasonably
acceptable to the Trustee)
A-1-13
<PAGE>
EXHIBIT A-2
THIS SECURITY WAS ISSUED WITH "ORIGINAL ISSUE DISCOUNT." THE ISSUE PRICE IS
$509.31 FOR EACH $1,000 OF PRINCIPAL AMOUNT AT MATURITY. THE ORIGINAL ISSUE
DISCOUNT IS $496.72 OF PRINCIPAL AMOUNT AT MATURITY. THE ISSUE DATE IS AUGUST 6,
1998. THE YIELD TO MATURITY IS ___%, COMPOUNDED SEMI-ANNUALLY.
Globe Holdings, Inc.
14% Senior Discount Note Due 2009
CUSIP No. _______
No. $
Globe Holdings, Inc., a Massachusetts corporation (the "Issuer"), for
value received, promises to pay to __________ or registered assigns, the
principal sum of __________ Dollars (which amount includes amortization of the
original issue discount) on August 1, 2009.
Interest Payment Dates: February 1 and August 1, commencing on
February 1, 2004
Record Dates: January 15 and July 15
IN WITNESS WHEREOF, the Issuer has caused this security to be signed
manually or by facsimile by its duly authorized officers.
Globe Holdings, Inc.,
a Massachusetts corporation
By
________________________________________
Name:
Title:
By
________________________________________
Name:
Title:
<PAGE>
Trustee's Certificate of Authentication
This is one of the 14% Senior Discount Notes due 2009 referred to in
the within-mentioned Indenture.
Date of Authentication:
Norwest Bank Minnesota, National
Association, as Trustee
By
_______________________________
Authorized Signatory
A-2-2
<PAGE>
(REVERSE OF SECURITY)
14% Senior Discount Note Due 2009
1. Accreted Value and Interest. (a) The Securities will accrete in value
until August 1, 2003 at a rate of 14% per annum, compounded semi-annually on
February 1 and August 1 of each year to an aggregate principal amount of
$49,086,000.
(b) Globe Holdings, Inc., a Massachusetts corporation (the "Issuer"),
promises to pay interest on the principal amount at maturity of this Security at
the rate per annum shown above. Interest will not accrue or be payable on this
Security prior to August 1, 2003. From August 1, 2003, interest on this Security
will accrue from the most recent date on which interest has been paid or, if no
interest has been paid, from August 1, 2003. The Issuer will pay interest semi-
annually in arrears on each Interest Payment Date, commencing February 1, 2004.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months.
The Issuer shall pay interest on overdue principal and on overdue
installments of interest from time to time in accordance with Section 2.12 of
the Indenture at the rate borne by the Securities to the extent lawful.
2. Method of Payment. The Issuer shall pay interest on the Securities
(except defaulted interest) to the Persons who are the registered Holders at the
close of business on the record date immediately preceding the Interest Payment
Date even if the Securities are canceled on registration of transfer or
registration of exchange after such record date. Holders must surrender
Securities to a Paying Agent to collect principal payments. The Issuer shall pay
principal, premium, if any, and interest in money of the United States that at
the time of payment is legal tender for payment of public and private debts
("U.S. Legal Tender"). However, the Issuer may pay principal, premium, if any,
and interest by its check payable in such U.S. Legal Tender unless a Holder of
Securities has given wire transfer instructions in which case the Issuer will be
required to make payment of principal, premium, if any, and interest by wire
transfer of immediately available funds to the accounts specified by such
Holder. The Issuer may deliver any such payments to the Paying Agent or to a
Holder at the Holder's registered address.
All references herein to payments of principal, premium, if any, and
interest on the Securities shall be deemed to include any applicable Liquidated
Damages that may become payable in respect of the Securities.
A-2-3
<PAGE>
3. Paying Agent and Registrar. Initially, the Trustee will act as Paying
Agent and Registrar. The Issuer may change any Paying Agent, Registrar or co-
Registrar without notice to the Holders. The Issuer or any of its Subsidiaries
may, subject to certain exceptions, act as Registrar or co-Registrar.
4. Indenture. The Issuer issued the Securities under an Indenture dated
as of August 6, 1998 (the "Indenture"), between the Issuer and Norwest Bank
Minnesota, National Association, as trustee (the "Trustee"). This Security is
one of a duly authorized issue of Securities of the Issuer designated as its 14%
Senior Discount Notes due 2009 issued on the Issue Date (the "Initial
Securities"), limited (except as otherwise provided in the Indenture) in
aggregate principal amount to $49,086,000, which may be issued under the
Indenture. The Securities include the Initial Securities, the Private Exchange
Securities and the Unrestricted Securities, as defined below, issued in exchange
for the Initial Securities pursuant to the Registration Rights Agreement. The
Initial Securities, the Private Exchange Securities and the Unrestricted
Securities are treated as a single class of securities under the Indenture. The
terms of the Securities include those stated in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C.
(S)(S) 77aaa-77bbbb) (the "TIA"), as in effect on the date of the Indenture.
Notwithstanding anything to the contrary herein, the Securities are subject to
all such terms, and Holders of Securities are referred to the Indenture and the
TIA for a statement of them. The Securities are general unsecured obligations of
the Issuer. Each Holder, by accepting a Security, agrees to be bound by all
terms and provisions of the Indenture, as the same may be amended from time to
time in accordance with its terms.
5. Optional Redemption. (i) The Securities will be redeemable at the
option of the Issuer, in whole or in part, at any time and from time to time on
or after August 1, 2003, at the Redemption Prices (expressed as percentages of
principal amount at maturity) set forth below, plus accrued and unpaid interest
thereon to the applicable Redemption Date, if redeemed during the 12-month
period beginning on August 1, of the years indicated below:
Redemption
Year Price
---- ----------
2003 ............................... 107.000%
2004 ............................... 104.667%
2005 ............................... 102.333%
2006 and thereafter................. 100.000%
(ii) At any time prior to August 1, 2001, the Issuer may on any one
or more occasions redeem from the net proceeds of one or more Equity Offerings
up to an aggregate of 35.0% in aggregate principal amount at maturity of the
Securities at a redemption price of 114% of the Accreted Value thereof, together
with Liquidated Damages, if any, to the redemption date;
A-2-4
<PAGE>
provided that at least 65% of the aggregate principal amount at maturity of
Securities remains outstanding immediately after the occurrence of such
redemption.
(iii) At any time prior to August 1, 2003, the Securities may be
redeemed, in whole but not in part, at the option of the Issuer at any time
within 180 days a Change of Control, at a redemption price equal to the sum of
(i) 100% of the Accreted Value thereof, together with Liquidated Damages, if
any, to the redemption date, plus (ii) the Applicable Premium.
6. Notice of Redemption. Notice of redemption shall be mailed by first-
class mail, postage prepaid, mailed to such Holder's registered address, at
least 30 but not more than 60 days before the Redemption Date. Securities in
denominations larger than $1,000 may be redeemed in part.
7. Change of Control Offer. In the event of a Change of Control, upon the
satisfaction of the conditions set forth in the Indenture, the Issuer shall be
required to offer to repurchase all or a portion of the then outstanding
Securities pursuant to a Change of Control Offer at a purchase price, on or
prior to August 1, 2003, equal to 100% of the Accreted Value thereof, together
with Liquidated Damages, if any, to the date of repurchase, and thereafter,
equal to 101% of the principal amount at maturity thereof, plus accrued interest
to the date of repurchase. Holders of Securities which are the subject of such
an offer to repurchase shall receive an offer to repurchase and may elect to
have such Securities repurchased in accordance with the provisions of the
Indenture pursuant to and in accordance with the terms of the Indenture.
8. Limitation on Disposition of Assets. Under certain circumstances the
Issuer is required to apply the net cash proceeds from Asset Sales to offer to
repurchase Securities at a price equal to (a) 100% of the Accreted Value
thereof, together with Liquidated Damages, if any, at the date such Asset Sale
Offer is consummated, if consummated on or prior to August 1, 2003, and (b) 100%
of the aggregate principal amount thereof, plus accrued interest to the date of
repurchase, if consummated after August 1, 2003.
9. Denominations; Transfer; Exchange. The Securities are in registered
form, without coupons, in denominations of $1,000 and integral multiples of
$1,000. A Holder shall register the transfer of or exchange Securities in
accordance with the Indenture. The Registrar may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and to pay
certain transfer taxes or similar governmental charges payable in connection
therewith as permitted by the Indenture. The Registrar or co-Registrar shall not
be required to register the transfer of or exchange of any Security (i) during a
period beginning at the opening of business 15 days before the mailing of a
notice of redemption of Securities and ending at the close of business on the
day of such mailing, (ii) selected for redemption in whole or in part pursuant
to Article Three of the Indenture, except the unredeemed portion of any Security
being redeemed in part and (iii) during a Change of
A-2-5
<PAGE>
Control Offer or an Asset Sale Offer if such Security is tendered pursuant to
such Change of Control Offer or Asset Sale Offer and not withdrawn.
10. Persons Deemed Owners. The registered Holder of a Security shall be
treated as the owner of it for all purposes.
11. Unclaimed Money. If money for the payment of principal or interest
remains unclaimed for one year, the Trustee and the Paying Agent will pay the
money back to the Issuer. After that, all liability of the Trustee and such
Paying Agent with respect to such money shall cease.
12. Discharge Prior to Redemption or Maturity. If the Issuer at any time
deposits with the Trustee U.S. Legal Tender or U.S. Government Obligations
sufficient to pay the principal of and interest on the Securities to redemption
or maturity and complies with the other provisions of the Indenture relating
thereto, the Issuer will be discharged from certain provisions of the Indenture
and the Securities (including certain covenants, but excluding its obligation to
pay the principal of and interest on the Securities).
13. Amendment; Supplement; Waiver. Subject to certain exceptions, the
Indenture or the Securities may be amended or supplemented with the written
consent of the Holders of at least a majority in aggregate principal amount of
the Securities then outstanding, and any existing Default or Event of Default or
noncompliance with any provision may be waived with the written consent of the
Holders of a majority in aggregate principal amount of the Securities then
outstanding. Without notice to or consent of any Holder, the parties thereto may
amend or supplement the Indenture or the Securities to, among other things, cure
any ambiguity, defect or inconsistency, provide for uncertificated Securities in
addition to or in place of certificated Securities, provide for the assumption
of the Issuer's obligations to Holders of the Securities in the event of any
Disposition involving the Issuer in which the Issuer is not a Surviving Person,
comply with requirements of the SEC in order to effect or maintain the
qualification of the Indenture under TIA, provide for the issuance of Exchange
Securities or make any other change that does not adversely affect in any
material respect the legal rights under the Indenture of any Holder of a
Security.
14. Restrictive Covenants. The Indenture imposes certain limitations on
the ability of the Issuer and its Restricted Subsidiaries to, among other
things, incur additional Debt, make payments in respect of its Equity Interests
or certain Debt, enter into transactions with Related Persons, create dividend
or other payment restrictions affecting Restricted Subsidiaries and merge or
consolidate with any other Person, sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of its assets or adopt a plan of
liquidation. Such limitations are subject to a number of important
qualifications and exceptions. The Issuer must annually report to the Trustee on
compliance with such limitations.
A-2-6
<PAGE>
15. Successors. When a successor assumes, in accordance with the
Indenture, all the obligations of its predecessor under the Securities and the
Indenture, the predecessor will be released from those obligations.
16. Defaults and Remedies. If an Event of Default occurs and is
continuing, the Trustee or the Holders of at least 25% in aggregate principal
amount at maturity of Securities then outstanding may declare all the Securities
to be due and payable in the manner, at the time and with the effect provided in
the Indenture. Holders of Securities may not enforce the Indenture or the
Securities except as provided in the Indenture. The Trustee is not obligated to
enforce the Indenture or the Securities unless it has been offered indemnity or
security reasonably satisfactory to it. The Indenture permits, subject to
certain limitations therein provided, Holders of a majority in aggregate
principal amount at maturity of the Securities then outstanding to direct the
Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of Securities notice of any continuing Default or Event of Default
(except a Default in payment of principal or interest) if it determines in good
faith that withholding notice is in their interest.
17. Defeasance. The Indenture contains provisions (which provisions apply
to this Security) which provide that (a) the Issuer will be discharged from any
and all obligations in respect of the Securities and (b) the payment of the
Securities may not be accelerated upon certain Events of Default, in each case
upon compliance by the Issuer with certain conditions set forth therein.
18. Trustee Dealings with Issuer. The Trustee under the Indenture, in its
individual or any other capacity, may become the owner or pledgee of Securities
and may otherwise deal with the Issuer, Subsidiaries of the Issuer or their
respective Affiliates as if it were not the Trustee.
19. No Recourse Against Others. No past, present or future director,
officer, employee, incorporator, stockholder or limited or general partner of
the Issuer or any of its Subsidiaries shall have any liability for any
obligations of the Issuer or any of its Subsidiaries under the Securities or the
Indenture or for any claim based on, in respect of or by reason of such
obligations or their creations. Each Holder of a Security by accepting a
Security waives and releases all such liability. Such waiver and release are
part of the consideration for the issuance of the Securities.
20. Authentication. This Security shall not be valid until the Trustee or
authenticating agent manually signs the certificate of authentication on this
Security.
21. Governing Law. The laws of the State of New York shall govern this
Security and the Indenture, without regard to principles of conflict of law
other than Section 5-1401 of the New York General Obligations Law.
A-2-7
<PAGE>
22. Abbreviations and Defined Terms. Customary abbreviations may be used
in the name of a Holder of a Security or an assignee, such as: TEN COM
(= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint
tenants with right of survivorship and not as tenants in common), CUST
(= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
23. CUSIP Numbers. Pursuant to a recommendation promulgated by the
committee on Uniform Security Identification Procedures, the Issuer has caused
CUSIP numbers to be printed on the Securities as a convenience to the Holders of
the Securities. No representation is made as to the accuracy of such numbers as
printed on the Securities and reliance may be placed only on the other
identification numbers printed hereon.
24. Indenture. Each Holder, by accepting a Security, agrees to be bound
by all of the terms and provisions of the Indenture, as the same may be amended
from time to time. Capitalized terms used herein and not defined herein have the
meanings ascribed thereto in the Indenture.
The Issuer will furnish to any Holder of a Security upon written
request and without charge a copy of the Indenture, which has the text of this
Security in larger type. Requests may be made to:
Globe Holdings, Inc.
456 Bedford Street
Fall River, Massachusetts 02720
Attention: President
Facsimile: (508) 679-9458
A-2-8
<PAGE>
[FORM OF ASSIGNMENT]
I or we assign to
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER
_________________________________
_________________________________________________________________
(please print or type name and address)
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
the within Security and all rights thereunder, hereby irrevocably constituting
and appointing
_________________________________________________________________
attorney to transfer the Security on the books of the Issuer with full power of
substitution in the premises.
Date: ________________ Your Signature: ________________________
NOTICE: The signature on this
assignment must correspond
with the name as it appears
upon the face of the within
Security in every particular
without alteration or
enlargement or any change
whatsoever and be guaranteed
by the endorser's bank or
broker.
Signature Guarantee: _____________________________________________
Participant in a recognized Signature Guarantee Medallion
Program (or other signature guarantor program reasonably
acceptable to the Trustee)
A-2-9
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Security purchased by the Issuer pursuant to
Section 4.15 or 4.16 of the Indenture, check the appropriate Box:
Section 4.15 [ ]
Section 4.16 [ ]
If you wish to have a portion of this Security purchased by the Issuer
pursuant to Section 4.15 or 4.16 of the Indenture, state the amount you wish to
have purchased:
US$_________
Date: ________________ Your Signature: ________________________
(Sign exactly as your name appears on
the other side of this Security)
Signature Guarantee: ____________________________________________
Participant in a recognized Signature Guarantee Medallion
Program (or other signature guarantor program reasonably
acceptable to the Trustee)
A-2-10
<PAGE>
Exhibit B
Form of Legend For Global Securities
Any Global Security authenticated and delivered hereunder shall bear a
legend (which would be in addition to any other legends required in the case of
a Restricted Security) in substantially the following form:
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE DEPOSITORY
TRUST COMPANY (THE "DEPOSITARY") OR A NOMINEE OF THE DEPOSITARY OR A
SUCCESSOR. THIS SECURITY IS NOT EXCHANGEABLE FOR SECURITIES REGISTERED IN
THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE EXCEPT IN THE
LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS
SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY THE
DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY
TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY) MAY BE REGISTERED
EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITARY (55 WATER STREET, NEW YORK, NEW YORK) 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 IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY
(AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.
TRANSFERS OF GLOBAL SECURITIES SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO THE DEPOSITARY, ITS SUCCESSORS OR THEIR RESPECTIVE
NOMINEES. INTERESTS OF BENEFICIAL OWNERS IN THE GLOBAL SECURITIES MAY BE
TRANSFERRED OR EXCHANGED FOR CERTIFICATED SECURITIES IN ACCORDANCE WITH THE
RULES AND PROCEDURES OF THE DEPOSITARY AND THE PROVISIONS OF SECTION 2.16
OF THE INDENTURE. IN ADDITION, CERTIFICATED SECURITIES SHALL BE TRANSFERRED
TO ALL BENEFICIAL OWNERS IN EXCHANGE FOR THEIR
<PAGE>
BENEFICIAL INTERESTS IN GLOBAL SECURITIES IF (i) THE ISSUER NOTIFIES THE
REGISTRAR THAT THE DEPOSITARY IS UNWILLING OR UNABLE TO CONTINUE AS
DEPOSITARY FOR ANY GLOBAL SECURITY AND A SUCCESSOR DEPOSITARY IS NOT
APPOINTED BY THE ISSUER WITHIN 90 DAYS OF SUCH NOTICE OR (ii) THE ISSUER,
AT ITS OPTION, NOTIFIES THE REGISTRAR IN WRITING THAT IT ELECTS TO CAUSE
THE ISSUANCE OF SECURITIES IN DEFINITIVE FORM UNDER THE INDENTURE.
B-2
<PAGE>
EXHIBIT C
Transferee Certificate for Institutional
Accredited Investors Who Are Not QIBs
__________, ____
Norwest Bank Minnesota, National Association, as Registrar
Norwest Center
Sixth & Marquette
Minneapolis, Minnesota 55479-0069
Attention: Corporate Trust Services
Facsimile: (612) 667-9825
Re: Globe Holdings, Inc.
14% Senior Discount Notes due 2009
----------------------------------
Dear Sir or Madam:
In connection with our proposed purchase of 14% Senior Discount Notes due
2009 (the "Securities") of Globe Holdings, Inc., a Massachusetts corporation
(the "Issuer"), we confirm that:
1. We are an institutional "accredited investor" within the meaning of
Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933 (the
"Securities Act"), or an entity in which all of the equity owners are accredited
investors within the meaning of Rule 501(a)(1), (2), (3) or (7) under the
Securities Act (an "Institutional Accredited Investor").
2. Any purchase of Securities by us will be for our own account or for
the account of one or more other Institutional Accredited Investors over which
we have sole investment discretion and authority to deliver this certificate and
to purchase the Securities.
3. In the event that we purchase any Securities, we will acquire
Securities having a minimum purchase price of as least $100,000 for our own
account and for each separate account for which we are acting.
4. We have such knowledge and experience in financial and business
matters that we are capable of evaluation the merits and risks of purchasing
Securities and we and any accounts for which we are acting are each able to bear
the economic risks for our or their investment.
<PAGE>
5. We have received a copy of the Offering Memorandum dated July 30,
1998, and acknowledge that we have had access to such financial and other
information, and have been afforded the opportunity to ask such questions of
representatives of the Issuer and receive answers thereto, as we deem necessary
in connection with our decision to purchase Securities.
6. We are not purchasing Securities for or on behalf of, and will not
transfer Securities to, any pension or welfare plan (as defined in Section 3 of
ERISA), except as may be permitted under ERISA and as described under "Notice to
Investors" in the Offering Memorandum.
We understand that the Securities are being offered in a transaction
not involving any public offering within the meaning of the Securities Act and
that the Securities have not been registered under the Securities Act or any
securities laws of any State of the United States, and we agree on our own
behalf and on behalf of each account for which we acquire any Securities, that
such Securities may be offered, resold, pledged or otherwise transferred only
(i) to a person whom we reasonably believe to be a qualified institutional buyer
(as defined in Rule 144A under the Securities Act), in a transaction meeting the
requirements of Rule 144 under the Securities Act, outside the United States to
a non-U.S. person in a transaction meeting the requirements of Rule 904 under
the Securities Act or in accordance with another exemption from the registration
requirements of the Securities Act (and based upon an opinion of counsel if the
Issue so requests), (ii) to the Issuer or (iii) pursuant to an effective
registration statement and, in each case, in accordance with any applicable
securities laws of any State of the United States or any other applicable
jurisdiction. We understand that the Registrar will not be required to accept
for registration any Securities, except upon presentation of evidence
satisfactory to the Issuer that the foregoing restrictions on transfer have been
complied with. We further understand and agree that the Securities purchased by
us will bear a legend reflecting the substances of this paragraph. We agree to
notify any subsequent purchasers of the Securities from us of the resale
restrictions set forth above.
We acknowledge that you, the Issuer and others will rely upon our
confirmations, acknowledgments and agreements set forth herein, and we agree to
notify you promptly in writing if any of our representations or warranties
herein ceases to be accurate and complete.
C-2
<PAGE>
THIS CERTIFICATE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK.
Very truly yours,
[Name of Purchaser]
By_________________________________
Name:
Title:
C-3
<PAGE>
EXHIBIT D
Form of Certificate to Be Delivered
in Connection with Transfers
Pursuant to Regulation S
_______________, _______
Norwest Bank Minnesota, National Association, as Registrar
Norwest Center
Sixth & Marquette
Minneapolis, Minnesota 55479-0069
Attention: Corporate Trust Services
Facsimile: (612) 667-9825
Re: Globe Holdings, Inc. (the "Issuer")
14% Senior Secured Notes due 2009
Ladies and Gentlemen:
In connection with our proposed sale of $________ aggregate principal
amount of the 14% Senior Discount Notes due 2009 (the "Securities"), 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
the transfer restrictions set forth in the Securities and, accordingly, we
represent that:
1. The offer of the Securities was not made to a person in the United
States;
2. Either (a) at the time the buy order was originated, the transferee
was outside the United States or we and any person acting on our behalf
reasonably believed that the transferee was outside the United States, or (b)
the transaction was executed in, on or through the facilities of a "designated
off-shore securities market" (as defined in Rule 904 of the Securities Act) 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;
<PAGE>
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 Securities.
You and the Issuer are entitled to rely upon this letter and are
irrevocably authorized to produce this certificate or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby. Terms used in this certificate have
the meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By_____________________________
Name:
Title:
D-2
<PAGE>
Exhibit 4.2
Globe Holdings, Inc.
49,086 Units Consisting of
$49,086,000
14% Senior Discount Notes due 2009
and Warrants to Purchase Shares
of Common Stock
PURCHASE AGREEMENT
July 31, 1998
BANCAMERICA ROBERTSON STEPHENS
231 South LaSalle Street, 17th Floor
Chicago, Illinois 60697
Ladies and Gentlemen:
Globe Holdings, Inc., a Massachusetts corporation (the "Company"),
hereby confirms its agreement with you (the "Initial Purchaser"), as set forth
below.
1. The Units. Subject to the terms and conditions herein contained,
the Company proposes to issue and sell to the Initial Purchaser 49,086 Units
(the "Units") consisting of an aggregate of $49,086,000 principal amount at
maturity of its 14% Senior Discount Notes due 2009 (the "Notes") and Common
Stock Purchase Warrants (the "Warrants") initially entitling the holders thereof
to purchase an aggregate of 69,481 shares of the Company's Class A Common Stock
$.01 par value per share (the "Common Stock"). The Units are to be issued under
a Unit Agreement (the "Unit Agreement") to be dated as of August 6, 1998 between
the Company and Norwest Bank Minnesota, National Association, as unit agent (in
such capacity, the "Unit Agent"), as trustee under the Indenture (as defined
below) and as warrant agent under the Warrant Agreement (as defined below).
The Notes are to be issued under an indenture (the "Indenture") to be dated as
of August 6, 1998, by and between the Company and Norwest Bank Minnesota,
National Association, as trustee (in such capacity, the "Trustee"). The
Warrants are to be governed by a Warrant Agreement (the "Warrant Agreement") to
be dated as of August 6, 1998 between the Company and Norwest Bank Minnesota,
National Association, as warrant agent (in such capacity, the "Warrant Agent").
Shares of Common Stock issuable upon exercise of the Warrants are collectively
referred to herein as the "Warrant Shares." The Units, the Notes, the Warrants
and the Warrant Shares are sometimes
<PAGE>
collectively referred to herein as the "Securities."
The Units will be offered and sold to the Initial Purchaser without
being registered under the Securities Act of 1933, as amended (the "Securities
Act"), in reliance on exemptions therefrom.
In connection with the sale of the Units, the Company will prepare a
final offering memorandum dated July 30, 1998 (the "Final Memorandum"), setting
forth or including a description of the terms of the Units, the terms of the
offering of the Units, a description of the Company and the Company's
subsidiaries listed in Schedule 1 attached hereto (the "Subsidiaries") and any
material developments relating to the Company and the Subsidiaries occurring
after the date of the most recent historical financial statements included
therein. Capitalized terms used herein and not otherwise defined shall have the
meanings given to such terms in the Final Memorandum.
The Initial Purchaser and its direct and indirect transferees of the
Units and the Notes will be entitled to the benefits of the Registration Rights
Agreement, substantially in the form attached hereto as Exhibit A (the
"Registration Rights Agreement"), pursuant to which the Company has agreed,
among other things, to file a registration statement (the "Registration
Statement") with the Securities and Exchange Commission (the "Commission") in
order to register the Notes or the Exchange Notes (as defined in the
Registration Rights Agreement) under the Securities Act.
Holders of the Warrants will have the registration rights set forth in
the Warrant Agreement. The Warrants issued to the Initial Purchasers as part of
the Units will, when executed and exercised in accordance with the terms
thereof, entitle the holders thereof to purchase 3% of the Company's outstanding
Common Stock on a fully-diluted basis as of the Closing Date (as defined in
Section 3 below).
2. Representations and Warranties. The Company represents and
warrants to, and agrees with, the Initial Purchaser on the date hereof that:
(a) Neither the Final Memorandum nor any amendment or supplement
thereto as of the date thereof and at all times subsequent thereto up to the
Closing Date contained or contains any untrue statement of a material fact or
omitted or omits to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, except that the representations and warranties set forth in this
Section 2(a) do not apply to statements or omissions made in reliance upon and
in conformity with information relating to the Initial Purchaser furnished to
the Company in writing by or on behalf of the Initial Purchaser expressly for
use in the Final Memorandum or any amendment or supplement thereto.
2
<PAGE>
(b) The Company has the authorized capitalization set forth in the
Final Memorandum. The Subsidiaries are the only subsidiaries of the Company (as
the term "subsidiary" is defined in the Final Memorandum); all of the
outstanding Equity Interests (as defined below) of the Company and the
Subsidiaries have been, and as of the Closing Date will be, duly authorized and
validly issued, are fully paid and non-assessable and were not issued in
violation of any preemptive or similar rights; as of the Closing Date, the
Company will own of record all of the outstanding Equity Interests of Globe
Manufacturing; as of the Closing Date, all of the outstanding Equity Interests
of each of the Company and the Subsidiaries will be free and clear of all liens,
encumbrances, equities and claims or restrictions on voting or transferability
(other than those imposed by the Senior Credit Facility (as defined in the Final
Memorandum) or by the Securities Act and the securities or "Blue Sky" laws of
certain jurisdictions and other than those permitted under the Indenture);
except as set forth in the Final Memorandum, there are no (i) options, warrants
or other rights to purchase from the Company or the Subsidiaries, (ii)
agreements or other obligations of the Company or the Subsidiaries to issue or
(iii) other rights to convert any obligation into, or exchange any securities
for, Equity Interests in the Company or the Subsidiaries outstanding. As used
herein "Equity Interest" of any person means any and all shares, interests,
rights to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) corporate stock or other equity
participations, including partnership interests, whether general or limited, of
such person.
(c) Each of the Company and the Subsidiaries has been duly organized,
is validly existing and is in good standing under the laws of the jurisdiction
of its organization, with all requisite power and authority to own its
properties and conduct its business as now conducted, and as described in the
Final Memorandum; each of the Company and the Subsidiaries is duly qualified to
do business as a foreign corporation and is in good standing in all other
jurisdictions where the ownership or leasing of its properties or the conduct of
its business requires such qualification, except where the failure to be so
qualified, individually or in the aggregate, would not (i) have a material
adverse effect on the general affairs, management, business, condition
(financial or otherwise), prospects or results of operations of the Company and
the Subsidiaries, taken as a whole, or (ii) materially impair the ability of the
Company or the Subsidiaries to perform their respective obligations contemplated
by the Transaction Documents (as defined below) to which they are a party and
the transactions contemplated to be performed by them described in the Final
Memorandum (any such event, a "Material Adverse Effect"). This Agreement, the
Unit Agreement, the Indenture, the Notes, the Exchange Notes (as defined in the
Registration Rights Agreement), the Private Exchange Notes (as defined in the
Registration Rights Agreement), the Warrant Agreement and the Warrants are
referred to herein collectively as the "Transaction Documents."
(d) The Company has all requisite power and authority to execute,
deliver and perform each of its obligations under the Transaction Documents. The
Notes, the Exchange Notes and the Private Exchange Notes have each been duly and
validly authorized by the Company and, when executed by the Company and
authenticated by the Trustee in accordance with the provisions
3
<PAGE>
of the Indenture and, in the case of the Notes, when delivered to and paid for
by the Initial Purchaser in accordance with the terms of this Agreement, will
have been duly executed, issued and delivered and will constitute valid and
legally binding obligations of the Company, entitled to the benefits of the
Indenture and enforceable against the Company 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 with respect thereto may be brought.
(e) The Company has all requisite power and authority to execute,
deliver and perform its obligations under the Indenture. The Indenture meets
the requirements for qualification under the Trust Indenture Act of 1939, as
amended (the "TIA"). The Indenture has been duly and validly authorized by the
Company and, when executed and delivered by the Company (assuming the due
authorization, execution and delivery by the Trustee), will constitute a valid
and legally binding agreement of the Company, enforceable against the Company in
accordance with its terms, except that the enforcement thereof may be subject to
(i) bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or
other similar laws now or hereafter in effect relating to creditors' rights
generally and (ii) general principles of equity and the discretion of the court
before which any proceeding with respect thereto may be brought.
(f) The Company has all requisite power and authority to execute,
deliver and perform its obligations under this Agreement and the Registration
Rights Agreement. When executed and delivered by the Company (assuming the due
authorization, execution and delivery by each other party thereto) each of this
Agreement and the Registration Rights Agreement will constitute the valid and
legally binding agreement of the Company, enforceable against the Company in
accordance with its terms, except that (A) the enforcement thereof may be
subject to (i) bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other 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 relating thereto may be
brought and (B) any rights to indemnity or contribution thereunder may be
limited by federal or state securities laws or public policy considerations.
(g) The Company has all requisite power and authority to perform its
obligations under the Unit Agreement. The Unit Agreement has been duly and
validly authorized by the Company and, when executed and delivered by the
Company (assuming the due authorization, execution and delivery by the Unit
Agent), will constitute a valid and legally binding agreement of the Company,
enforceable against the Company in accordance with its terms, except that the
enforcement thereof may be subject to (i) bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and (ii) general
principles of equity and the discretion of the court before which any proceeding
with respect thereto may be brought.
4
<PAGE>
(h) The Company has all requisite power and authority to execute,
deliver and perform its obligations under the Warrant Agreement. The Warrant
Agreement has been duly and validly authorized by the Company and, when executed
and delivered by the Company (assuming the due authorization, execution and
delivery by the Warrant Agent), will constitute a valid and legally binding
agreement of the Company, enforceable against the Company in accordance with its
terms, except that the enforcement thereof may be subject to (i) bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights generally and (ii)
general principles of equity and the discretion of the court before which any
proceeding with respect thereto may be brought.
(i) The Warrants have been duly and validly authorized for issuance
and sale pursuant to this Agreement and the issuance of the Warrants will not
trigger any pre-emptive, anti-dilution or similar rights. The Warrants are
exercisable into Warrant Shares in accordance with the terms of the Warrant
Agreement. The Warrant Shares have been duly and validly authorized by the
Company and reserved for issuance upon exercise of the Warrants and, when issued
upon exercise of the Warrants in accordance with the terms thereof, will be
validly issued, fully paid and non-assessable. The issuance of the Warrant
Shares will not trigger any anti-dilution, pre-emptive or similar rights. The
Warrants and the Warrant Shares when issued and delivered, will conform in all
material respects to the description thereof in the Final Memorandum.
(j) No consent, approval, authorization or order of any court or
governmental agency or body, or third party is required for the performance by
the Company of its obligations under the Transaction Documents or the
consummation by the Company of the transactions contemplated thereby or hereby,
except such as shall have been made or obtained prior to the Closing Date, such
as may be required in connection with the registration of the Notes, Exchange
Notes or the Warrant Shares under the Securities Act in accordance with the
Registration Rights Agreement or the Warrant Agreement, such as may be required
under state securities or "Blue Sky" laws, such as may be required for
qualification of the Indenture under the TIA and such that the failure to obtain
would not, singularly or in the aggregate, reasonably be expected to have a
Material Adverse Effect. None of the Company or the Subsidiaries is (i) in
violation of its certificate of incorporation or bylaws (or similar
organizational documents), (ii) (assuming compliance with all applicable state
securities or "Blue Sky" laws and assuming the accuracy of the representations
and warranties of the Initial Purchaser in Section 8 hereof) 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, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect, or (iii) in breach of
or default under (nor has any event occurred which, with notice or passage of
time or both, would constitute a default under) or in violation of any of the
terms or provisions of any indenture, mortgage, deed of trust, loan agreement,
note, lease, license, franchise agreement, distributor agreement, permit,
certificate, contract or other agreement or instrument to which any of them is a
party or to which any of them or their respective properties or assets is
subject (collectively, "Contracts"), except for any
5
<PAGE>
such breach, default, violation or event which, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect.
(k) The issuance, sale and delivery of the Units and the execution,
delivery and performance by the Company of each of the Transaction Documents,
and the consummation by the Company of the transactions contemplated thereby and
hereby, and the fulfillment of the terms thereof or hereof, will not conflict
with or constitute or result in a breach of or a default under or an event which
with notice or passage of time or both would constitute a default under or
violation of or cause an acceleration of any material obligation under, or
result in the imposition or creation of (or the obligation to create or impose)
a lien on any property or assets of the Company with respect to (i) any of the
terms or provisions of any Contract, except for any such conflict, breach,
violation, default or event which, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect, (ii) the certificate
of incorporation or bylaws (or similar organizational documents) of any of the
Company or the Subsidiaries or (iii) (assuming compliance with all applicable
state securities or "Blue Sky" laws and assuming the accuracy of the
representations and warranties of the Initial Purchaser in Section 8 hereof) any
statute, judgment, decree, order, rule or regulation applicable to any of the
Company or the Subsidiaries or any of their respective properties or assets,
except for any such conflict, breach or violation which, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect.
(l) The historical consolidated financial statements (including the
related notes thereto) of the Company included in the Final Memorandum present
fairly in all material respects the financial position, results of operations
and cash flows of the Company and the 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 financial data in the Final Memorandum under the headings
"Offering Memorandum Summary - Summary Consolidated Financial Data" and
"Selected Consolidated Financial Data" present fairly in all material respects
the information purported to be shown therein and have been prepared and
compiled on a basis consistent with the financial statements included therein,
except as otherwise stated therein. Ernst & Young LLP (the "Independent
Accountants") is an independent public accounting firm with respect to the
Company within the meaning of Rule 101 of the Code of Professional Conduct of
the American Institute of Certified Public Accountants ("AICPA") and its
interpretations and rulings thereunder, as of the dates of above-referenced
financial statements.
(m) The pro forma financial information included in the Final
Memorandum (i) has been properly computed on the bases described therein and the
assumptions used in the preparation of the pro forma financial data and other
pro forma financial information included in the Final Memorandum are reasonable,
and the adjustments used therein are appropriate to give effect to the
transactions or circumstances referred to therein; and (ii) presents fairly, in
all material respects, the information purported to be shown therein.
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(n) Except as described in the Final Memorandum, there is not pending
or, to the knowledge of the Company or any Subsidiary, threatened any action,
suit or proceeding to which the Company, any Subsidiary or any of their
respective affiliates is a party, or to which the property or assets of the
Company, any Subsidiary or their respective affiliates are subject, before or
brought by any court, arbitrator or governmental agency or body which, if
determined adversely to the Company or any Subsidiary, individually or in the
aggregate, would reasonably be expected to have a Material Adverse Effect or
which seeks to restrain, enjoin, prevent the consummation of or otherwise
challenge the issuance or sale of the Units to be sold hereunder or the
consummation of the other transactions on the Closing Date contemplated by the
Transaction Documents or otherwise described in the Final Memorandum. Neither
the Company nor any Subsidiary has received any notice or claim of any default
(or event, condition or omission which with notice or lapse of time or both
would result in a default) under any of their respective Contracts, including
those referred to in the Final Memorandum, or any other Transaction Document to
which it is a party or has knowledge of any breach of any of such Contracts by
the other party or parties thereto, except such defaults or breaches as would
not reasonably be expected to result in a Material Adverse Effect.
(o) Each of the Company and the Subsidiaries owns or possesses
adequate licenses or other rights to use all patents, trademarks, service marks,
trade names, copyrights and know-how necessary to conduct the businesses now or
proposed to be operated by it as described in the Final Memorandum except where
the failure to possess or make the same would not reasonably be expected to have
a Material Adverse Effect, and none of the Company or the Subsidiaries has
received any notice of infringement of or conflict with (or knows of any such
infringement of or conflict with) asserted rights of others with respect to any
patents, trademarks, service marks, trade names, copyrights or know-how which,
if such assertion of infringement or conflict were sustained, individually or in
the aggregate, would have a Material Adverse Effect.
(p) Since the date of the most recent financial statements appearing
in the Final Memorandum, except as described therein or as contemplated by the
Transaction Documents or the Merger Agreement, (i) neither the Company nor any
Subsidiary has incurred any liabilities or obligations, direct or contingent, or
entered into or agreed to enter into any transactions or contracts (written or
oral) not in the ordinary course of business which liabilities, obligations,
transactions or contracts, individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect, (ii) neither the Company nor any
Subsidiary has purchased any of its outstanding Equity Interests, or declared,
paid or otherwise made any dividend or distribution of any kind on its Equity
Interests and (iii) there has not been any change in the long term indebtedness
of the Company or any Subsidiary that, individually or in the aggregate, would
have a Material Adverse Effect. Since the respective dates as of which
information is given in the Final Memorandum, except as described therein, there
has been no occurrence or any fact or event known to the Company which has had,
or would reasonably be expected to have, a Material Adverse Effect.
(q) Each of the Company and the Subsidiaries has filed all necessary
federal, state
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and foreign income and franchise tax returns required to be filed through the
date hereof except where the failure to so file such returns, individually or in
the aggregate, would not reasonably be expected to have a Material Adverse
Effect, and has paid all taxes shown as due thereon prior to the date upon which
penalties attach thereto, except for taxes which the Company or any Subsidiary
is contesting in good faith for which adequate reserves have been established;
and other than tax deficiencies which the Company or any Subsidiary is
contesting in good faith and for which the Company or such Subsidiary has
provided adequate reserves, there is no tax deficiency that has been asserted
against the Company or any of the Subsidiaries that, individually or in the
aggregate, would reasonably be expected to have a Material Adverse Effect.
(r) The statements set forth under the heading "Description of
Capital Stock" in the Final Memorandum, insofar as such statements purport to
summarize certain provisions of the articles of incorporation of the Company
provide a fair summary of such provisions and information with respect thereto;
the statements set forth under the heading "Description of the Warrants" in the
Final Memorandum, insofar as such statements purport to summarize certain
provisions of the Warrant Agreement, the Warrant Registration Rights Agreement
and the Warrants provide a fair summary of such provisions and information with
respect thereto; the statements set forth under the heading "Description of the
Notes" in the Final Memorandum, insofar as such statements purport to summarize
certain provisions of the Notes and the Indenture, provide a fair summary of
such provisions and information with respect thereto; the statements set forth
under the heading "Description of Senior Credit Facility" in the Final
Memorandum, insofar as such statements purport to summarize certain provisions
of the Senior Credit Facility provide a fair summary of such provisions and
information with respect thereto; the statements set forth under the heading
"Certain Relationships and Related Transactions" in the Final Memorandum,
insofar as such statements purport to summarize certain provisions of the
Recapitalization, the Merger Agreement, the Management Agreement, the
Stockholders Agreement, the Registration Agreement and the Tax Sharing Agreement
(each as defined in the Final Memorandum), provide a fair summary of such
provisions and information with respect thereto; the statements set forth under
the subheading "Recapitalization" under the heading "Certain Relationships and
Related Transactions" in the Final Memorandum, insofar as such statements
purport to summarize certain provisions of the Recapitalization (as defined in
the Final Memorandum), provide a fair summary of such provisions and information
with respect thereto.
(s) The statistical and market-related data included in the Final
Memorandum are based on or derived from sources which the Company believes to be
reliable and accurate.
(t) No part of the proceeds of the sale of the Notes will be used,
directly or indirectly, for any purpose that violates any provision of
Regulation T, U or X of the Board of Governors of the Federal Reserve System, in
each case as in effect, or as the same may hereafter be in effect, on the
Closing Date.
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(u) Each of the Company and the Subsidiaries has good and marketable
title in fee simple to all real property and owns all personal property
described in the Final Memorandum as being owned by it and holds a leasehold
estate in the real and personal property described in the Final Memorandum as
being leased by it, in each case, free and clear of all liens, charges,
encumbrances or restrictions, except (i) liens, encumbrances and claims securing
the Senior Credit Facility or otherwise permitted under the Indenture, (ii) as
described in the Final Memorandum or (iii) to the extent the failure to have
such title or the existence of such liens, charges, encumbrances or
restrictions, individually or in the aggregate, would not reasonably be expected
to have a Material Adverse Effect. All leases, contracts and agreements to
which the Company or any of the Subsidiaries is a party or by which any of them
is bound are valid and enforceable against the Company or the Subsidiary, as the
case may be, and, to the Company's knowledge, are valid and enforceable against
the other party or parties thereto (in each case, 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 with respect thereto may be brought) and are in full force and
effect with only such exceptions as, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect.
(v) Except as described in the Final Memorandum or as, individually
or in the aggregate, would not reasonably be expected to have a Material Adverse
Effect (A) each of the Company and the Subsidiaries is in compliance with and
not subject to liability under applicable Environmental Laws (as defined below),
(B) each of the Company and the Subsidiaries has made all filings and provided
all notices required under any applicable Environmental Law, and has and is in
compliance with all permits required under any applicable Environmental Laws and
each of them is in full force and effect, (C) there is no civil, criminal or
administrative action, suit, claim, hearing, notice of violation, investigation,
proceeding, written notice or demand letter or request for information pending
or, to the knowledge of the Company or any Subsidiary, threatened against the
Company or any Subsidiary under any Environmental Law, (D) no lien, encumbrance
or restriction has been recorded under any Environmental Law with respect to any
assets, facility or property owned, operated, leased or controlled by the
Company or any Subsidiary, (E) none of the Company or the Subsidiaries has
received notice that it has been identified as a potentially responsible party
under the Comprehensive Environmental Response, Compensation and Liability Act
of 1980, as amended ("CERCLA") or any comparable state law, (F) no property or
facility of the Company or any Subsidiary is (i) listed or proposed for listing
on the National Priorities List under CERCLA or is (ii) listed in the
Comprehensive Environmental Response, Compensation, Liability Information System
List promulgated pursuant to CERCLA, or on any comparable list maintained by any
state or local governmental authority.
For purposes of this Agreement, "Environmental Laws" means the common
law and all applicable federal, state and local laws or regulations, codes,
orders, decrees, judgments or injunctions issued, promulgated, approved or
entered thereunder, relating to pollution or protection
9
<PAGE>
of public or employee health and safety or the environment, including, without
limitation, laws relating to (i) emissions, discharges, releases or threatened
releases of hazardous substances as defined by CERCLA, including, without
limitation, petroleum, crude oil or any fraction thereof (collectively,
"Hazardous Materials"), into the environment (including, without limitation,
ambient air, surface water, ground water, land surface or subsurface strata) and
(ii) the manufacture, processing, distribution, use, generation, treatment,
storage, disposal, transport or handling of Hazardous Materials.
(w) There is no strike, labor dispute, slowdown or work stoppage with
the employees of any of the Company or the Subsidiaries which is pending or, to
the knowledge of the Company or any Subsidiary, threatened, which would
reasonably be expected to have a Material Adverse Effect. No employees of the
Company or any Subsidiary are covered by a collective bargaining agreement nor
is any union organizing effort or campaign pending or, to the knowledge of the
Company or any Subsidiary, threatened with respect to any such employees.
(x) Each of the Company and the Subsidiaries maintains insurance in
such amounts and covering such risks as are reasonable and customary given the
nature of their respective businesses and the value of their properties.
(y) None of the Company or the Subsidiaries has any liability for any
prohibited transaction or accumulated funding deficiency (as defined in Section
412 of the Code) or any complete or partial withdrawal liability with respect to
any pension, profit sharing or other plan which is subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), to which the
Company or any Subsidiary makes or ever has made a contribution and in which any
employee of the Company or any Subsidiary is or has ever been a participant.
With respect to such plans, the Company and each Subsidiary is in compliance in
all material respects with all applicable provisions of ERISA.
(z) Each of the Company and the Subsidiaries (i) makes and keeps
reasonably accurate books and records and (ii) maintains internal accounting
controls which provide reasonable assurance that (A) transactions are executed
in accordance with management's general or specific authorizations, (B)
transactions are recorded as necessary to permit preparation of its financial
statements and to maintain accountability for its assets, (C) access to its
assets is permitted only in accordance with management's general or specific
authorizations and (D) the reported accountability for its assets is compared
with existing assets at reasonable intervals and appropriate action has been
taken with respect to any differences.
(aa) None of the Company or any Subsidiary is or will be an
"investment company" or "promoter" or "principal underwriter" for an "investment
company," as such terms are defined in the Investment Company Act of 1940, as
amended, and the rules and regulations thereunder.
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(bb) None of the Company or any Subsidiary does business with the
government of Cuba or with any person or affiliate located in Cuba within the
meaning of Section 517.075, Florida Statutes 1985, as amended, and all
regulations promulgated thereunder.
(cc) No condition, omission, event or act has occurred with respect
to the Company or any Subsidiary which, had the Indenture already been executed
and delivered, would (or, with the giving of notice and/or the lapse of time
and/or the issuance of a certificate, could) constitute a Default (as defined in
the Indenture).
(dd) Other than holders of the Notes or the Exchange Notes pursuant
to the Registration Rights Agreement and holders of the Warrants pursuant to the
Warrant Agreement, no holder of securities of the Company or any Subsidiary will
be entitled to have such securities registered under the registration statements
required to be filed by the Company pursuant to the Registration Rights
Agreement or the Warrant Agreement other than as expressly permitted thereby.
(ee) Immediately after the consummation of the transactions
contemplated by this Agreement (including the Related Transactions (as defined
below)), the fair value and present fair saleable value of the assets of the
Company (on a consolidated and going concern basis) will exceed the sum of its
stated liabilities and identified contingent liabilities; the Company (on a
consolidated basis) is not, nor will the Company (on a consolidated basis) be,
after giving effect to the execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby (including the
Related Transactions (as defined below)), (a) left with unreasonably small
capital with which to carry on its business as it is proposed to be conducted,
or (b) unable to pay its debts (contingent or otherwise) as they mature.
(ff) Assuming the accuracy of the representations and warranties of
the Initial Purchaser contained in Section 8 hereof and their compliance with
the agreements set forth therein, none of the Company, any Subsidiary or any of
their respective Affiliates (as defined in Rule 501(b) of Regulation D under the
Securities Act) has directly, or through any authorized agent, (i) sold, offered
for sale, solicited offers to buy or otherwise negotiated in respect of, any
"security" (as defined in the Securities Act) which is or will be integrated
with the sale of the Units in a manner that would require the registration under
the Securities Act of the Units, the Notes or the Warrant Shares or (ii) engaged
in any form of general solicitation or general advertising (as those terms are
used in Rule 502(c) under the Securities Act) in connection with the offering of
the Units or in any manner involving a public offering within the meaning of
Section 4(2) of the Securities Act.
(gg) Assuming the accuracy of the representations and warranties of
the Initial Purchaser in Section 8 hereof and its compliance with the agreements
set forth therein, it is not necessary in connection with the offer, sale and
delivery of the Units to the Initial Purchaser in the manner contemplated by
this Agreement to register any of the Units, the Notes, the Warrants or the
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<PAGE>
Warrant Shares under the Securities Act or to qualify the Indenture under the
TIA.
(hh) No securities of the Company or any Subsidiary are of the same
class (within the meaning of Rule 144A under the Securities Act) as the Units,
the Notes, the Warrants or the Warrant Shares and listed on a national
securities exchange registered under Section 6 of the Exchange Act, or quoted in
a United States automated inter-dealer quotation system.
(ii) None of the Company or the Subsidiaries has taken, nor will any
of them 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 Units, the Notes or the Warrants in violation of Regulation M under
the Exchange Act.
3. Purchase, Sale and Delivery of the Units. On the basis of the
representations, warranties, agreements and covenants herein contained and
subject to the terms and conditions herein set forth, the Company agrees to
issue and sell to the Initial Purchaser, and the Initial Purchaser agrees to
purchase from the Company, 49,086 Units at a purchase price of $500.39705 per
Unit (the "Unit Purchase Price"), or an aggregate purchase price of $24,562,490
(the "Purchase Price"). The Company and the Initial Purchaser agree that, for
federal income tax purposes, (i) the Notes and the Warrants constitute
investment units and (ii) the aggregate issuance price of the Units is $509.31,
with the aggregate issue price of the Notes being $496.72 and the aggregate
issue price of the Warrants being $12.59. Neither the Company nor the Initial
Purchaser shall voluntarily take any action inconsistent with the agreement set
forth in the immediately preceding sentence, except that, with respect to clause
(ii) thereof, any such party may, after notice to the other party, compromise or
settle any audit or review of such treatment initiated by the Internal Revenue
Service.
One or more certificates in definitive form for the Units that the
Initial Purchaser has agreed to purchase hereunder, and in such denomination or
denominations and registered in such name or names as the Initial Purchaser
requests upon notice to the Company at least thirty-six (36) hours prior to the
Closing Date, shall be delivered by or on behalf of the Company to the Initial
Purchaser on the Closing Date, against payment by or on behalf of the Initial
Purchaser of the purchase price therefor by wire transfer (same day funds), to
such account or accounts as the Company shall specify prior to the Closing Date,
or by such means as the parties hereto shall agree prior to the Closing Date.
The Units will be represented by one or more definitive global securities in
book-entry form which will be deposited by or on behalf of the Company with The
Depository Trust Company or its designated custodian. For purposes of Rule
15c6-1 under the Exchange Act, the Closing Date shall be the date for payment of
funds and delivery of securities for all the Units sold pursuant to the offering
of the Units. Such delivery of and payment for the Units shall be made at the
offices of Winston & Strawn, 35 West Wacker Drive, Chicago, Illinois, at 10:00
A.M., Chicago time, on August 5, 1998, or at such other place, time or date as
the Initial Purchaser and the Company may agree upon, such time and date of
delivery against payment being herein referred to as the "Closing Date." The
Company will make such certificate or certificates for the Units available
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<PAGE>
for checking and packaging by the Initial Purchaser at the offices of Winston &
Strawn in Chicago, Illinois, or at such other place as the Initial Purchaser may
designate, at least twenty-four (24) hours prior to the Closing Date.
The Company hereby agrees to pay any transfer taxes payable in
connection with the initial delivery to the Initial Purchaser of the Notes.
4. Offering by the Initial Purchaser. The Initial Purchaser proposes
to make an offering of the Units 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.
5. Covenants of the Company. The Company covenants and agrees with
the Initial Purchaser that:
(a) The Company will not amend or supplement the Final Memorandum or
any amendment or supplement thereto of which the Initial Purchaser 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 have objected to by notice to the Company, unless the Company is
advised by counsel that such amendment or supplement is legally required. The
Company will promptly, upon the reasonable request of the Initial Purchaser or
counsel for the Initial Purchaser, make any amendments or supplements to the
Final Memorandum that may be necessary or advisable in connection with the
resale of the Notes by the Initial Purchaser.
(b) The Company will cooperate with the Initial Purchaser in
arranging for the qualification of the Units for offering and sale under the
securities or "Blue Sky" laws of such jurisdictions as the Initial Purchaser may
reasonably designate and will continue such qualifications in effect for as long
as may be necessary to complete the resale of the Units; provided, however, that
in connection herewith, the Company shall not be required to qualify as a
foreign entity 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 or qualified.
(c) If, at any time prior to the completion of the resale by the
Initial Purchaser of the Units, any event occurs or information becomes known as
a result of which, in the reasonable opinion of counsel for the Company, 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 light of the circumstances under which they were made
and at the time made, not misleading, or if for any other reason it is
necessary, in the reasonable opinion of counsel for the Company, at any time to
amend or supplement the Final Memorandum to comply with applicable law, the
Company will promptly notify the Initial Purchaser thereof and will prepare,
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<PAGE>
at the expense of the Company, an amendment or supplement to the Final
Memorandum that corrects such statement or omission or effects such compliance.
(d) The Company will, without charge, provide to the Initial
Purchaser and to counsel for the Initial Purchaser as many copies of the Final
Memorandum or any amendment or supplement thereto as the Initial Purchaser may
reasonably request.
(e) For and during the period commencing on the date hereof and
ending on the date that no Units, Notes or Warrants are outstanding, the Company
will furnish to the Initial Purchaser copies of all reports and other
communications (financial or otherwise) furnished by the Company to the Unit
Agent, the Trustee, the Warrant Agent or the holders of the Units, the Notes,
the Exchange Notes or the Warrants and, as soon as available, copies of any
reports or financial statements furnished to or filed by the Company with the
Commission or any national securities exchange or governing body of any
automated quotation system on which any class of securities of the Company may
be listed.
(f) Prior to the Closing Date, the Company will furnish to the
Initial Purchaser, as soon as they are available to the Company, a copy of any
unaudited interim financial statements of the Company and the Subsidiaries, for
any period subsequent to the period covered by the most recent financial
statements appearing in the Final Memorandum.
(g) None of the Company, the Subsidiaries 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 Securities Act) which
could be integrated with the sale of the Units in a manner which would require
the registration under the Securities Act of any of the Securities.
(h) None of the Company or the Subsidiaries shall, for a period of
120 days following the date hereof, without the prior written consent of the
Initial Purchaser, offer, sell, contract to sell or otherwise dispose of,
directly or indirectly, any debt securities of the Company or the Subsidiaries,
other than the Notes, the Exchange Notes, the Private Exchange Notes, and debt
securities evidencing indebtedness under the Senior Credit Facility,
indebtedness otherwise permitted under the Senior Credit Facility, indebtedness
of Globe Manufacturing pursuant to the Senior Subordinated Note Offering (as
defined in the Final Memorandum) or indebtedness under a loan or similar
agreement entered into between the Company or Globe Manufacturing and banks or
banking or other financial institutions or otherwise relating to receivables or
inventory financings entered into by the Company or Globe Manufacturing.
(i) Prior to the effectiveness of the Exchange Registration Statement
(as defined in the Registration Rights Agreement) or the Shelf Registration
Statement (as defined in the Registration Rights Agreement), as the case may be,
and thereafter only to the extent contemplated by such registration statements,
none of the Company or its affiliates will engage in any form of
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<PAGE>
general solicitation or general advertising (as those terms are used in
Regulation D under the Securities Act) in connection with the offering of the
Units or in any manner involving a public offering within the meaning of Section
4(2) of the Securities Act.
(j) For so long as any of the Units, the Notes or the Warrants remain
outstanding and are "restricted securities" within the meaning of Rule 144(a)(3)
under the Securities Act, the Company will make available, upon request, to any
holder of such securities the information specified in Rule 144A(d)(4) under the
Securities Act, unless the Company is then subject to Section 13 or 15(d) of the
Exchange Act.
(k) The Company will use its reasonable best efforts to (i) permit
the Units, the Notes and the Warrants to be designated PORTAL securities in
accordance with the rules and regulations adopted by the National Association of
Securities Dealers (the "NASD") relating to trading in the Private Offerings,
Resales and Trading through Automated Linkages Market (the "Portal Market") and
(ii) permit such securities to be eligible for clearance and settlement through
The Depository Trust Company and its participants.
6. Expenses. The Company agrees to pay all costs and expenses
incident to the performance of its obligations under this Agreement, whether or
not the transactions contemplated herein are consummated or this Agreement is
terminated pursuant to Section 11 hereof, including all costs and expenses
incident to (i) the printing, word processing or other production of documents
with respect to the transactions contemplated hereby, including any costs of
printing the Final Memorandum and any amendment or supplement thereto, and any
"Blue Sky" memoranda, (ii) all arrangements relating to the delivery to the
Initial Purchaser of copies of the foregoing documents, (iii) the fees and
disbursements of the counsel, the accountants and any other experts or advisors
retained by the Company, (iv) preparation (including printing), issuance and
delivery to the Initial Purchaser of the Units, (v) the qualification of the
Securities under state securities and "Blue Sky" laws, including filing fees and
reasonable fees and expenses of counsel for the Initial Purchaser relating
thereto, (vi) reasonable fees and expenses of the Unit Agent, the Trustee and
the Warrant Agent including reasonable fees and expenses of counsel thereto,
(vii) all expenses and listing fees incurred in connection with the application
for quotation of the Units, the Notes and the Warrants on the PORTAL Market and
(viii) any fees charged by investment rating agencies for the rating of the
Notes; provided, however, that except as expressly provided in the last sentence
of this Section 6, the Initial Purchaser shall pay its own costs and expenses.
If the sale of the Units provided for herein is not consummated because any
condition to the obligations of the Initial Purchaser set forth in Section 7
hereof is not satisfied, because this Agreement is terminated pursuant to
Section 11 hereof or because of any failure, refusal or inability on the part of
the Company to perform all obligations and satisfy all conditions on its part to
be performed or satisfied hereunder (other than solely by reason of a default by
the Initial Purchaser of its obligations hereunder after all conditions
hereunder have been satisfied in accordance herewith), the Company agrees to
promptly reimburse the Initial Purchaser upon demand for all out-of-pocket
expenses (including reasonable fees and
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<PAGE>
expenses of Winston & Strawn, counsel for the Initial Purchaser) that shall have
been incurred by the Initial Purchaser in connection with the proposed purchase
and sale of the Units.
7. Conditions of the Initial Purchaser's Obligations. The
obligation of the Initial Purchaser to purchase and pay for the Notes shall, in
its sole discretion, be subject to the satisfaction or waiver of the following
conditions on or prior to the Closing Date:
(a) On the Closing Date, the Initial Purchaser shall have received
(i) an opinion, dated as of the Closing Date and addressed to the Initial
Purchaser, of Hale & Dorr, special counsel for the Company, in form and
substance satisfactory to the Initial Purchaser, and (ii) an opinion, dated as
of the Closing Date and addressed to the Initial Purchaser, of Maynard, Cooper
and Gale P.C., special counsel for Globe Manufacturing, in form and substance
satisfactory to the Initial Purchaser.
(b) On the Closing Date, the Initial Purchaser shall have received
the opinion, dated as of the Closing Date and addressed to the Initial
Purchaser, of Kirkland & Ellis, counsel for the Company, in form and substance
satisfactory to the Initial Purchaser. In addition, the Initial Purchaser shall
have received a letter or letters permitting it to rely on any opinions rendered
by counsel to MergerCo, the Company and Globe Manufacturing in connection with
the Transactions.
(c) On the Closing Date, the Initial Purchaser shall have received
the opinion, in form and substance satisfactory to the Initial Purchaser, dated
as of the Closing Date and addressed to the Initial Purchaser, of Winston &
Strawn, counsel for the Initial Purchaser, with respect to certain legal matters
relating to this Agreement and such other related matters as the Initial
Purchaser may reasonably require. In rendering such opinion, Winston & Strawn
shall have received and may rely upon such certificates and other documents and
information as it may reasonably request to pass upon such matters.
(d) The Initial Purchaser shall have received from the Independent
Accountants a comfort letter or letters dated the date hereof and the Closing
Date, in form and substance reasonably satisfactory to counsel for the Initial
Purchaser.
(e) The representations and warranties of the Company contained in
this Agreement shall be true and correct on and as of the date hereof and on and
as of the Closing Date as if made on and as of the Closing Date; the statements
of the Company's officers made pursuant to any certificate delivered in
accordance with the provisions hereof shall be true and correct and as of the
date made and on and as of the Closing Date; the Company shall have performed
all covenants and agreements and satisfied all conditions on its part to be
performed or satisfied hereunder at or prior the Closing Date; and, except as
described in the Final Memorandum (exclusive of any amendment or supplement
thereto after the date hereof), subsequent to the date of the most recent
financial statements in such Final Memorandum, there shall have been no event or
development that,
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<PAGE>
individually or in the aggregate, has or would reasonably be expected to have a
Material Adverse Effect.
(f) The sale of the Units hereunder shall not be enjoined
(temporarily or permanently) on the Closing Date.
(g) Subsequent to the date of the most recent financial statements in
the Final Memorandum (exclusive of any amendment or supplement thereto after the
date hereof), the conduct of the business and operations of the Company or the
Subsidiaries shall not have been interfered with by strike, fire, flood,
hurricane, accident or other calamity (whether or not insured) or by any court
or governmental action, order or decree, and, except as otherwise stated
therein, the properties of the Company or any Subsidiary shall not have
sustained any loss or damage (whether or not insured) as a result of any such
occurrence, except any such interference, loss or damage which, individually or
in the aggregate, would not reasonably be expected to have a Material Adverse
Effect.
(h) The Initial Purchaser shall have received a certificate of the
Company, dated the Closing Date, signed by its Chairman of the Board, President
or any Vice President and the Chief Financial Officer (in their respective
capacities as such), to the effect that:
(i) The representations and warranties of the Company contained
in this Agreement are true and correct as of the date hereof and as of
the Closing Date, and the Company has performed all covenants and
agreements and satisfied all conditions on its part to be performed or
satisfied hereunder at or prior to the Closing Date;
(ii) At the Closing Date, since the date hereof or since the
date of the most recent financial statements in the Final Memorandum
(exclusive of any amendment or supplement thereto after the date
hereof), no event or events have occurred, no information has become
known nor does any condition exist that, individually or in the
aggregate, would reasonably be expected to have a Material Adverse
Effect;
(iii) The sale of the Units hereunder shall not have been
enjoined (temporarily or permanently); and
(iv) The Related Transactions have been consummated. As used
herein, "Related Transactions" means (i) the Recapitalization of the
Company (as defined in the Final Memorandum) pursuant to the Merger
Agreement (as defined below), (ii) the Merger (as defined in the Final
Memorandum), (iii) the CHS Loan, (iv) the repayment of the CHS Loan by
the Company with the net proceeds of the offering of the Units, (v)
the Asset Drop Down (as defined in the Final Memorandum), (vi) the
consummation of the Senior Credit Facility and the initial borrowing
by Globe Manufacturing of approximately $120 million thereunder, (vii)
the repayment of all
17
<PAGE>
outstanding obligations under the Old Credit Facility (as defined in
the Final Memorandum) and the release of all liens on property of the
Company granted in connection therewith and (viii) the other
transactions contemplated by the Merger Agreement. As used herein, the
Merger Agreement means the Agreement and Plan of Merger dated June 23,
1998, by and between the Company and Globe Acquisition Company, a
newly formed affiliate of Code Hennessy & Simmons III, L.P., as
amended through the date hereof.
(i) On the Closing Date, the Initial Purchaser shall have received
(x) the Registration Rights Agreement executed by the Company, (y) the Unit
Agreement executed by the Company and the Unit Agent, the Trustee and the
Warrant Agent and (z) the Warrant Agreement executed by the Company and the
Warrant Agent and each such agreement shall be in full force and effect at all
times from and after the Closing Date except as otherwise terminated in
accordance with its terms.
(j) The conditions to the obligations of MergerCo under the Merger
Agreement shall have been satisfied in all material respects, and the Merger
shall have been consummated in accordance with the terms of the Merger Agreement
and as described in the Final Memorandum (exclusive of any amendment or
supplement thereto after the date hereof).
(k) The Related Transactions shall have been consummated, and counsel
to the Initial Purchaser shall have received such documents relating thereto and
other evidence thereof as they may request in form and substance reasonably
satisfactory to such counsel.
(l) On the Closing Date, the Initial Purchaser shall have received
certified copies of the Tax Sharing Agreement, the Management Agreement, the
Registration Agreement, the Merger Agreement, the Senior Credit Facility and the
agreement effecting the Asset Drop Down, each executed by the Company and/or the
other signatories thereto and in form and substance reasonably satisfactory to
the Initial Purchaser.
(m) On the Closing Date, the Initial Purchaser shall have received
the opinion dated as of the Closing Date and addressed to the Initial Purchaser
of Valuation Research Corporation, regarding the solvency of the Company after
giving effect to the Transactions (including the offering of the Units
contemplated by the Final Memorandum), together with copies of all officers'
certificates and other documents referred to therein, and such opinion and other
documents shall be in form and substance reasonably satisfactory to the Initial
Purchaser.
(n) On the Closing Date, the Initial Purchaser shall have received
evidence, in form and substance satisfactory to the Initial Purchaser, of the
repayment in full of the CHS Loan.
On or before the Closing Date, the Initial Purchaser and counsel for
the Initial
18
<PAGE>
Purchaser shall have received such further documents, opinions, certificates,
letters and schedules or instruments relating to the business, corporate, legal
and financial affairs of the Company and the Subsidiaries as they shall have
heretofore reasonably requested from the Company.
All such documents, opinions, certificates, letters, schedules or
instruments delivered pursuant to this Agreement will comply with the provisions
hereof only if they are reasonably satisfactory in all material respects to the
Initial Purchaser and counsel for the Initial Purchaser. The Company shall
furnish to the Initial Purchaser such conformed copies of such documents,
opinions, certificates, letters, schedules and instruments in such quantities as
the Initial Purchaser shall reasonably request.
8. Offering of Notes; Restrictions on Transfer. The Initial
Purchaser agrees with the Company that (i) it has not and will not solicit
offers for, or offer or sell, the Units by any form of general solicitation or
general advertising (as those terms are used in Regulation D under the
Securities Act) or in any manner involving a public offering within the meaning
of Section 4(2) of the Securities Act; and (ii) it has and will solicit offers
for the Units only from, and has offered or sold and will offer, sell or
deliver, the Units only to (A) in the case of offers inside the United States,
(x) 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 (y) a limited number of other
institutional investors reasonably believed by the Initial Purchaser to be
Accredited Investors that, prior to their purchase of the Units, 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, in each case, in
compliance with Regulation S under the Securities Act ("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 Units such persons are deemed to have represented and agreed
as provided under the caption "Notice to Investors" contained in the Final
Memorandum.
9. Indemnification and Contribution. (a) The Company agrees to
indemnify and hold harmless the Initial Purchaser, and each person, if any, who
controls the Initial Purchaser within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, against any losses, claims,
damages or liabilities to which the Initial Purchaser or such controlling person
may become subject under the Securities Act, the Exchange Act or otherwise,
insofar as any such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon:
(i) any untrue statement or alleged untrue statement of any
material fact
19
<PAGE>
contained in the Final Memorandum or any amendment or supplement
thereto or any application, or any amendment or supplement thereto,
prepared or executed by the Company or any Subsidiary or based upon
written information furnished by or on behalf of the Company or any
Subsidiary filed in any jurisdiction in order to qualify the
Securities under the securities or "Blue Sky" laws thereof or filed
with any securities association or securities exchange (each an
"Application"); or
(ii) the omission or alleged omission to state, in the Final
Memorandum or any amendment or supplement thereto or any Application,
a material fact required to be stated therein or necessary to make the
statements therein in light of the circumstances in which they were
made, not misleading,
and will reimburse, promptly after demand, the Initial Purchaser and each such
controlling person for any reasonable legal or other expenses reasonably
incurred by the Initial Purchaser or such controlling person in connection with
investigating, defending against or appearing as a third-party witness in
connection with any such loss, claim, damage, liability or action as such
expenses are incurred; provided, however, the Company will not be liable in any
such case to the extent that any such loss, claim, damage, or liability arises
out of or is based upon any untrue statement or alleged untrue statement or
omission or alleged omission made in the Final Memorandum or any amendment or
supplement thereto or any Application in reliance upon and in conformity with
written information concerning the Initial Purchaser furnished to the Company by
the Initial Purchaser specifically for use therein. This indemnity agreement
will be in addition to any liability that the Company may otherwise have to the
indemnified parties. The Company shall not be liable under this Section 9 for
any settlement of such claim or action effected without its consent, which shall
not be unreasonably withheld.
(b) The Initial Purchaser agrees to indemnify and hold harmless the
Company and its directors, officers, employees, representatives, affiliates and
agents and each person, if any, who controls the Company within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act against any
losses, claims, damages or liabilities to which the Company or any such
director, officer, employee, representative, affiliate, agent or controlling
person may become subject under the Securities Act, the Exchange Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon (i) any untrue statement or
alleged untrue statement of any material fact contained in the Final Memorandum
or any amendment or supplement thereto or any Application, or (ii) the omission
or the alleged omission to state therein a material fact required to be stated
in the Final Memorandum or any amendment or supplement thereto or any
Application, or necessary to make the statements therein in light of the
circumstances in which they were made, not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information concerning such Initial Purchaser, furnished
to the Company by or on behalf of such Initial Purchaser specifically for use
therein; and subject to the
20
<PAGE>
limitation set forth immediately preceding this clause, will reimburse, promptly
after demand, any reasonable legal or other expenses reasonably incurred by the
Company or any such director, officer, employee, representative, affiliate,
agent or controlling person in connection with investigating or defending
against or appearing as a third party witness in connection with any such loss,
claim, damage, liability or action in respect thereof. This indemnity agreement
will be in addition to any liability that the Initial Purchaser may otherwise
have to the indemnified parties. The Initial Purchaser shall not be liable under
this Section 9 for any settlement of any claim or action effected without their
consent, which shall not be unreasonably withheld.
(c) Promptly after receipt by an indemnified party under this Section
9 of notice of the commencement of any action for which such indemnified party
is entitled to indemnification under this Section 9, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 9, notify the indemnifying party of the commencement thereof
in writing; but the omission to so notify the indemnifying party (i) will not
relieve it from any liability under paragraph (a) or (b) above unless and to the
extent such failure results in the forfeiture by the indemnifying party of
substantial rights and defenses and (ii) will not, in any event, relieve the
indemnifying party from any obligations to any indemnified party other than the
indemnification obligation provided in paragraphs (a) and (b) above. In case any
such action is brought against any indemnified party, and it notifies the
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate therein and, to the extent that it may wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified party;
provided, however, that if (i) the use of counsel chosen by the indemnifying
party to represent the indemnified party would present such counsel with a
conflict of interest, (ii) the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have been advised by counsel that there may be one or more legal defenses
available to it and/or other indemnified parties that are different from or
additional to those available to the indemnifying party, or (iii) the
indemnifying party shall not have employed counsel reasonably satisfactory to
the indemnified party to represent the indemnified party within a reasonable
time after receipt by the indemnifying party of notice of the institution of
such action, then, in each such case, the indemnifying party shall not have the
right to direct the defense of such action on behalf of such indemnified party
or parties and such indemnified party or parties shall have the right to select
separate counsel to defend such action on behalf of such indemnified party or
parties. After notice from the indemnifying party to such indemnified party of
its election so to assume the defense thereof and approval by such indemnified
party of counsel appointed to defend such action (which approval shall not be
unreasonably withheld), the indemnifying party will not be liable to such
indemnified party under this Section 9 for any legal or other expenses, other
than reasonable costs of investigation, subsequently incurred by such
indemnified party in connection with the defense thereof, unless (i) the
indemnified party shall have employed separate counsel in accordance with the
proviso to the immediately preceding sentence (it being understood, however,
that in connection with such action the indemnifying party shall not be liable
for the expenses of more than one separate counsel (in addition to local
counsel)
21
<PAGE>
in any one action or separate but substantially similar actions in the same
jurisdiction arising out of the same general allegations or circumstances,
designated by the Initial Purchaser in the case of paragraph (a) of this Section
9 or the Company in the case of paragraph (b) of this Section 9, representing
the indemnified parties under such paragraph (a) or paragraph (b), as the case
may be, who are parties to such action or actions) or (ii) the indemnifying
party has authorized in writing the employment of counsel for the indemnified
party at the expense of the indemnifying party. After such notice from the
indemnifying party to such indemnified party, the indemnifying party will not be
liable for the costs and expenses of any settlement of such action effected by
such indemnified party without the prior written consent of the indemnifying
party (which consent shall not be unreasonably withheld), unless such
indemnified party waived in writing its rights under this Section 9, in which
case the indemnified party may effect such a settlement without such consent.
(d) In circumstances in which the indemnity agreement provided for in
the preceding paragraphs of this Section 9 is unavailable to, or insufficient to
hold harmless, an indemnified party in respect of any losses, claims, damages or
liabilities (or actions in respect thereof), each indemnifying party, in order
to provide for just and equitable contribution, shall contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims,
damages or liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect (i) the relative benefits received by the indemnifying
party or parties on the one hand and the indemnified party on the other from the
offering of the Units or (ii) if the allocation provided by the foregoing clause
(i) is not permitted by applicable law, not only such relative benefits but also
the relative fault of the indemnifying party or parties on the one hand and the
indemnified party on the other in connection with the statements or omissions or
alleged statements or omissions that resulted in such losses, claims, damages or
liabilities (or actions in respect thereof). The relative benefits received by
the Company on the one hand and the Initial Purchaser on the other shall be
deemed to be in the same proportion as the total net proceeds from the offering
(before deducting expenses) received by the Company and the total discounts and
commissions received by the Initial Purchaser on the other hand, bear to the
total gross proceeds from the sale of the Units. The relative fault of the
parties shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
on the one hand, or the Initial Purchaser on the other, the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission or alleged statement or omission, and any other
equitable considerations appropriate in the circumstances. The Company and the
Initial Purchaser agree that it would not be equitable if the amount of such
contribution were determined by pro rata or per capita allocation or by any
other method of allocation that does not take into account the equitable
considerations referred to in the first sentence of this paragraph (d).
Notwithstanding any other provision of this paragraph (d), the Initial Purchaser
shall not be obligated to make contributions hereunder that in the aggregate
exceed the total discounts, commissions and other compensation received by the
Initial Purchaser under this Agreement, less the aggregate amount of any damages
that the Initial Purchaser has otherwise been required to pay by reason of the
untrue or alleged untrue statements or the
22
<PAGE>
omissions or alleged omissions to state a material fact, and no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. For purposes of this paragraph (d),
each person, if any, who controls the Initial Purchaser within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act shall have
the same rights to contribution as the Initial Purchaser, and each director,
officer, employee, representative, affiliate and agent of the Company and each
person, if any, who controls the Company within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, shall have the same rights to
contribution as the Company.
10. Survival Clause. The respective representations, warranties,
agreements, covenants, indemnities and other statements of the Company, its
officers and directors and the Initial Purchaser set forth in this Agreement or
made by or on behalf of them pursuant to this Agreement shall remain in full
force and effect until termination of this Agreement, except as set forth in the
following sentence, regardless of (i) any investigation made by or on behalf of
the Company, any of its officers or directors, the Initial Purchaser or any
controlling person referred to in Section 9 hereof and (ii) delivery of and
payment for the Units. The respective agreements, covenants, indemnities and
other statements set forth in Sections 6, 9 and 15 hereof shall remain in full
force and effect, regardless of any termination or cancellation of this
Agreement.
11. Termination. (a) This Agreement may be terminated in the sole
discretion of the Initial Purchaser by notice to the Company given prior to the
Closing Date in the event that the Company shall have failed, refused or been
unable to perform all obligations and satisfy all conditions on its part to be
performed or satisfied hereunder at or prior thereto or, if on and after the
date hereof and at or prior to the Closing Date:
(i) any of the Company or the 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 dispute, slowdown
or work stoppage or any legal or governmental proceeding, which loss
or interference, in the sole judgment of the Initial Purchaser, has
had or could be reasonably likely to have 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
the Company), 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, on the American Stock Exchange or in the Nasdaq National
Market System shall have been suspended or minimum or maximum prices
shall have been established on any
23
<PAGE>
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 Units as contemplated by the Final Memorandum; or
(v) any securities of the Company 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 11 shall
be without liability of any party to any other party except as provided in
Section 10 hereof.
12. Information Supplied by the Initial Purchaser. The statements
set forth (i) in the last paragraph on the front cover page of the Final
Memorandum, (ii) in the first paragraph on page i of the Final Memorandum and
(iii) in the third, fourth and sixth paragraphs and in the second sentence of
the fifth paragraph under the heading "Plan of Distribution" of the Final
Memorandum constitute the only information furnished by the Initial Purchaser to
the Company for the purposes of Sections 2(a) and 9 hereof.
13. Notices. All communications hereunder shall be in writing and,
if sent to the Initial Purchaser, shall be mailed or delivered to (i)
BancAmerica Robertson Stephens, 231 S. LaSalle Street, 17th Floor, Chicago,
Illinois 60697, Attention: Thomas J. McGrath, with a copy to Winston & Strawn,
35 W. Wacker, Chicago, Illinois 60601, Attention: Steven J. Gavin; if sent to
the Company, shall be mailed or delivered to 456 Bedford Street, Fall River,
Massachusetts 02720, Attention: Chief Financial Officer; with a copy to Code,
Hennessy & Simmons LLC, 10 South Wacker Drive, Chicago, Illinois 60606,
Attention: Peter M. Gotsch, and to Kirkland & Ellis, 200 East Randolph Drive,
Chicago, Illinois 60601, Attention: Laurie T. Gunther.
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; five business days after
being deposited in the mail, postage prepaid, if mailed; and one business day
after being timely delivered to a next-day air courier.
24
<PAGE>
14. Successors. This Agreement shall inure to the benefit of and be
binding upon the Initial Purchaser, the 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
provisions herein contained; this Agreement and all conditions and provisions
hereof being intended 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 the Company contained in Section 9 of this Agreement shall also be for the
benefit of any person or persons who control the Initial Purchaser within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act
and (ii) the indemnities of the Initial Purchaser contained in Section 9 of this
Agreement shall also be for the benefit of the directors, officers, employees,
representatives, affiliates and agents and any person or persons who control the
Company within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act. No purchaser of the Units from the Initial Purchaser will be
deemed a successor because of such purchase.
15. APPLICABLE LAW. THE VALIDITY AND INTERPRETATION OF THIS
AGREEMENT, AND THE TERMS AND CONDITIONS SET FORTH HEREIN SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED WHOLLY THEREIN, WITHOUT GIVING EFFECT TO ANY
PROVISIONS THEREOF RELATING TO CONFLICTS OF LAW OTHER THAN SECTION 5-1401 OF THE
NEW YORK GENERAL OBLIGATIONS LAW.
16. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
17. Effective Date. This Agreement shall be deemed effective as of
July 30, 1998.
[Signature pages follow]
25
<PAGE>
If the foregoing correctly sets forth our understanding, please
indicate your acceptance thereof in the space provided below for that purpose,
whereupon this letter shall constitute a binding agreement between the Company
and the Initial Purchaser.
Very truly yours,
GLOBE HOLDINGS, INC.
By /s/ Lawrence R. Walsh
---------------------------
Name: Lawrence R. Walsh
Title: Vice President, Finance and
Administration Treasurer and
Assistant Clerk
The foregoing Agreement is
hereby confirmed and accepted
as of the date first above written.
BANCAMERICA ROBERTSON STEPHENS
By: /s/ Thomas J. McGrath
------------------------------
Title: Managing Director
<PAGE>
Schedule 1
Subsidiaries of the Company
<TABLE>
<CAPTION>
Jurisdiction of
Name Incorporation
- ----------------------------------------------------------- ---------------
<S> <C>
Globe Manufacturing Corp. Alabama
Globe Manufacturing FSC Ltd. Barbados
</TABLE>
<PAGE>
Exhibit A
Form of Registration Rights Agreement
<PAGE>
Exhibit 4.3
EXECUTION COPY
- --------------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT
Dated as of August 6, 1998
Between
GLOBE HOLDINGS, INC.
and
BANCAMERICA ROBERTSON STEPHENS
as Initial Purchaser
- --------------------------------------------------------------------------------
$49,086,000
14% SENIOR DISCOUNT NOTES DUE 2009
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
1. Definitions............................................................. 1
2. Exchange Offer.......................................................... 4
3. Shelf Registration...................................................... 7
4. Liquidated Damages...................................................... 8
5. Registration Procedures.................................................10
6. Registration Expenses...................................................18
7. Indemnification.........................................................19
8. Rule 144 and 144A.......................................................22
9. Underwritten Registrations..............................................22
10. Miscellaneous...........................................................23
(a) No Inconsistent Agreements.........................................23
(b) Adjustments Affecting Registrable Notes............................23
(c) Amendments and Waivers.............................................23
(d) Notices............................................................23
(e) Successors and Assigns.............................................25
(f) Counterparts.......................................................25
(g) Headings...........................................................25
(h) Governing Law......................................................25
(i) Severability.......................................................26
(j) Notes Held by the Company or its Affiliates........................26
(k) Third Party Beneficiaries..........................................26
</TABLE>
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is dated as of
August 6, 1998, by and between Globe Holdings, Inc., a Massachusetts corporation
(the "Company"), and BancAmerica Robertson Stephens (the "Initial Purchaser").
This Agreement is entered into in connection with the Purchase
Agreement, effective as of July 30, 1998, between the Company and the Initial
Purchaser (the "Purchase Agreement"), which provides for the sale to the Initial
Purchaser of Units (the "Units") consisting of an aggregate of $49,086,000
principal amount at maturity of 14% Senior Discount Notes due 2009 of the
Company (the "Notes") and Warrants (the "Warrants") to purchase shares of the
Company's Common Stock, $0.01 par value per share. The Notes and the Warrants
will be separately transferable at the close of business upon the earliest to
occur of (i) the date that is six months after the Issue Date (as defined below)
(ii) the commencement of the Exchange Offer (as defined below), (iii) the date a
Shelf Registration Statement (as defined below) is declared effective, (iv) a
Change of Control (as defined in the Indenture and (v) such date as the Initial
Purchaser may in its sole discretion deem appropriate. In order to induce the
Initial Purchaser to enter into the Purchase Agreement, the Company has agreed
to provide the registration rights set forth in this Agreement for the benefit
of the Initial Purchaser and its direct and indirect transferees. The execution
and delivery of this Agreement is a condition to the obligation of the Initial
Purchaser to purchase the Units 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:
Advice: See the last paragraph of Section 5 hereof.
Agreement: See the first introductory paragraph hereto.
Applicable Period: See Section 2(b) hereof.
Closing Date: The Closing Date as defined in the Purchase Agreement.
Company: See the first introductory paragraph hereto.
Effectiveness Date: The 150th day after the Issue Date; provided,
however, that with respect to any Shelf Registration, the Effectiveness Date
shall be the 90th day after the Filing Date with respect thereto.
<PAGE>
Effectiveness Period: See Section 3(a) hereof.
Event Date: See Section 4(b) hereof.
Exchange Act: The Securities Exchange Act of 1934, as amended, and
the rules and regulations of the SEC promulgated thereunder.
Exchange Notes: See Section 2(a) hereof.
Exchange Offer: See Section 2(a) hereof.
Exchange Registration Statement: See Section 2(a) hereof.
Expiration Date: See Section 2(a) hereof.
Filing Date: (A) In the case of an Exchange Registration Statement,
the 60th day after the Issue Date; or (B) in the case of a Shelf Registration
(which may be applicable notwithstanding the consummation of the Exchange
Offer), the 60th day after a Shelf Notice is required to be delivered pursuant
to this Agreement.
Holder: Any record holder of a Registrable Note or Registrable Notes.
Indemnified Person: See Section 7(c) hereof.
Indemnifying Person: See Section 7(c) hereof.
Indenture: The Indenture, dated as of August 6, 1998 between the
Company and Norwest Bank Minnesota, National Association, as trustee, pursuant
to which the Notes are being issued, as amended or supplemented from time to
time in accordance with the terms thereof.
Initial Purchaser: See the first introductory paragraph hereto.
Inspectors: See Section 5(o) hereof.
Issue Date: August 6, 1998, the date of original issuance of the
Notes.
Liquidated Damages: See Section 4(a) hereof.
NASD: See Section 5(s) hereof.
Offering Memorandum: The final offering memorandum of the Company
dated July 30, 1998, in respect of the offering of the Notes.
2
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Participant: See Section 7(a) hereof.
Participating Broker-Dealer: See Section 2(b) hereof.
Person: An individual, trustee, corporation, partnership, limited
liability company, limited liability limited partnership, joint stock company,
trust, unincorporated association, union, business association, firm or other
legal entity.
Private Exchange: See Section 2(b) hereof.
Private Exchange Notes: See Section 2(b) hereof.
Prospectus: The prospectus included in any Registration Statement
(including, without limitation, any prospectus 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, and all other amendments
and supplements to the Prospectus, with respect to the terms of the offering of
any portion of the Registrable Notes covered by such Registration Statement
including post-effective amendments, and all material incorporated by reference
or deemed to be incorporated by reference in such Prospectus.
Purchase Agreement: See the second introductory paragraph hereto.
Records: See Section 5(o) hereof.
Registrable Notes: Each Note upon its original issuance and at all
times subsequent thereto, each Exchange Note as to which Section 2(c)(iv) hereof
is applicable upon original issuance and at all times subsequent thereto and
each Private Exchange Note upon original issuance thereof and at all times
subsequent thereto, until in the case of any such Note, Exchange Note or Private
Exchange Note, as the case may be, the earliest to occur of (i) a Registration
Statement (other than, with respect to any Exchange Note as to which Section
2(c)(iv) hereof is applicable, the Exchange Registration Statement) covering
such Note, Exchange Note or Private Exchange Note, as the case may be, has been
declared effective by the SEC and such Note (unless such Note was not tendered
for exchange by the Holder thereof), Exchange Note or Private Exchange Note, as
the case may be, has been disposed of in accordance with such effective
Registration Statement, (ii) such Note, Exchange Note or Private Exchange Note,
as the case may be, is sold in compliance with Rule 144, or (iii) such Note,
Exchange Note or Private Exchange Note, as the case may be, ceases to be
outstanding for purposes of the Indenture.
Registration Statement: Any registration statement of the Company,
including, but not limited to, the Exchange Registration Statement, that 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
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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.
Rule 415: Rule 415 promulgated under the Securities Act, as such Rule
may be amended from time to time, or any similar rule or regulation hereafter
adopted by the SEC.
SEC: The Securities and Exchange Commission.
Securities Act: The Securities Act of 1933, as amended, and the rules
and regulations of the SEC promulgated thereunder.
Shelf Notice: See Section 2(c) hereof.
Shelf Registration: See Section 3(a) hereof.
Shelf Registration Statement: See Section 3(a) hereof.
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 for reoffering to the
public.
2. Exchange Offer.
(a) The Company agrees to file with the SEC no later than the Filing
Date a registration statement with respect to an offer to exchange (the
"Exchange Offer") any and all of the Registrable Notes (other than the Private
Exchange Notes, if any) for a like aggregate principal amount of senior discount
debt securities of the Company which are identical in all material respects to
the Notes (the "Exchange Notes") and which are entitled to the benefits of the
Indenture or a trust indenture which is identical in all material respects to
the Indenture (other than such changes to the
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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 qualified under the TIA,
except that the Exchange Notes (other than Private Exchange Notes, if any) shall
have been registered pursuant to an effective Registration Statement under the
Securities Act and shall contain no restrictive legend thereon. The Exchange
Offer shall be registered under the Securities Act on the appropriate form (the
"Exchange Registration Statement") and shall 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 be declared
effective under the Securities Act on or before the Effectiveness Date; (y) keep
the Exchange Offer open for at least 20 business days (or longer if required by
applicable law) after the date that notice of the Exchange Offer is mailed to
Holders (the last day of such period, the "Expiration Date"); and (z) consummate
the Exchange Offer on or prior to the 180th day following the Issue Date. Each
Holder who participates in the Exchange Offer will be required to represent to
the Company that any Exchange Notes to be received by it will be acquired in the
ordinary course of its business, that at the time of the consummation of the
Exchange Offer such Holder will have no arrangement or understanding with any
Person to participate in the distribution of the Exchange Notes in violation of
the provisions of the Securities Act, that such Holder is not an affiliate of
any of the Company within the meaning of the Securities Act and that such Holder
is not acting on behalf of any Person who could not truthfully make the
foregoing representations. Upon consummation of the Exchange Offer in accordance
with this Section 2, the Company shall have no further obligation to register
Registrable Notes (other than Private Exchange Notes and other than in respect
of any Exchange Notes as to which clause 2(c)(iv) hereof applies) pursuant to
Section 3 hereof. No securities other than the Exchange Notes shall be included
in the Exchange Registration Statement.
(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 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
judgment of the Initial Purchaser, represent the prevailing views of the Staff
of the SEC. Such "Plan of Distribution" section shall also expressly permit 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 any Participating Broker-Dealer subject to the prospectus delivery
requirements of the Securities Act for such period of time as is necessary to
comply with applicable law in connection with any resale of the Exchange Notes;
provided, however, that such period shall not exceed 180 days following the
first bona fide offering of securities under such
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Registration Statement (or such longer period if extended pursuant to the last
paragraph of Section 5 hereof)(the "Applicable Period"). Notwithstanding the
foregoing, the Company shall have no obligation to keep the Exchange
Registration Statement effective or to amend and supplement the Prospectus
contained therein in the event that the Company has not received written notice
within 30 days following the completion of the Exchange Offer that a
Participating Broker-Dealer received Exchange Notes in the Exchange Offer.
If, prior to consummation of the Exchange Offer, the Initial Purchaser
holds any Notes acquired by it and having the status of an unsold allotment in
the initial distribution, the Company shall, upon the request of the Initial
Purchaser, 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 such Notes held by the Initial Purchaser a like
principal amount of debt securities of the Company that are identical to the
Exchange Notes (the "Private Exchange Notes") (and which are issued pursuant to
the same indenture as the Exchange Notes) except for the placement of a
restrictive legend on such Private Exchange Notes. The Private Exchange Notes
shall bear the same CUSIP number as the Exchange Notes.
Interest on the Exchange Notes and the Private Exchange Notes will
accrue from the last interest payment date on which interest was paid on the
Notes surrendered in exchange therefor or, if no interest has been paid on the
Notes, from the Issue Date.
In connection with the Exchange Offer, the Company shall:
(1) mail or cause to be mailed to each Holder a copy of the
Prospectus forming part of the Exchange Registration Statement, together
with an appropriate letter of transmittal and related documents;
(2) utilize the services of a depositary for the Exchange Offer with
an address in the Borough of Manhattan, the City of New York;
(3) permit Holders to withdraw tendered Notes at any time prior to
the close of business, New York time, on the last business day on which the
Exchange Offer shall remain open; and
(4) otherwise comply in all material respects with all applicable
laws, rules and regulations.
As soon as practicable after the close of the Exchange Offer or the
Private Exchange, as the case may be, the Company shall:
(1) accept for exchange all Notes tendered and not validly withdrawn
pursuant to the Exchange Offer or the Private Exchange;
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(2) deliver to the Trustee for cancellation all Notes so accepted for
exchange; and
(3) 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 shall be issued
under (i) the Indenture or (ii) an indenture identical in all material respects
to the Indenture, which in either event shall provide that (1) the Exchange
Notes shall not be subject to the transfer restrictions set forth in the
Indenture and (2) the Private Exchange Notes shall be subject to the transfer
restrictions set forth in the Indenture. The Indenture or such indenture shall
provide that the Exchange Notes, the Private Exchange Notes and the Notes shall
vote and consent together on all matters as one class and that none of the
Exchange Notes, the Private Exchange Notes or the Notes will have the right to
vote or consent as a separate class on any matter.
(c) If, (i) because of any change in law or in currently prevailing
interpretations of the Staff of the SEC, the Company reasonably determines in
good faith that it is not permitted to effect an Exchange Offer, (ii) the
Exchange Offer is not consummated within 180 days of the Issue Date, (iii) any
holder of Private Exchange Notes so requests at any time after the consummation
of the Private Exchange, or (iv) in the case of any Holder that participates in
the Exchange Offer, such Holder does not receive Exchange Notes on the date of
the exchange that may be sold without restriction under state and federal
securities laws (other than due solely to the status of such Holder as an
affiliate of the Company within the meaning of the Securities Act) and any such
Holder so requests in writing to the Company, then the Company shall promptly
(and, in any event, within five business days) deliver to the Holders and the
Trustee written notice thereof (the "Shelf Notice") and shall file a Shelf
Registration pursuant to Section 3 hereof; provided, that the Company shall have
no obligation to deliver a Shelf Notice or file a Shelf Registration Statement
pursuant to clause (ii) above if the Exchange Registration Statement has been
declared effective by the SEC and the scheduled expiration date of the Exchange
Offer is less than 195 days after the Issue Date.
3. Shelf Registration.
If a Shelf Notice is delivered as contemplated by Section 2(c) hereof,
then:
(a) Shelf Registration. The Company shall as promptly as reasonably
practicable 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 "Shelf Registration"). The Company shall use its best efforts to file
with the SEC the Shelf Registration on or before the applicable Filing Date. The
Shelf Registration shall be on Form S-1 or another appropriate form (the "Shelf
Registration Statement") permitting registration of such Registrable Notes for
resale by Holders in the manner or manners designated by them (including,
without limitation, one or more underwritten offerings). The Company shall not
permit any securities other than the Registrable Notes to be included in the
Shelf Registration.
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The Company shall use its commercially reasonable efforts to cause the
Shelf Registration to be declared effective under the Securities Act on or prior
to the Effectiveness Date and to keep the Shelf Registration continuously
effective under the Securities Act until the date which is two years from the
date on which the SEC declares such Shelf Registration Statement effective,
subject to extension pursuant to the last paragraph of Section 5 hereof (the
"Effectiveness Period"), or such shorter period ending when all Registrable
Notes covered by the Shelf Registration have been sold in the manner set forth
and as contemplated in the Shelf Registration.
(b) Withdrawal of Stop Orders. If the Shelf Registration ceases to
be effective for any reason at any time during the Effectiveness Period (other
than because of the sale of all of the securities registered thereunder), the
Company shall use its best efforts to obtain the prompt withdrawal of any order
suspending the effectiveness thereof.
(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
of such Registrable Notes.
4. Liquidated Damages.
(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,
under the circumstances and to the extent set forth below, liquidated damages
("Liquidated Damages") shall become payable in respect of the Notes as follows
(each clause below being given independent effect):
(i) if the Exchange Registration Statement or any Shelf
Registration has not been filed on or prior to the applicable Filing Date,
Liquidated Damages shall accrue on the principal amount at maturity of the
Notes at a rate of 0.50% per annum for the first 90 days immediately
following such Filing Date, such Liquidated Damages increasing by an
additional 0.25% per annum at the beginning of each subsequent 90-day
period;
(ii) if (A) the Exchange Registration Statement is not declared
effective by the SEC on or prior to the relevant Effectiveness Date or (B)
notwithstanding that the Company has consummated or will consummate the
Exchange Offer, the Company is required to file a Shelf Registration and
such Shelf Registration is not declared effective by the SEC on or prior to
the Effectiveness Date in respect of such Shelf Registration, then,
commencing on the day after either such Effectiveness Date, Liquidated
Damages shall accrue on the principal amount at maturity of the Notes at a
rate of 0.50% per annum for the first 90 days immediately following such
date, such Liquidated Damages increasing by an additional 0.25% per annum
at the beginning of each subsequent 90-day period; and
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(iii) if (A) the Company has not exchanged Exchange Notes for
all Notes validly tendered in accordance with the terms of the Exchange
Offer on or prior to the 180th day after the Issue Date or (B) the Exchange
Registration Statement ceases to be effective at any time prior to the
Expiration Date or (C) if applicable, the Shelf Registration has been
declared effective and such Shelf Registration ceases to be effective at
any time during the Effectiveness Period (unless all Notes have been sold
thereunder), then Liquidated Damages shall accrue on the principal amount
at maturity of the Notes at a rate of 0.50% per annum for the first 90 days
commencing on (x) the 181st day after the Issue Date in the case of (A)
above, or (y) the day the Exchange Registration Statement ceases to be
effective in the case of (B) above, or (z) the day such Shelf Registration
ceases to be effective in the case of (C) above, such Liquidated Damages
increasing by an additional 0.25% per annum at the beginning of each such
subsequent 90-day period;
provided, however, that the Liquidated Damages as a result of the provisions of
clauses (i), (ii) and (iii) above may not exceed in the aggregate 2.0% per
annum; and provided, further, that (1) upon the filing of the Exchange
Registration Statement or a Shelf Registration (in the case of clause (i) of
this Section 4(a)), (2) upon the effectiveness of the Exchange Registration
Statement or the Shelf Registration (in the case of clause (ii) of this Section
4(a)), or (3) upon the exchange of Exchange Notes for all Notes tendered and not
withdrawn (in the case of clause (iii)(A) of this Section 4(a)), or upon the
effectiveness of the Exchange Registration Statement which had ceased to remain
effective (in the case of (iii)(B) of this Section 4(a)), or upon the
effectiveness of the Shelf Registration which had ceased to remain effective (in
the case of (iii)(C) of this Section 4(a)), Liquidated Damages on the Notes as a
result of such clause (or the relevant subclause thereof), as the case may be,
shall cease to accrue.
(b) The Company shall notify the Trustee within five business days
after each and every date on which an event occurs in respect of which
Liquidated Damages are required to be paid (an "Event Date"). Any amounts of
Liquidated Damages due pursuant to clauses (a)(i), (a)(ii) or (a)(iii) of this
Section 4 will be payable to the Holders of affected Notes in cash semi-annually
on each February 1 and August 1 in each year (to the holders of record on the
January 15 and July 15 immediately preceding such dates), commencing with the
first such date occurring after any such Liquidated Damages commence to accrue.
The amount of Liquidated Damages will be determined by multiplying the
applicable rate of Liquidated Damages by the principal amount at maturity of the
Notes, multiplied by a fraction, the numerator of which is the number of days
such Liquidated Damages rate was applicable during such period (determined on
the basis of a 360-day year comprised of twelve 30-day months and, in the case
of a partial month, the actual number of days elapsed), and the denominator of
which is 360.
5. Registration Procedures.
In connection with the filing of any Registration Statement pursuant
to Sections 2 or 3 hereof, the Company shall effect such registration(s) to
permit the sale of the securities covered thereby in accordance with the
intended method or methods of disposition thereof, and pursuant
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thereto and in connection with any Registration Statement filed by the Company
hereunder, the Company shall:
(a) Prepare and file with the SEC prior to the applicable Filing Date
a Registration Statement or Registration Statements as prescribed by Sections 2
or 3 hereof, and use its best efforts to cause each such Registration Statement
to become effective and remain effective as provided herein; provided, however,
that, if (1) such filing is pursuant to Section 3 hereof, or (2) a Prospectus
contained in an Exchange Registration Statement filed pursuant to Section 2
hereof is required to be delivered under the Securities Act by any Participating
Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period,
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 covered by such Registration Statement or each
such Participating Broker-Dealer, as the case may be, their counsel and the
managing underwriters, if any, a reasonable opportunity to review copies of all
such documents (including copies of any documents to be incorporated by
reference therein and all exhibits thereto) proposed to be filed (in each case
at least five business days prior to such filing). The Company shall not file
any Shelf Registration Statement or Prospectus or any amendments or supplements
thereto in respect of which the Holders must be afforded an opportunity to
review prior to the filing of such document, if the Holders of a majority in
aggregate principal amount of the Registrable Notes covered by such Shelf
Registration Statement, their counsel, or the managing underwriters, if any,
shall reasonably object.
(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 or
until consummation of the Exchange Offer, 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) promulgated under the Securities Act; and
comply with the provisions of the Securities Act and the Exchange Act applicable
to it 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 paragraph 5(j)
hereof and the last paragraph of this Section 5.
(c) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 hereof is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period and who has notified the Company in writing
that
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it will be a Participating Broker-Dealer on or prior to 30 days following the
completion of the Exchange Offer, the Company shall notify the selling Holders
of Registrable Notes, or each such Participating Broker-Dealer, as the case may
be, their counsel and the managing underwriters, if any, promptly (but in any
event within five business days), and confirm such notice in writing, (i) when a
Prospectus or any Prospectus supplement or post-effective amendment has been
filed, and, with respect to a Registration Statement or any post-effective
amendment, when the same has become effective under the Securities Act
(including in such notice a written statement that any Holder may, upon request,
obtain, at the sole expense of the Company, one conformed copy of such
Registration Statement or post-effective amendment including financial
statements and schedules, documents incorporated or deemed to be incorporated by
reference and exhibits), (ii) of the issuance by the SEC of any stop order
suspending the effectiveness of a Registration Statement or of any order
preventing or suspending the use of any preliminary prospectus or the initiation
of any proceedings for that purpose, (iii) if at any time when a prospectus is
required by the Securities Act to be delivered in connection with sales of the
Registrable Notes or resales of Exchange Notes by Participating Broker-Dealers
the representations and warranties of the Company contained in any agreement
(including any underwriting agreement), contemplated by Section 5(l) hereof
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, the existence of any condition
or any information becoming known that makes any statement made in such
Registration Statement or related Prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect or
that requires the making of any changes in or amendments or supplements to such
Registration Statement, Prospectus or documents so that, in the case of the
Registration Statement, it will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and that in the case of
the Prospectus, it will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and (vi) of the determination by the Company that a post-
effective amendment to a Registration Statement would be appropriate.
(d) If (1) a Shelf Registration is filed pursuant to Section 3 hereof
or (2) a Prospectus contained in an Exchange Registration Statement filed
pursuant to Section 2 hereof is required to be delivered under the Securities
Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during
the Applicable Period, 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 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.
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(e) If a Shelf Registration is filed pursuant to Section 3 and if
requested by the managing underwriter or underwriters (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 such information about the
Company as the managing underwriter or underwriters (if any), such Holders, or
counsel for any of them reasonably request to be included therein and (ii) make
all required filings of such prospectus supplement or such post-effective
amendment as soon as practicable after the Company has received notification of
the matters to be incorporated in such prospectus supplement or post-effective
amendment.
(f) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 hereof is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, furnish to each selling Holder of
Registrable Notes and to each such Participating Broker-Dealer who so requests
and upon request to counsel and each managing underwriter, if any, at the sole
expense of the Company, one conformed copy of the Registration Statement or
Registration Statements and each post-effective amendment thereto, including
financial statements and schedules, and, if requested, all documents
incorporated or deemed to be incorporated therein by reference and all exhibits.
(g) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 hereof is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, deliver to each selling Holder of
Registrable Notes, or each such Participating Broker-Dealer, as the case may be,
their respective counsel, and the underwriters, if any, at the sole expense of
the Company, 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 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 such
Registrable Notes (and to cooperate with selling Holders of Registrable Notes or
each such Participating Broker-Dealer, as the case may be, the managing
underwriter or underwriters, if any, and their respective counsel in connection
with the registration or qualification (or exemption from such registration or
qualification) of such Registrable Notes) for offer and sale under the
securities or Blue Sky laws of such jurisdictions within the United States as
any selling Holder,
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Participating Broker-Dealer, or the managing underwriter or underwriters
reasonably request in writing; provided, however, 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); use its best efforts to keep
each such registration or qualification (or exemption therefrom) effective
during the period such Registration Statement is required to be kept effective
hereunder and do any and all other acts or things reasonably necessary or
advisable to enable the disposition in such jurisdictions of the Exchange Notes
held by Participating Broker-Dealers or the Registrable Notes covered by the
applicable Registration Statement; provided, however, that 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 any such jurisdiction where it is not then so
subject.
(i) If a Shelf Registration is filed pursuant to Section 3 hereof,
cooperate with the selling Holders of Registrable Notes and the managing
underwriter or underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing Registrable Notes to be sold, which
certificates shall not bear any restrictive legends and shall be in a form
eligible for deposit with The Depository Trust Company; and enable such
Registrable Notes to be in such denominations and registered in such names as
the managing underwriter or underwriters, if any, or Holders may reasonably
request.
(j) If (1) a Shelf Registration is filed pursuant to Section 3 hereof,
or (2) a Prospectus contained in an Exchange Registration Statement filed
pursuant to Section 2 hereof is required to be delivered under the Securities
Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during
the Applicable Period, upon the occurrence of any event contemplated by
paragraph 5(c)(v) or 5(c)(vi) hereof, as promptly as practicable prepare and
(subject to Section 5(a) hereof) file with the SEC, at the sole expense of the
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, 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 light of the circumstances under which they were made,
not misleading; provided, however, that the Company shall not be required to
amend or supplement a Registration Statement, any related Prospectus or any
document incorporated therein by reference, in the event that, and for a period
not to exceed an aggregate of 45 days in any calendar year if, (i) any event
occurs and is continuing as a result of which a Shelf Registration Statement
would, in the Company's good faith judgment, contain an untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, and (ii)(a) the Company determines in its good faith
judgment that the disclosure of such event at such time would have a material
adverse effect on the business, operations or
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prospects of the Company or (b) the disclosure otherwise relates to a pending
material business transaction that has not been publicly disclosed.
(k) Prior to the effective date of the first Registration Statement
relating to the Registrable Notes, (i) provide the Trustee with certificates for
the Registrable Notes or Exchange Notes, as the case may be, in a form eligible
for deposit with The Depository Trust Company and (ii) provide a CUSIP number
for the Registrable Notes or Exchange Notes, as the case may be.
(l) In connection with any underwritten offering of Registrable Notes
pursuant to a Shelf Registration, enter into an underwriting agreement as is
customary in underwritten offerings of debt securities similar to the Notes in
form and substance reasonably satisfactory to the Company and take all such
other actions as are reasonably requested by the managing underwriter or
underwriters in order to facilitate the registration or the disposition of such
Registrable Notes and, in such connection, (i) make such representations and
warranties to, and covenants with, the underwriters with respect to the business
of the Company and its subsidiaries and the Registration Statement, Prospectus
and documents, if any, incorporated or deemed to be incorporated by reference
therein, in each case, as are customarily made by issuers to underwriters in
underwritten offerings of debt securities similar to the Notes, and confirm the
same in writing if and when requested; (ii) obtain the written opinion of
counsel to the Company and written updates thereof in form, scope and substance
reasonably satisfactory to the managing underwriter or underwriters, addressed
to the underwriters covering the matters customarily covered in opinions
requested in underwritten offerings of debt similar to the Notes; (iii) use its
best efforts to obtain "cold comfort" letters and updates thereof in form, scope
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 or any of
its subsidiaries for which financial statements and financial data are, or are
required to be, included or incorporated by reference in the Registration
Statement), addressed to each of the underwriters, such letters to be in
customary form and substantially in the form delivered to the Initial Purchaser
under the Purchase Agreement; 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.
(m) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 hereof is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, subject to prior receipt of appropriate
confidentiality agreements, make available for inspection by one representative
of the selling Holders of such Registrable Notes being sold, or each such
Participating Broker-Dealer, as the case may be, any underwriter participating
in any such disposition of Registrable Notes, if any, and any
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attorney, accountant or other agent retained by any such selling Holders or each
such Participating Broker-Dealer, as the case may be, or underwriter
(collectively, the "Inspectors"), at the offices where normally kept, during
reasonable business hours, all financial and other records, pertinent corporate
documents and instruments 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
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, (iii) disclosure of such information is, in the opinion of counsel
for any Inspector, necessary or advisable in connection with any action, claim,
suit or proceeding, directly or indirectly, involving or reasonably likely to
involve such Inspector and arising out of, based upon, relating to, or involving
this Agreement, or any transactions contemplated hereby or arising hereunder, or
(iv) the information in such Records has been made generally available to the
public; provided, further, however, that prior notice shall be provided as soon
as practicable to the Company of the potential disclosure of any information by
such Inspector pursuant to clauses (i), (ii), (iii) or (iv) of this sentence to
permit the Company to obtain a protective order (or waive the provisions of this
paragraph (m)) and that such Inspector shall take such actions as are reasonably
necessary to protect the confidentiality of such information (if practicable).
Each selling Holder of such Registrable Notes and each such Participating
Broker-Dealer 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 as the basis for any market transactions in the securities of the Company or
any of its subsidiaries unless and until such information is 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 prior notice to the Company and allow the Company to
undertake appropriate action to prevent disclosure of the Records deemed
confidential at the Company's, sole expense.
(n) Provide an indenture trustee for the Registrable Notes or the
Exchange Notes, as the case may be, and cause the Indenture or the trust
indenture provided for in Section 2(a) hereof, as the case may be, to be
qualified under the TIA not later than the effective date of the Exchange Offer
or the first Registration Statement relating to the Registrable Notes; and in
connection therewith, cooperate with the trustee under any such indenture and
the Holders of the Registrable Notes, to effect such changes to such indenture
as may be required for such indenture to be so qualified in accordance with the
terms of the TIA; and execute, and use its 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.
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(o) Comply with all applicable rules and regulations of the SEC to
the extent and so long as they are applicable to the Exchange Registration
Statement or the Shelf Registration Statement 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 60 days after the end of any
12-month period (or 120 days after the end of any 12-month period if such period
is a fiscal year) (i) commencing at the end of any fiscal quarter in which
Registrable Notes are sold to underwriters in a firm commitment or best efforts
underwritten offering and (ii) if not sold to underwriters in such an offering,
commencing on the first day of the first fiscal quarter of the Company after the
effective date of a Registration Statement, which statements shall cover said
12-month periods.
(p) 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 Registrable Notes that such Registrable Notes are being
canceled in exchange for the Exchange Notes or the Private Exchange Notes, as
the case may be; in no event shall such Registrable Notes be marked as paid or
otherwise satisfied.
(q) Cooperate with each seller of Registrable Notes covered by any
Registration Statement and each underwriter, if any, participating in the
disposition of such Registrable Notes and their respective counsel in connection
with any filings required to be made with the National Association of Securities
Dealers, Inc. (the "NASD").
(r) Upon consummation of the Exchange Offer or a Private Exchange,
obtain an opinion of counsel to the Company, in a form customary for
underwritten transactions, addressed to the Trustee for the benefit of all
Holders of Registrable Notes participating in the Exchange Offer or the Private
Exchange, as the case may be, that the Exchange Notes or Private Exchange Notes,
as the case may be, and the related indenture constitute legal, valid and
binding obligations of the Company enforceable against the Company in accordance
with their respective terms, subject to customary exceptions and qualifications.
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
as the Company may, from time to time, reasonably request. The Company may
exclude from such registration the Registrable Notes or Exchange Notes of any
seller or Participating Broker-Dealer who fails to furnish such information
within a reasonable time after receiving such request. Each seller or
Participating Broker-Dealer as to which any Shelf Registration is being effected
agrees to furnish promptly to the Company all information required to be
disclosed in order to make the information previously furnished to the Company
by such seller or Participating Broker-Dealer not materially misleading and to
promptly notify the Company following any sale or other
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transfer of Registrable Notes covered by the Shelf Registration Statement, which
notice shall specify the amount of securities involved and the market, if any,
on which such sale or transfer occurred.
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 actual receipt
of any notice from the Company of the happening of any event of the kind
described in Section 5(c)(ii), 5(c)(iv), 5(c)(v), or 5(c)(vi) hereof, such
Holder will forthwith discontinue disposition of such Registrable Notes covered
by such Registration Statement or Prospectus or Exchange Notes to be sold by
such Holder or Participating Broker-Dealer, as the case may be, until such
Holder's or Participating Broker-Dealer's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 5(j) hereof, or until
it is advised in writing (the "Advice") by the Company that the use of the
applicable Prospectus may be resumed, and has received copies of any amendments
or supplements thereto. In the event the Company shall give any such notice,
each of the Effectiveness Period and the Applicable Period shall be extended by
the number of days during such periods from and including the date of the giving
of such notice to and including the date when each seller of Registrable Notes
covered by such Registration Statement or Exchange Notes to be sold by such
Participating Broker-Dealer, as the case may be, shall have received (x) the
copies of the supplemented or amended Prospectus contemplated by Section 5(j)
hereof or (y) the Advice; provided, however, that nothing in this paragraph
shall be construed to require the Company to keep a Registration Statement
effective at a time when all of the Registrable Notes covered thereby may be
sold under Rule 144.
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) hereof, in the case of Registrable Notes or Exchange
Notes to be sold by a Participating Broker-Dealer during the Applicable
Period)), (ii) printing expenses, including, without limitation, expenses of
printing certificates for Registrable Notes or Exchange Notes in a form eligible
for deposit with The Depository Trust Company and of printing prospectuses if
the printing of prospectuses is requested by the managing underwriter or
underwriters, if any, or by the Holders of a majority in aggregate principal
amount of the Registrable Notes included in any Registration Statement or sold
by any Participating Broker-Dealer, as the case may be, (iii) messenger,
telephone and delivery expenses incurred by the Company, (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
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Section 6(b) hereof), (v) fees and disbursements of all independent certified
public accountants referred to in Section 5(l)(iii) hereof (including, without
limitation, the expenses of any special audit and "cold comfort" letters
required by or incident to such performance), (vi) rating agency fees, if any,
and any fees associated with making the Registrable Notes or Exchange Notes
eligible for trading through The Depository Trust Company, (vii) Securities Act
liability insurance, if the Company desires such insurance, (viii) fees and
expenses of all other Persons retained by the Company, (ix) internal expenses of
the Company (including, without limitation, all salaries and expenses of
officers and employees of the Company performing legal or accounting duties),
(x) the expense of any annual audit of the Company, (xi) the fees and expenses
incurred in connection with the listing of the securities to be registered on
any securities exchange, if applicable, and (xii) the expenses relating to
printing, word processing and distributing all Registration Statements and any
other documents necessary in order to comply with this Agreement.
(b) In the event the Company is required to file a Shelf Registration
Statement pursuant to a Shelf Notice delivered pursuant to Section 2(c)(ii)
hereof, the Company, shall reimburse the Holders of the Registrable Notes being
registered in a Shelf 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 Shelf Registration Statement.
7. Indemnification.
(a) The Company agrees to indemnify and hold harmless each Holder of
Registrable Notes offered pursuant to a Shelf Registration Statement 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 actually
incurred in connection with any suit, action or proceeding or any claim
asserted) caused by, arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained in any Registration
Statement pursuant to which the offering of such Registrable Notes or Exchange
Notes, as the case may be, is registered (or any amendment thereto) or related
Prospectus (or any amendments or supplements thereto) or any related preliminary
prospectus, or caused by, any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading; provided, however, that the Company will not be required to
indemnify a Participant if (i) such losses, claims, damages or liabilities are
caused by any untrue statement or omission or alleged untrue statement or
omission made in reliance upon and in conformity with information relating to
any Participant furnished to the Company in writing by or on behalf of such
Participant expressly for use therein or (ii) if such Participant sold to the
person asserting the claim the Registrable Notes or Exchange Notes which are the
subject of such claim and such untrue statement or omission or alleged untrue
statement or omission was contained or made in any preliminary prospectus and
corrected in the Prospectus or any amendment
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<PAGE>
or supplement thereto and the Prospectus does not contain any other untrue
statement or omission or alleged untrue statement or omission of a material fact
that was the subject matter of the related proceeding and it is established by
the Company in the related proceeding that such Participant failed to deliver or
provide a copy of the Prospectus (as amended or supplemented) to such Person
with or prior to the confirmation of the sale of such Registrable Notes or
Exchange Notes sold to such Person if required by applicable law, unless such
failure to deliver or provide a copy of the Prospectus (as amended or
supplemented) or as a result of noncompliance by the Company with Section 5 of
this Agreement.
(b) Each Participant agrees, severally and not jointly, to indemnify
and hold harmless the Company, its directors and officers, employees,
representatives, affiliates and agents and each Person who controls the Company
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 (i) with reference to information relating to such
Participant furnished to the Company in writing by or on behalf of such
Participant expressly for use in any Registration Statement or Prospectus, any
amendment or supplement thereto, or any preliminary prospectus or (ii) with
respect to any untrue statement or representation made by such Participant in
writing to the Company. The liability of any Participant under this paragraph
shall in no event exceed the proceeds received by such Participant from sales of
Registrable Notes or Exchange Notes giving rise to such obligations.
(c) If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted against
any Person in respect of which indemnity may be sought pursuant to either of the
two preceding paragraphs, such Person (the "Indemnified Person") shall promptly
notify the Person against whom such indemnity may be sought (the "Indemnifying
Person") in writing, and the Indemnifying Person, upon request of the
Indemnified Person, shall retain counsel reasonably satisfactory to the
Indemnified Person to represent the Indemnified Person and any others the
Indemnifying Person may reasonably designate in such proceeding and shall pay
the reasonable fees and expenses actually incurred by such counsel related to
such proceeding; provided, however, that the failure to so notify the
Indemnifying Person shall not relieve it of any obligation or liability which it
may have hereunder or otherwise (unless and only to the extent that such failure
directly results in the loss or compromise of any material rights or defenses by
the Indemnifying Person and the Indemnifying Person was not otherwise aware of
such action or claim). 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 shall have failed within a reasonable
period of time to retain counsel reasonably satisfactory to the Indemnified
Person or (iii) the named parties in any such proceeding (including any
impleaded parties) include both the Indemnifying Person and the Indemnified
Person and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them. It is
understood that, unless there exists a conflict among Indemnified Persons, the
Indemnifying Person shall not, in connection with any one such proceeding or
separate but substantially similar related
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proceedings in the same jurisdiction arising out of the same general
allegations, be liable for the fees and expenses of more than one separate firm
(in addition to any local counsel) for all Indemnified Persons, and that all
such fees and expenses shall be reimbursed promptly after demand as they are
incurred. Any such separate firm for the Participants and such control Persons
of Participants shall be designated in writing by Participants who sold a
majority in interest of Registrable Notes and Exchange Notes sold by all such
Participants and any such separate firm for the Company, its directors,
officers, employees, representatives, agents and affiliates 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 prior written consent, but if settled with such consent or
if there be a final non-appealable judgment for the plaintiff for which the
Indemnified Person is entitled to indemnification pursuant to this Agreement,
the Indemnifying Person agrees to indemnify and hold harmless each Indemnified
Person from and against any loss or liability by reason of such settlement or
judgment. No Indemnifying Person shall, without the prior written consent of the
Indemnified Person (which consent shall not be unreasonably withheld), effect
any settlement or compromise of any pending or threatened proceeding in respect
of which any Indemnified Person is or could have been a party, and indemnity
could have been sought hereunder by such Indemnified Person, unless such
settlement (A) includes an unconditional written release of such Indemnified
Person, in form and substance reasonably satisfactory to such Indemnified
Person, from all liability on claims that are the subject matter of such
proceeding and (B) does not include any statement as to an admission of fault,
culpability or failure to act by or on behalf of any Indemnified Person.
(d) If the indemnification provided for in the first and second
paragraphs of this Section 7 is for any reason unavailable to, or insufficient
to hold harmless, an Indemnified Person in respect of any losses, claims,
damages or liabilities referred to therein, then each Indemnifying Person under
such paragraphs, in lieu of indemnifying such Indemnified Person thereunder and
in order to provide for just and equitable contribution, shall contribute to the
amount paid or payable by such Indemnified Person as a result of such losses,
claims, damages or liabilities in such proportion as is appropriate to reflect
(i) the relative benefits received by the Indemnifying Person or Persons on the
one hand and the Indemnified Person or Persons on the other from the offering of
the Notes or (ii) if the allocation provided by the foregoing clause (i) is not
permitted by applicable law, not only such relative benefits but also the
relative fault of the Indemnifying Person or Persons on the one hand and the
Indemnified Person or Persons on the other in connection with the statements or
omissions or alleged statements or omissions that resulted in such losses,
claims, damages or liabilities (or actions in respect thereof) as well as any
other relevant equitable considerations. The relative fault of the parties shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company on the one hand
or such Participant or such other Indemnified Person, as the case may be, on the
other, the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission, and any other
equitable considerations appropriate in the circumstances.
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(e) The parties agree that it would not be just and equitable if
contribution pursuant to this Section 7 were determined by pro rata allocation
(even if the Participants were treated as one entity for such purpose) or by any
other method of allocation that does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an Indemnified Person as a result of the losses, claims,
damages 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, as the case may be, exceeds the amount of any damages that such
Participant has otherwise been required to pay or has paid by reason of such
untrue or alleged untrue statement or omission or alleged omission. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.
(f) 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. Rule 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 in accordance with
the requirements of the Securities Act and the Exchange Act 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, provide other information so long as necessary
to permit sales pursuant to Rule 144 and Rule 144A. The Company further
covenants for so long as any Registrable Notes remain outstanding, to make
available to any Holder or beneficial owner of Registrable Notes in connection
with any sale thereof and any prospective purchaser of such Registrable Notes
from such Holder or beneficial owner the information required by Rule 144A(d)(4)
under the Securities Act in order to permit resales of such Registrable Notes
pursuant to Rule 144A.
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 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
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in any underwriting arrangements approved by the Persons entitled hereunder to
approve such arrangements and (b) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
required under the terms of such underwriting arrangements.
10. Miscellaneous.
(a) No Inconsistent Agreements. The Company has not, as of the date
hereof, and 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 nor will it
enter into any agreement with respect to any of its securities which will grant
to any Person piggy-back registration rights with respect to a Registration
Statement.
(b) 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.
(c) Amendments and Waivers. The provisions of this Agreement may not
be amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, otherwise than with the prior written
consent of the Company and the Holders of not less than a majority in aggregate
principal amount of the then outstanding 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 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, however, that
the provisions of this sentence may not be amended, modified or supplemented
except in accordance with the provisions of the immediately preceding sentence.
(d) Notices. All notices and other communications (including without
limitation any notices or other communications to the Trustee) provided for or
permitted hereunder shall be made in writing by hand-delivery, registered first-
class mail, next-day air courier or facsimile:
1. if to a Holder of the Registrable Notes or any Participating
Broker-Dealer, at the most current address of such Holder or Participating
Broker-Dealer, as the case may be, set forth on the records of the
registrar under the Indenture, with a copy in like manner to the Initial
Purchaser as follows:
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BancAmerica Robertson Stephens
231 S. LaSalle Street
17th Floor
Chicago, Illinois 60697
Facsimile No: (312) 828-5539
Attention: Thomas J. McGrath
with a copy to:
Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
Facsimile No: (312) 558-5700
Attention: Steven J. Gavin
2. if to the Initial Purchaser, at the addresses specified in
Section 10(d)(1);
3. if to the Company, as follows:
Globe Holdings, Inc.
456 Bedford Street
Fall River, Massachusetts 02720
Facsimile No: (508) 679-9458
Attention: President
with copies to:
Code Hennessy & Simmons LLC
10 South Wacker Drive
Suite 3175
Chicago, Illinois 60606
Facsimile No: (312) 876-3884
Attention: Peter M. Gotsch
and
Kirkland & Ellis
200 East Randolph
Chicago, Illinois 60601
Facsimile No: (312) 861-2000
Attention: Laurie T. Gunther
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All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; five business days after
being deposited in the mail, postage prepaid, if mailed; one business day after
being timely delivered to a next-day air courier; and when receipt is
acknowledged by the addressee, if sent by facsimile.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address and in the manner specified in such Indenture.
(e) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the parties
hereto; provided, however, that this Agreement shall not inure to the benefit of
or be binding upon a successor or assign of a Holder unless and to the extent
such successor or assign holds Registrable Notes.
(f) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(g) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(h) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS
MADE AND PERFORMED WHOLLY WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL
OBLIGATIONS LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT T0 THE JURISDICTION
OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT
OF OR RELATING TO THIS AGREEMENT.
(i) Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best reasonable efforts to find and employ an alternative
means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or unenforceable.
(j) 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
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Notes held by the Company or its affiliates (as such term is defined in Rule 405
under the Securities Act) shall not be counted in determining whether such
consent or approval was given by the Holders of such required percentage.
(k) Third Party Beneficiaries. Holders of Registrable Notes and
Participating Broker-Dealers are intended third party beneficiaries of this
Agreement and this Agreement may be enforced by such Persons.
[Signature pages follow]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
GLOBE HOLDINGS, INC., a Massachusetts corporation
By: /s/ Thomas A. Rodgers, III
------------------------------
Name: Thomas A. Rodgers, III
Title: President
The foregoing Agreement is
hereby confirmed and accepted
as of the date first above
written:
BANCAMERICA ROBERTSON STEPHENS
By: /s/ Thomas J. McGrath
---------------------------
Name: Thomas J. McGrath
Title: Managing Director
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Exhibit 4.4
EXECUTION COPY
===============================================================================
UNIT AGREEMENT
Between
GLOBE HOLDINGS, INC.
and
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
as Unit Agent, Warrant Agent and Trustee
Dated as of August 6, 1998
===============================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 1. Appointment of Unit Agent......................................... 1
SECTION 2. Unit Certificates................................................. 2
SECTION 3. Execution of Unit Certificates.................................... 2
SECTION 4. Registration and Authentication................................... 3
SECTION 5. Registration of Transfers and Exchanges........................... 3
SECTION 6. Separation of the Notes and the Warrants.......................... 7
SECTION 7. Rights of Unit Holders............................................ 8
SECTION 8. Unit Agent........................................................ 8
SECTION 9. Resignation and Appointment of Successor..........................10
SECTION 10. Notices to the Company and Unit Agent, Trustee and Warrant Agent..12
SECTION 11. Supplements and Amendments........................................13
SECTION 12. Successors........................................................13
SECTION 13. Governing Law.....................................................13
SECTION 14. Benefits of This Agreement........................................13
SECTION 15. Counterparts......................................................13
</TABLE>
i
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UNIT AGREEMENT
This UNIT AGREEMENT (this "Agreement") dated as of August 6, 1998 is
between Globe Holdings, Inc., a Massachusetts corporation (the "Company"), and
Norwest Bank Minnesota, National Association, as Unit Agent (in such capacity,
together with any successor unit agent, the "Unit Agent") and as Warrant Agent
(as defined below) and as Trustee (as defined below).
WHEREAS, the Company proposes to issue $49,086,000 aggregate principal
amount at maturity of its 14% Senior Discount Notes due 2009 (the "Notes")
pursuant to an Indenture dated as of August 6, 1998 (the "Indenture") between
the Company and Norwest Bank Minnesota, National Association, as Trustee (in
such capacity, the "Trustee"), and to issue warrants (the "Warrants") to
initially purchase an aggregate of 69,481 shares of its Class A Common Stock,
par value $.01 per share (the "Common Stock"), pursuant to a Warrant Agreement
dated as of August 6, 1998 (the "Warrant Agreement") between the Company and
Norwest Bank Minnesota, National Association, as Warrant Agent (in such
capacity, the "Warrant Agent"). The Notes and the Warrants will initially be
represented by units (the "Units"), with each Unit consisting of $1,000
principal amount of Notes and one Warrant initially entitling the holder thereof
to purchase 1.4155 shares of Common Stock (the "Warrant Shares").
WHEREAS, the Company, the Trustee and the Warrant Agent desire to
appoint the Unit Agent to act as their agent for the purpose of issuing
certificates ("Unit Certificates") representing the Units and for the
registration of transfers and exchanges thereof.
WHEREAS, the Units will be exchangeable for the Notes and Warrants
represented thereby upon the earliest to occur of: (i) the date that is six
months following the initial sale of the Units, (ii) the commencement of the
Exchange Offer (as defined in the Indenture), (iii) the date a Shelf
Registration Statement (as defined in the Registration Rights Agreement) with
respect to the Notes is declared effective, (iv) a Change of Control (as defined
in the Indenture), and (v) such date as the BancAmerica Robertson Stephens (the
"Initial Purchaser") may, in its sole discretion, deem appropriate. The earliest
date on which an event listed in the preceding sentence occurs is referred to as
the "Separation Date."
WHEREAS, capitalized terms used herein and not otherwise defined shall
have the meanings given to such terms in the Indenture.
NOW THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereto agree as follows:
SECTION 1. Appointment of Unit Agent. (a) The Company hereby appoints
the Unit Agent to act as agent for the Company in accordance with the
instructions set forth hereinafter in this Agreement, and the Unit Agent hereby
accepts such appointment.
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(b) The Trustee and the Company hereby appoint the Unit Agent as an
Authenticating Agent and Registrar (as such terms are defined in the Indenture)
for the Notes for so long as the Notes are represented by the Units. In its
capacity as an Authenticating Agent and Registrar, the Unit Agent shall have the
rights and obligations provided for such capacities in the Indenture.
(c) The Warrant Agent and the Company hereby appoint the Unit Agent as
Warrant Registrar (as such term is defined in the Warrant Agreement) for the
Warrants for so long as the Warrants are represented by the Units. In its
capacity as Warrant Registrar, the Unit Agent shall have the rights and
obligations provided for such capacity in the Warrant Agreement.
SECTION 2. Unit Certificates. Units issued in global form ("Global
Units") shall be substantially in the form of Exhibit A attached hereto and
shall include the Global Unit Legend set forth on Exhibit B (the "Global Unit
Legend") and the "Schedule of Exchanges of Interests in Global Units." Units
issued in definitive form (the "Definitive Units") shall be substantially in the
form of Exhibit A attached hereto but shall not include the Global Unit Legend
or the "Schedule of Exchanges of Interests in Global Units." Global Units shall
represent such of the outstanding Units as shall be specified therein and each
shall provide that it shall represent the aggregate Units from time to time
endorsed thereon and that the aggregate amount of outstanding Units represented
thereby may from time to time be reduced or increased, as appropriate. Any
endorsement of a Global Unit to reflect the amount of any increase or decrease
in the amount of outstanding Units represented thereby shall be made by the Unit
Agent in accordance with instructions given by the holder thereof. The
Depository Trust Company shall act as the Depositary with respect to the Global
Units until a successor shall be appointed by the Company and the Unit Agent.
Upon written request, a Unit holder may receive from the Unit Agent Definitive
Units as set forth in Section 5 below.
SECTION 3. Execution of Unit Certificates. Unit Certificates shall be
signed on behalf of the Company by two Officers (as such term is defined in the
Indenture). Each such signature upon the Unit Certificates may be in the form of
a facsimile signature of any person who is an Officer as of or subsequent to the
date hereof and may be imprinted or otherwise reproduced on the Unit
Certificates and for that purpose the Company may adopt and use the facsimile
signature of any person who shall have been an Officer, notwithstanding the fact
that at the time the Unit Certificates shall be authenticated and delivered or
disposed of he or she shall have ceased to hold such office. The seal of the
Company, if affixed to a Unit Certificate, may be in the form of a facsimile
thereof.
In case any Officer of the Company who shall have signed any of the
Unit Certificates shall cease to be such Officer before the Unit Certificates so
signed shall have been authenticated by the Unit Agent, or disposed of by the
Company, such Unit Certificates nevertheless may be authenticated and delivered
or disposed of as though such person had not ceased to be such Officer of the
Company; and any Unit Certificate may be signed on behalf of the Company by any
person who, at the actual date of the execution of such Unit Certificate, shall
be a proper Officer of the Company to sign such Unit Certificate, although at
the date of the execution of this Unit Agreement any such person was not such
officer.
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<PAGE>
Unit Certificates shall be dated the date of authentication by the
Unit Agent.
SECTION 4. Registration and Authentication. The Unit Agent, on behalf
of the Company, shall number and register the Unit Certificates in a register as
they are issued by the Company.
Unit Certificates shall be manually authenticated by the Unit Agent
and shall not be valid for any purpose unless so authenticated. The Unit Agent
shall, upon written instructions of an Officer of the Company specifying the
number of Units to be authenticated, whether the Units are to be Global Units or
Definitive Units, the date of such Units, and such other information as the Unit
Agent may request, initially authenticate and deliver not more than 49,086 Units
and shall thereafter authenticate and deliver Units as otherwise provided in
this Agreement.
SECTION 5. Registration of Transfers and Exchanges.
(a) Transfer and Exchange. The Unit Certificates shall be issued in
registered form only. The Company shall cause to be kept at the office of the
Unit Agent a register in which, subject to such reasonable regulations as it may
prescribe, the Company shall provide for the registration of Unit Certificates
and transfers or exchanges of Unit Certificates as herein provided. All Unit
Certificates issued upon any registration of transfer or exchange of Unit
Certificates shall be valid obligations of the Company, evidencing the same
obligations, and entitled to the same benefits under this Agreement, as the Unit
Certificates surrendered for such registration of transfer or exchange.
A holder of Units may transfer its Units only by complying with the
terms of this Agreement, the Indenture and the Warrant Agreement. No such
transfer shall be effected until final acceptance and registration of the
transfer by the Unit Agent in the register. Prior to the registration of any
transfer of Units as provided herein, the Company, the Unit Agent and any agent
of the Company or the Unit Agent may treat the Person in whose name the Units
are registered as the owner thereof for all purposes and as the Person entitled
to exercise the rights represented thereby, any notice to the contrary
notwithstanding. Furthermore, any holder of a Global Unit, shall, by acceptance
of such Global Unit, agree that transfers of beneficial interests in such Global
Unit may be effected only through a book-entry system maintained by the holder
of such Global Unit (or its agent), and that ownership of a beneficial interest
in the Units represented thereby shall be required to be reflected in a book
entry. When Unit Certificates are presented to the Unit Agent with a request to
register the transfer or to exchange them for an equal number of Units of other
authorized denominations, the Unit Agent shall register the transfer or make the
exchange in accordance with the provisions hereof.
(b) Registration, Registration of Transfer and Exchange. Prior to the
Separation Date, when Unit Certificates are presented to the Unit Agent with a
request from the holder of such Units to register the transfer or to exchange
them for an equal number of Units of other authorized denominations, the Unit
Agent shall register the transfer or make the exchange as requested; provided,
however, that every Unit presented and surrendered for registration of transfer
or exchange, as well as the Notes and Warrants to which it relates, shall be
duly endorsed and be accompanied by a written
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<PAGE>
instrument of transfer in form satisfactory to the Company, duly executed by the
holder thereof or such holder's attorneys duly authorizing in writing.
Prior to the Separation Date, to permit registrations of transfer and
exchanges, the Company shall make available to the Unit Agent a sufficient
number of executed Unit Certificates to effect such registrations of transfers
and exchanges. No service charge shall be made to the holder of Units for any
registration of transfer or exchange of Units, but the Company may require from
the transferring or exchanging holder payment of a sum sufficient to cover any
transfer tax or similar governmental charge payable under the Indenture or the
Warrant Agreement, and such transfer or exchange shall not be consummated unless
or until such holder shall have paid to the Company the amount of such tax or
shall have established to the satisfaction of the Company and the Unit Agent
that such tax has been paid.
(c) Book-Entry Provisions for Global Units.
(i) The Global Units initially shall (A) be registered in the
name of the Depositary (as defined in the Indenture) for such Global Units or
the nominee of such Depositary, (B) be delivered to the Unit Agent as custodian
for such Depositary and (C) bear the legends as set forth on Exhibit A and
Exhibit B.
Members of, or participants in, the Depositary ("Agent Members")
shall have no rights under this Agreement with respect to any Global Unit held
on their behalf by the Depositary or the Unit Agent as its custodian, or under
any Global Unit, and the Depositary may be treated by the Company, the Unit
Agent and any agent of the Company or the Unit Agent as the absolute owner of
any Global Unit for all purposes whatsoever. Notwithstanding the foregoing,
nothing herein shall prevent the Company, the Unit Agent or any agent of the
Company or the Unit Agent from giving effect to any written certification, proxy
or other authorization furnished by the Depositary or impair, as between the
Depositary and its Agent Members, the operation of customary practices governing
the exercise of the rights of a holder of any Unit.
(ii) Transfers of Global Units shall be limited to transfers in
whole, but not in part, to the Depositary, its successors or their respective
nominees. Interests of beneficial owners in the Global Units may be transferred
or exchanged for Definitive Units and Definitive Units may be transferred or
exchanged for beneficial interests in the Global Units in accordance with the
rules and procedures of the Depositary and the provisions of Section 5(d). In
addition, Definitive Units shall be transferred to all beneficial owners in
exchange for their beneficial interests in Global Units if (x) the Company
notifies the Unit Agent that the Depositary is unwilling or unable to continue
as Depositary for any Global Unit and a successor Depositary is not appointed by
the Company within 90 days of such notice or (y) the Company, at its option,
notifies the Unit Agent in writing that it elects to cause the issuance of the
Units in definitive form under the Unit Agreement.
(iii) In connection with any transfer or exchange of a portion
of the beneficial interest in any Global Unit to beneficial owners pursuant to
paragraph (ii) above, the Unit
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<PAGE>
Agent shall (if one or more Definitive Units are to be issued) reflect on its
books and records the date and a decrease in the number of Units represented by
the Global Unit in an amount equal to the number of Units represented by the
beneficial interest in the Global Unit to be transferred, and the Company shall
execute, and the Unit Agent shall authenticate and cause to be delivered, one or
more Definitive Units in an amount equal to the beneficial interest in the
Global Unit so transferred.
(iv) In connection with the transfer of Global Units as an
entirety to beneficial owners pursuant to paragraph (ii) above, the Global Units
shall be deemed to be surrendered to the Unit Agent for cancellation, and the
Company shall execute, and the Unit Agent shall authenticate and cause to be
delivered to each beneficial owner identified by the Depositary in exchange for
its beneficial interest in the Global Units, Definitive Units of authorized
denominations representing, in the aggregate, the number of Units theretofore
represented by the Global Units so transferred.
(v) Any Definitive Unit delivered in exchange for an interest
in a Global Unit pursuant to paragraph (ii) or (iii) shall bear the legend
described as the Private Placement Legend on Exhibit A (the "Private Placement
Legend").
(vi) The registered holder of any Global Unit 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 Unit Agreement or the Units.
(d) Special Transfer Restrictions.
(i) Transfers to Non-QIB Institutional Accredited Investors
and Non-U.S. Persons and other Transfers Exempt under the Securities Act. The
following provisions shall apply (x) with respect to the registration of any
proposed transfer of a Unit to any Institutional Accredited Investor which is
not a QIB or to any Non-U.S. Person and (y) with respect to the registration of
any proposed transfer pursuant to another available exemption from the
registration requirements of the Securities Act:
(A) the Unit Agent shall register the transfer of any Units if (x)
the requested transfer is to an Institutional Accredited Investor pursuant
to a private placement exemption from the registration requirements of the
Securities Act or (y) the requested transfer is to a Non-U.S. Person
pursuant to an exemption from the registration requirements of the
Securities Act in accordance with Rule 904 under the Securities Act or (z)
the requested transfer is being made in reliance on another exemption from
the registration requirements of the Securities Act, together, in the case
of either clause (x), (y) or (z) with a certification to such effect (in
substantially the form set forth in the form of Unit attached hereto as
Exhibit A) and such other certifications, Opinions of Counsel or other
information as the Company or the Unit Agent may reasonably require to
confirm that such transfer is being made pursuant to an exemption from, or
in a transaction not subject to, the registration requirements of the
Securities Act; and
5
<PAGE>
(B) the Unit Agent shall register the transfer of any Unit if the
proposed transferor is an Agent Member holding a beneficial interest in a
Global Unit, upon, receipt by the Unit Agent of (x) the certificate, if
any, required by paragraph (A) above and (y) instructions given in
accordance with the Depositary's and the Unit Agent's procedures,
whereupon (a) the Unit Agent shall reflect on its books and records the date and
(if the transfer does not involve a transfer of outstanding Definitive Units) a
decrease in the number of Units represented by the applicable Global Unit, in an
amount equal to the number of Units represented by the beneficial interest in
the Global Warrant to be transferred (the "Transfer Amount"), (b) if the Units
to be transferred are to be evidenced by Definitive Units, the Company shall
execute and the Unit Agent shall authenticate upon receipt of a written order
from the Company and cause to be delivered one or more Definitive Units in an
aggregate number equal to the Transfer Amount and (c) if the Units to be
transferred are to be evidenced by an interest in a Global Unit, upon receipt of
instructions given in accordance with the Depositary's and the Unit Agent's
procedures, the Unit Agent shall reflect on its books and records the date and
an increase in the number of Units represented by the Global Unit in which the
transferee will hold its beneficial interest in an amount equal to the Transfer
Amount.
(ii) Transfers to QIBs. The following provisions shall apply with
respect to the registration of any proposed transfer of a Unit to a QIB
(excluding transfers to Non-U.S. Persons):
(A) the Unit Agent shall register the transfer if such transfer is
being made by a proposed transferor who has delivered a certification (in
substantially the form set forth in the form of Unit attached hereto as
Exhibit A) stating, or has otherwise advised the Company and the Unit Agent
in writing, that the sale has been made in compliance with the provisions
of Rule 144A to a transferee who has advised the Company and the Unit Agent
in writing that it is purchasing the Unit 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 Company and the transferor are
relying upon its foregoing representations in order to claim the exemption
from registration provided by Rule 144A; if the Unit Agent or the Company
shall so request, such proposed transferor shall have delivered an Opinion
of Counsel, an officers' certificate and such other information as the Unit
Agent or the Company may reasonably require in connection with such
proposed transfer; and
(B) if the proposed transferee is an Agent Member, and the Units to
be transferred consist of Definitive Units which after transfer are to be
evidenced by an interest in the Global Unit, upon receipt by the Unit Agent
of instructions given in accordance with the Depositary's and the Unit
Agent's procedures, the Unit Agent shall reflect on its books and records
the date and an increase in the number of Units represented by the Global
Unit in an amount equal to the number of Definitive Units to be
transferred, and the Unit Agent shall cancel the Definitive Units so
transferred; and
(C) if the proposed transferee is an Agent Member, and the Units to
be transferred consist of a beneficial interest in a Global Unit which
after transfer is to continue to be evidenced
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<PAGE>
by an interest in a Global Unit, upon receipt by the Unit Agent of
instructions given in accordance with the Depositary's and the Unit Agent's
procedures, the Unit Agent shall reflect on its books and records (A) the
date, (B) a decrease in the number of Units represented by the Global Unit
in which the transferor owns the beneficial interest to be transferred in
an amount equal to the number of Units represented by the beneficial
interest to be transferred and (C) an increase in the number of Units
represented by the Global Unit in which the transferee will hold its
beneficial interest in a like amount.
(iii) Other Restrictions on Transfer. In addition to the
restrictions on transfer set forth in (i) and (ii) above, any transfers of Units
shall be made in accordance with the transfer and exchange provisions set forth
in the Indenture and the Warrant Agreement.
(e) Private Placement Legend. Upon the transfer, exchange or
replacement of Units, the Unit Agent shall deliver only Units that bear the
Private Placement Legend.
(f) Cancellation and/or Adjustment of Global Unit. At such time
as all beneficial interests in Global Units have either been exchanged for
Definitive Units or canceled, all Global Units shall be returned to or retained
and canceled by the Unit Agent and destroyed by the Company, or by the Unit
Agent at the Company's request. At any time prior to such cancellation, if any
beneficial interest in a Global Unit is exchanged for Definitive Units or
canceled, the number of Units represented by such Global Unit shall be reduced
and an endorsement shall be made on such Global Unit by the Unit Agent to
reflect such reduction.
(g) Legends. Each Unit Certificate evidencing the Global Units and
the Definitive Units (and all Units issued in exchange therefor or substitution
thereof) shall bear a legend substantially to the following effect:
THIS SECURITY HAS BEEN OFFERED AS PART OF A UNIT. EACH OF THE UNITS
CONSISTS OF $1,000 PRINCIPAL AMOUNT OF 14% SENIOR DISCOUNT NOTES DUE 2009
(THE "NOTES") OF GLOBE HOLDINGS, INC. (THE "COMPANY") AND ONE WARRANT TO
PURCHASE 1.4155 SHARES OF COMMON STOCK OF THE COMPANY (THE "WARRANT"). THE
NOTES AND WARRANTS WILL NOT BE TRANSFERABLE BY A HOLDER THEREOF SEPARATELY
FROM EACH OTHER UNTIL THE "SEPARATION DATE," WHICH SHALL BE THE EARLIEST TO
OCCUR OF (i) THE DATE THAT IS SIX MONTHS FOLLOWING THE INITIAL SALE OF THE
UNITS, (ii) THE COMMENCEMENT OF AN EXCHANGE OFFER WITH RESPECT TO THE
NOTES, (iii) THE DATE A SHELF REGISTRATION STATEMENT (AS DEFINED IN THE
REGISTRATION RIGHTS AGREEMENT) WITH RESPECT TO THE NOTES IS DECLARED
EFFECTIVE, (iv) A CHANGE OF CONTROL (AS DEFINED IN THE INDENTURE), OR (v)
SUCH DATE AS BANCAMERICA ROBERTSON STEPHENS MAY, IN ITS SOLE DISCRETION,
DEEM APPROPRIATE.
SECTION 6. Separation of the Notes and the Warrants. After the
Separation Date, the Notes and the Warrants represented by the Units shall be
separately transferable. Upon
7
<PAGE>
presentation after the Separation Date of any Unit Certificate for exchange for
Warrants and Notes or for registration of transfer or otherwise, (i) the Unit
Agent shall notify the Trustee and the Warrant Agent of the number of Units so
presented, the registered owner thereof, such owner's registered address, the
nature of any legends or restrictive endorsements set forth on such Unit
Certificate and any other information provided by the holder thereof in
connection therewith, (ii) the Trustee and Registrar under the Indenture, if the
requirements of the Indenture for such transaction are met, shall promptly
register, authenticate and deliver a new Note equal in principal amount to the
Notes represented by such Unit Certificate in accordance with the direction of
such holder and (iii) the Warrant Agent, if the requirements of the Warrant
Agreement for such transactions are met, shall promptly countersign, register
and deliver a new Warrant Certificate for the number of Warrants previously
represented by such Unit Certificate in accordance with the directions of such
holder. The Warrant Agent and the Trustee will notify the Unit Agent of any
additional requirements in connection with a particular transfer or exchange.
Following the Separation Date, no Unit Certificates shall be issued
upon transfer or exchange of Unit Certificates, or otherwise.
SECTION 7. Rights of Unit Holders. The registered holder of a Unit
Certificate shall have all the rights and privileges of a registered owner of
the principal amount of Notes represented thereby and the number of Warrants
represented thereby and shall be treated as the registered owner thereof for all
purposes. The Company agrees that it shall be bound by all provisions of the
Indenture, the Notes, the Warrant Agreement and the Warrants and that the Notes
and Warrants represented by each Unit Certificate shall be deemed legal, valid
and binding obligations of the Company and that upon exercise of the Warrants,
the Warrant Shares will be validly issued, fully paid and nonassessable.
SECTION 8. Unit Agent. The Unit Agent undertakes the duties and
obligations imposed by this Agreement upon the following terms and conditions,
by which the Company and the holders of Units, by their acceptance thereof,
shall be bound:
(a) The statements contained herein and in the Unit Certificates
shall be taken as statements of the Company, and the Unit Agent assumes no
responsibility for the correctness of any of the same, other than with
respect to the certificate of authentication, except such as describe the
Unit Agent or action taken or to be taken by it. The Unit Agent assumes no
responsibility with respect to the distribution of the Unit Certificates
except as herein otherwise specifically provided.
(b) The Unit Agent shall not be responsible for any failure of the
Company to comply with any of the covenants in this Agreement, the Unit
Certificates, the Indenture or the Warrant Agreement to be complied with by
the Company.
(c) The Unit Agent may consult at any time with counsel satisfactory
to it (who may be counsel for the Company) and the Unit Agent shall incur
no liability or responsibility to the Company or to any holder of any Unit
Certificate in respect of any action taken, suffered
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<PAGE>
or omitted by it hereunder in good faith and in accordance with the written
opinion or the written advice of such counsel.
(d) The Unit Agent shall incur no liability or responsibility to the
Company or to any holder of any Unit Certificate for any action taken in
reliance on any Unit Certificate, certificate of shares, notice,
resolution, waiver, consent, order, certificate, or other paper, document
or instrument reasonably believed by the Unit Agent to be genuine and to
have been signed, sent or presented by the proper party or parties.
(e) The Company agrees to pay to the Unit Agent reasonable
compensation for all services rendered by the Unit Agent in connection with
this Agreement, to reimburse the Unit Agent for all expenses (including
reasonable fees, expenses and disbursements of counsel), taxes and
governmental charges and other charges of any kind and nature incurred by
the Unit Agent in connection with this Agreement and to indemnify the Unit
Agent and save it harmless against any and all losses and liabilities,
including judgments, costs and counsel fees and actual expenses, for any
action taken or omitted by the Unit Agent or arising in connection with
this Agreement and the exercise by the Unit Agent of its rights hereunder
and the performance by the Unit Agent of any of its obligations hereunder
except as a result of the Unit Agent's gross negligence, bad faith or
willful misconduct.
(f) The Unit Agent, and any stockholder, director, officer, affiliate
or employee ("Related Parties") of it, may buy, sell or deal in any of the
Units, Notes, Warrants, Common Stock or other securities of the Company or
become pecuniarily interested in any transaction in which the Company may
be interested, or contract with or lend money to the Company or otherwise
act as fully and freely as though it were not Unit Agent under this
Agreement. Nothing herein shall preclude the Unit Agent or such Related
Parties from acting in any other capacity for the Company or for any other
legal entity.
(g) The Unit Agent shall act hereunder solely as agent for the
Company, the Trustee and the Warrant Agent, and its duties shall be
determined solely by the provisions hereof. The Unit Agent shall not be
liable for anything which it may do or refrain from doing in connection
with this Agreement except for its own negligence, bad faith or willful
misconduct.
(h) No provision of this Agreement shall require the Unit Agent to
expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder or in the exercise of any of
its rights or powers if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or
liability is not reasonably assured to it.
(i) The Unit Agent shall be under no obligation to institute any
action, suit or legal proceeding or to take any other action unless the
Company or one or more registered holders of Unit Certificates shall
furnish the Unit Agent with security and indemnity for any costs and
9
<PAGE>
expenses which may be incurred acceptable to the Unit Agent. This provision
shall not affect the power of the Unit Agent to take such action as it may
consider proper, whether with or without any such security or indemnity.
All rights of action under this Agreement or under any of the Units may be
enforced by the Unit Agent without the possession of any of the Unit
Certificates or the production thereof at any trial or other proceeding
relative thereto, and any such action, suit or proceeding instituted by the
Unit Agent shall be brought in its name as Unit Agent and any recovery of
judgment shall be for the ratable benefit of the registered holders of the
Units, as their respective rights or interests may appear.
(j) Before the Unit Agent acts or refrains from acting with respect
to any matter contemplated by this Unit Agreement, it may require:
(1) an Officers' Certificate stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this Unit
Agreement relating to the proposed action have been complied with; and
(2) an opinion of counsel for the Company stating that, in the
opinion of such counsel, all such conditions precedent have been
complied with.
Each Officers' Certificate or opinion of counsel with respect to
compliance with a condition or covenant provided for in this Unit Agreement
shall include:
(1) a statement that the person making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such person, he or she
has made such examination or investigation as is necessary to enable
him or her 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 condition or covenant has been complied with.
The Unit Agent shall not be liable for any action it takes or omits to
take in good faith in reliance on any such certificate or opinion.
(k) In the absence of bad faith on its part, the Unit Agent 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 Unit Agent and conforming to the requirements of this
10
<PAGE>
Unit Agreement. However, the Unit Agent shall examine the certificates and
opinions to determine whether or not they conform to the requirements of
this Unit Agreement.
(l) The Unit Agent may rely and shall be fully protected in relying
upon any document believed by it to be genuine and to have been signed or
presented by the proper person. The Unit Agent need not investigate any
fact or matter stated in the document.
(m) The Unit Agent may act through agents and shall not be
responsible for the misconduct or negligence of any agent appointed with
due care.
SECTION 9. Resignation and Appointment of Successor. (a) The
Company agrees, for the benefit of the Holders from time to time of the Units,
that there shall at all times be a Unit Agent hereunder.
(b) The Unit Agent may at any time resign as Unit Agent by giving
written notice to the Company of such intention on its part, specifying the date
on which its desired resignation shall become effective, provided that such date
shall be at least 30 days after the date on which such notice is given unless
the Company agrees to accept less notice. Upon receiving such notice of
resignation, the Company shall promptly appoint a successor Unit Agent,
qualified as provided in Section 9(d) hereof, by written instrument in duplicate
signed on behalf of the Company, one copy of which shall be delivered to the
resigning Unit Agent and one copy to the successor Unit Agent. As provided in
Section 9(d) hereof, such resignation shall become effective upon the earlier of
(x) the acceptance of the appointment by the successor Unit Agent or (y) 30 days
after receipt by the Company of notice of such resignation. The Company shall
remove the Unit Agent and appoint a successor Unit Agent by written instrument
signed by the Company, one copy of which shall be delivered to the Unit Agent
being removed and one copy to the successor Unit Agent, if the Unit Agent shall
become incapable of acting, or shall be adjudged a bankrupt or insolvent, or a
receiver of the Unit Agent or of its property shall be appointed, or any public
officer shall take charge or control of it or of its property or affairs for the
purpose of rehabilitation, conservation or liquidation. The Company may also
remove the Unit Agent for any reason, in the manner described in the preceding
sentence, with the consent of the Trustee and the Warrant Agent. Any removal of
the Unit Agent and any appointment of a successor Unit Agent shall become
effective upon acceptance of appointment by the successor Unit Agent as provided
in Section 9(d). As soon as practicable after appointment of the successor Unit
Agent, the Company shall cause written notice of the change in the Unit Agent to
be given to each of the registered holders of the Units in the manner provided
for in Section 10 hereof.
(c) Upon resignation or removal of the Unit Agent, if the Company
shall fail to appoint a successor Unit Agent within a period of 30 days after
receipt of such notice of resignation or removal, then the holder of any Unit
Certificate or the Unit Agent may apply to a court of competent jurisdiction for
the appointment of a successor to the Unit Agent. Pending appointment of a
successor to the Unit Agent, either by the Company or by such a court, the
duties of the Unit Agent shall be carried out by the Company.
11
<PAGE>
(d) Any successor Unit Agent, whether appointed by the Company or by
a court, shall be an institution that meets the eligibility requirements for a
trustee under the Indenture. Such successor Unit Agent shall execute and deliver
to its predecessor and to the Company an instrument accepting such appointment
hereunder and all the provisions of this Agreement, and thereupon such successor
Unit Agent, without any further act, deed or conveyance, shall become vested
with all the rights, powers, duties and obligations of its predecessor
hereunder, with like effect as if originally named as Unit Agent hereunder, and
such predecessor shall thereupon become obligated to (i) transfer and deliver,
and such successor Unit Agent shall be entitled to receive, all securities,
records or other property on deposit with or held by such predecessor as Unit
Agent hereunder and (ii) upon payment of the amounts then due it pursuant to
Section 8(e) hereof, pay over, and such successor Unit Agent shall be entitled
to receive, all monies deposited with or held by any predecessor Unit Agent
hereunder.
(e) Any corporation or bank into which the Unit Agent hereunder may
be merged or converted, or any corporation or bank with which the Unit Agent may
be consolidated, or any corporation or bank resulting from any merger,
conversion or consolidation to which the Unit Agent shall be a party, or any
corporation or bank to which the Unit Agent shall sell or otherwise transfer all
or substantially all of its corporate trust business, shall be the successor to
the Unit Agent under this Agreement (provided that such corporation or bank
shall be qualified as aforesaid) without the execution or filing of any document
or any further act on the part of any of the parties hereto.
(f) No Unit Agent under this Unit Agreement shall be personally
liable for any action or omission of any successor Unit Agent.
(g) The indemnity provisions of Section 8(e) hereof shall survive the
resignation or removal of the Unit Agent.
SECTION 10. Notices to the Company and Unit Agent, Trustee and Warrant
Agent. Notice to the Unit Agent, the Warrant Agent and the Trustee shall be
sufficiently given or made when received by the Unit Agent, the Warrant Agent or
the Trustee, as applicable, at the addresses set forth below. Notice or demand
authorized by this Agreement to be given to or on the Company shall be
sufficiently given or made when and if deposited in the mail, first class or
registered, postage paid, addressed to:
Globe Holdings, Inc.
456 Bedford Street
Fall River, Massachusetts 02720
Attention: Chief Financial Officer
Copies to: Code, Hennessy & Simmons LLC
10 South Wacker Drive
Suite 3175
Chicago, IL 60606
12
<PAGE>
Attention: Peter Gotsch
and
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attention: Stephen L. Ritchie, Esq.
Address of the Unit Agent, the Warrant Agent and the Trustee:
Norwest Bank Minnesota, National Association
Norwest Center
Sixth and Marquette
Minneapolis, Minnesota 55479
Attention: Corporate Trust Services
The parties hereto by notice to the other parties may designate
additional or different addresses for subsequent communications or notice.
Any notice to be mailed to a holder of Units shall be mailed to him or
her at the address that appears on the register of Units maintained by the Unit
Agent. Copies of any such communication shall also be mailed to the Unit Agent,
Trustee and Warrant Agent. The Unit Agent shall furnish the Company, the Trustee
or the Warrant Agent promptly when requested with a list of registered holders
of Units for the purpose of mailing any notice or communication to the holders
of the Notes or Warrants and at such other times as may be reasonably requested.
SECTION 11. Supplements and Amendments. The Company and the Unit
Agent may from time to time supplement or amend this Agreement without the
approval of any holders of Units in order to cure any ambiguity or to correct or
supplement any provision contained herein which may be defective or inconsistent
with any other provision herein, or to make any other provisions in regard to
matters or questions arising hereunder which the Company, the Trustee, the
Warrant Agent and the Unit Agent may deem necessary or desirable and which shall
not adversely affect the interests of the holders of Unit Certificates in any
material respect. Any amendment or supplement to this Agreement that has a
material adverse effect on the interests of Unit holders shall require the
written consent of registered holders of the then outstanding Units representing
not less than a majority of the then outstanding Units.
SECTION 12. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company, the Trustee, the Warrant Agent
or the Unit Agent shall bind and inure to the benefit of their respective
successors and assigns hereunder.
13
<PAGE>
SECTION 13. Governing Law. THIS AGREEMENT AND EACH UNIT CERTIFICATE
ISSUED HEREUNDER SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE
STATE OF NEW YORK AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF SAID STATE, WITHOUT REGARD TO THE CONFLICT OF LAW RULES THEREOF.
SECTION 14. Benefits of This Agreement. Nothing in this Agreement
shall be construed to give to any person or corporation other than the Company,
the Trustee, the Warrant Agent, the Unit Agent and the registered holders of the
Unit Certificates any legal or equitable right, remedy or claim under this
Agreement; but this Agreement shall be for the sole and exclusive benefit of the
Company, the Trustee, the Warrant Agent, the Unit Agent and the registered
holders of the Unit Certificates.
SECTION 15. Counterparts. This Agreement may be executed in any
number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
14
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, as of the day and year first above written.
GLOBE HOLDINGS, INC.
By: /s/ Thomas A. Rodgers, III
------------------------------
Name: Thomas A. Rodgers, III
Title: President
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Unit Agent, Warrant Agent
and Trustee
By: /s/ Curtis D. Schwegman
------------------------------
Name: Curtis D. Schwegman
Title: Assistant Vice President
<PAGE>
EXHIBIT A
[FORM OF UNIT CERTIFICATE]
THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE SECURITY
EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER
MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER OR ANOTHER EXEMPTION UNDER THE
SECURITIES ACT. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE
BENEFIT OF THE ISSUER THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED ONLY (i) (a) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT), PURCHASING FOR ITS OWN ACCOUNT IN A TRANSACTION MEETING THE REQUIREMENTS
OF RULE 144A UNDER THE SECURITIES ACT, (b) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144 OF THE SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO
A FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 OF
REGULATION S UNDER THE SECURITIES ACT OR (d) IN ACCORDANCE WITH ANOTHER
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT PROVIDED THAT
IN THE CASE OF A TRANSFER PURSUANT TO CLAUSE (d) SUCH TRANSFER IS EFFECTED BY
THE DELIVERY TO THE TRANSFEREE OF DEFINITIVE SECURITIES REGISTERED IN ITS NAME
(OR ITS NOMINEE'S NAME) IN THE BOOKS MAINTAINED BY THE REGISTRAR, AND IS SUBJECT
TO THE RECEIPT BY THE REGISTRAR (AND THE COMPANY, IF ITS SO REQUESTS) OF A
CERTIFICATION OF THE TRANSFEROR AND AN OPINION OF COUNSEL TO THE EFFECT THAT
SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (ii) TO THE COMPANY OR
(iii) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY
STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE
HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER
FROM IT OF THE SECURITIES EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH
IN (A) ABOVE.
THE NOTE COMPRISING A PART OF THIS SECURITY WAS ISSUED WITH "ORIGINAL ISSUE
DISCOUNT" FOR FEDERAL INCOME TAX PURPOSES. FOR THE ISSUE PRICE, AMOUNT OF
ORIGINAL ISSUE DISCOUNT, ISSUE DATE AND YIELD TO MATURITY OF THE NOTE FOR
FEDERAL INCOME TAX PURPOSES, HOLDERS MAY CONTACT THE
A-1
<PAGE>
COMPANY'S REPRESENTATIVE, LAWRENCE R. WALSH, VICE PRESIDENT, FINANCE AND
ADMINISTRATION, AT (508) 674-3585.
THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE INITIALLY ISSUED AS PART OF AN
ISSUANCE OF UNITS (THE "UNITS"), EACH OF WHICH CONSIST OF $1,000 PRINCIPAL
AMOUNT AT MATURITY OF 14% SENIOR DISCOUNT NOTES DUE 2009 OF THE COMPANY (THE
"NOTES") AND ONE WARRANT ("WARRANT") INITIALLY ENTITLING THE HOLDER THEREOF TO
PURCHASE 1.4155 SHARES OF CLASS A COMMON STOCK, PAR VALUE $0.01 PER SHARE, OF
THE COMPANY. PRIOR TO THE EARLIEST TO OCCUR OF (I) THE DATE THAT IS SIX MONTHS
FOLLOWING THE INITIAL SALE OF THE UNITS, (II) THE COMMENCEMENT OF AN EXCHANGE
OFFER (AS DEFINED IN THE REGISTRATION RIGHTS AGREEMENT) WITH RESPECT TO THE
NOTES, (III) THE DATE A SHELF REGISTRATION STATEMENT (AS DEFINED IN THE
REGISTRATION RIGHTS AGREEMENT) WITH RESPECT TO THE NOTES IS DECLARED EFFECTIVE,
(IV) A CHANGE OF CONTROL (AS DEFINED IN THE INDENTURE), OR (V) SUCH DATE AS
BANCAMERICA ROBERTSON STEPHENS MAY, IN ITS SOLE DISCRETION, DEEM APPROPRIATE,
THE SECURITIES EVIDENCED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED OR EXCHANGED
SEPARATE FROM. BUT MAY BE TRANSFERRED OR EXCHANGED ONLY TOGETHER WITH, THE
WARRANTS.
A-2
<PAGE>
GLOBE HOLDINGS, INC.
Units, Each Consisting of $1,000 Principal Amount at Maturity of 14% Senior
Discount Notes due 2009 and one Warrant to Purchase 1.4155 Shares of Common
Stock
No._______ CUSIP No._________
_______ Units
Globe Holdings, Inc., a Massachusetts corporation (the "Company,"
which term includes any successor corporation), hereby certifies that
_____________ is the owner of __________ Units as described above, transferable
only on the books of the Company by the holder thereof in person or by his or
her duly authorized attorney, on surrender of this Certificate properly
endorsed.
Each Unit consists of $1,000 principal amount at maturity of 14%
Senior Discount Notes due 2009 of the Company (collectively, the "Notes") and
one warrant (collectively, the "Warrants") to purchase 1.4155 shares of Class A
Common Stock of the Company, par value $.01 per share (the "Common Stock"),
subject to adjustment as provided in the Warrant Agreement (as defined below).
The Notes and the Warrants represented by this Unit Certificate, which are
attached hereto and made a part hereof, are non-detachable and not separately
transferrable except as set forth herein. This Unit is issued pursuant to the
Unit Agreement dated as of August 6, 1998 (the "Unit Agreement"), between the
Company and Norwest Bank Minnesota, National Association, in its capacity as
Unit Agent (in such capacity, the "Unit Agent") as well as in its capacities as
Warrant Agent under the Warrant Agreement and Trustee under the Indenture (as
defined below) and is subject to the terms and provisions contained therein, to
all of which terms and provisions the holder of this Unit Certificate consents
by acceptance hereof. The terms of the Notes are governed by an Indenture dated
as of August 6, 1998 (the "Indenture") between the Company and Norwest Bank
Minnesota, National Association, as Trustee (the "Trustee"), and are subject to
the terms and provisions contained therein, to all of which terms and provisions
the holder of this Unit Certificate consents by acceptance hereof.
The terms of the Warrants are governed by a Warrant Agreement dated as
of August 6, 1998 (the "Warrant Agreement") between the Company and Norwest Bank
Minnesota, National Association, as Warrant Agent (the "Warrant Agent"), and are
subject to the terms and provisions contained therein, to all of which terms and
provisions the holder of this Unit Certificate consents by acceptance hereof.
The Company will furnish to any Holder of a Unit upon written request and
without charge a copy of the Unit Agreement, the Indenture and the Warrant
Agreement. Requests may be made to: Globe Holdings, Inc., 456 Bedford Street,
Fall River, Massachusetts 02720, Attn: Chief Financial Officer.
A-3
<PAGE>
A-4
<PAGE>
Dated:
GLOBE HOLDINGS, INC.
By:______________________________________
Name:
Title:
By:_______________________________________
Name:
Title:
A-5
<PAGE>
Certificate of Authentication: This is one
of the Units referred to in the above
mentioned Unit Agreement.
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as Unit Agent
By:___________________________________
Authorized Signatory
A-6
<PAGE>
NOTICE: THIS UNIT MAY NOT BE TRANSFERRED SEPARATELY
FROM THE NOTES AND WARRANTS THAT COMPRISE THIS UNIT
ASSIGNMENT FORM
To assign this Unit, fill in the form below: (I) or (we) assign and
transfer this Unit to:
- --------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint _______________________________________________________
to transfer this Unit on the books of the Company. The agent may substitute
another to act for him.
[Check One]
[_] (a) this Unit is being transferred in compliance with the exemption
from registration under the Securities Act provided by Rule 144A
thereunder.
[_] (b) this Unit is being transferred pursuant to Rule 904 under the
Securities Act and documents are being furnished which comply with the
conditions of transfer set forth in the Unit Agreement.
[_] (c) this Unit is being transferred other than in accordance with (a) or
(b) above and documents are being furnished which comply with the
conditions of transfer set forth in the Unit Agreement.
If none of the foregoing boxes is checked, the Unit Agent shall not be obligated
to register this Unit 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 5 of the Unit Agreement shall have been satisfied.
Transfer of this Unit is subject to the terms of the Indenture and the Warrant
Agreement.
A-7
<PAGE>
Date: ____________________
Your Signature:__________________________________________________
(Sign exactly as your names appears on the face of
this Unit)
Signature Guarantee:___________________________________________________________
Participant in a recognized Signature Guarantee Medallion
Program (or other signature guarantor program reasonably
acceptable to the Registrar)
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED
The undersigned represents and warrants to the Company, the Unit Agent, the
Trustee and the Warrant Agent that it is purchasing this Unit 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 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.
Date:__________________________ _______________________________________
NOTICE: to be executed by an executive
officer
A-8
<PAGE>
SCHEDULE OF EXCHANGES OF INTERESTS IN GLOBAL UNITS/1/
-----------------------------------------------------
The following exchanges of a part of this Global Unit for Definitive Units have
been made:
Number of Units
Decrease in Increase in of this Global Signature of
Number of Number of Unit following authorized
Units of this Units of this such decrease signatory of
Date of Exchange Global Unit Global Unit (or increase) Unit Agent
================================================================================
- ------------------
/1/ This is to be included only if the Unit is in global form.
<PAGE>
EXHIBIT B
FORM OF LEGEND FOR GLOBAL UNIT
Any Global Unit authenticated and delivered hereunder shall bear a
legend (which would be in addition to any other legends required under the Unit
Agreement) in substantially the following form:
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE UNIT
AGREEMENT HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE
DEPOSITARY TRUST COMPANY (THE "DEPOSITARY") OR A NOMINEE OF THE DEPOSITARY
OR A SUCCESSOR. THIS SECURITY IS NOT EXCHANGEABLE FOR SECURITIES REGISTERED
IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE EXCEPT IN
THE LIMITED CIRCUMSTANCES DESCRIBED IN THE UNIT AGREEMENT, AND NO TRANSFER
OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY THE
DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY
TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY) MAY BE REGISTERED
EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE UNIT AGREEMENT.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITARY (55 WATER STREET, NEW YORK, NEW YORK) TO THE COMPANY OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER
NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY (AND
ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY), ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
TRANSFERS OF GLOBAL SECURITIES SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO THE DEPOSITARY, ITS SUCCESSORS OR THEIR RESPECTIVE
NOMINEES. INTERESTS OF BENEFICIAL OWNERS IN THE GLOBAL SECURITIES MAY BE
TRANSFERRED OR EXCHANGED FOR CERTIFICATED SECURITIES IN ACCORDANCE WITH THE
RULES AND PROCEDURES OF THE DEPOSITARY AND THE PROVISIONS OF SECTION 5 OF
THE UNIT AGREEMENT. IN ADDITION, CERTIFICATED SECURITIES SHALL BE
TRANSFERRED TO ALL BENEFICIAL OWNERS IN EXCHANGE FOR THEIR
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<PAGE>
BENEFICIAL INTERESTS IN GLOBAL SECURITIES IF (i) THE COMPANY NOTIFIES THE
REGISTRAR THAT THE DEPOSITARY IS UNWILLING OR UNABLE TO CONTINUE AS
DEPOSITARY FOR ANY GLOBAL SECURITY AND A SUCCESSOR DEPOSITARY IS NOT
APPOINTED BY THE ISSUER WITHIN 90 DAYS OF SUCH NOTICE OR (ii) THE COMPANY,
AT ITS OPTION, NOTIFIES THE REGISTRAR IN WRITING THAT IT ELECTS TO CAUSE
THE ISSUANCE OF SECURITIES IN DEFINITIVE FORM UNDER THE UNIT AGREEMENT.
B-2
<PAGE>
Exhibit 4.5
EXECUTION COPY
================================================================================
WARRANT AGREEMENT
________________________________________
GLOBE HOLDINGS, INC.
as Issuer
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
as Warrant Agent
________________________________________
August 6, 1998
________________________________________
================================================================================
<PAGE>
WARRANT AGREEMENT dated as of August 6, 1998 between Globe Holdings, Inc.
(the "Company") and Norwest Bank Minnesota National Association, as Warrant
Agent (the "Warrant Agent").
WHEREAS, the Company proposes to issue common stock purchase warrants, as
hereinafter described (the "Warrants"), to purchase up to an aggregate of 69,481
shares of Class A Common Stock, par value $0.01 per share (the "Common Stock"),
of the Company (the Common Stock issuable on exercise of the Warrants being
referred to herein as the "Warrant Shares"), in connection with an offering of
an aggregate of $49,086,000 principal amount at maturity of the 14% Senior
Discount Notes due 2009 (the "Notes") of the Company and 49,086 Warrants, each
Warrant entitling the holder thereof to purchase 1.4155 Warrant Shares. The
Notes and Warrants will be sold in units (the "Units"), each Unit consisting of
$1,000 in aggregate principal amount of Notes and one Warrant.
WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing so to act, in connection with the
issuance of Warrant Certificates (as defined below) and other matters as
provided herein;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, the parties hereto agree as follows:
Section 1. Definitions. Capitalized terms used herein shall have the
meanings assigned to such terms in this Agreement. In addition, the following
terms shall have the meanings set forth below.
"144A Global Warrant" means a Global Warrant in the form of Exhibit A
hereto bearing the Global Warrant Legend and the Private Placement Legend and
deposited with or on behalf of, and registered in the name of, the Depositary or
its nominee that will be issued in a denomination equal to the outstanding
number of the Warrants sold in reliance on Rule 144A.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For 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, shall mean
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.
"Applicable Procedures" means, with respect to any transfer or exchange of
or for beneficial interests in any Global Warrant, the rules and procedures of
the Depositary that apply to such transfer or exchange.
"Business Day" means any day other than a Legal Holiday.
"Definitive Warrant" means a certificated Warrant registered in the name of
the holder thereof and issued in accordance with Section 3 hereof, in the form
of Exhibit A1 hereto except that such Warrant shall not bear the Global Warrant
Legend and shall not have the "Schedule of Exchanges of Interests in the Global
Warrant" attached thereto.
<PAGE>
"Depositary" means, with respect to the Warrants issuable or issued in
whole or in part in global form, the Person specified in Section 3.3 hereof as
the Depositary with respect to the Warrants, and any and all successors thereto
appointed as Depositary hereunder and having become such pursuant to the
applicable provision of this Agreement.
"Disinterested Director" means, in connection with any issuance of
securities that give rise to a determination of the Fair Market Value thereof
under this Agreement, each member of the Board of Directors of the Company who
is not an officer, employee, director or other Affiliate of the party to whom
the Company is proposing to issue the securities giving rise to such
determination.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" for a security shall mean (A) the average over the 20
trading days ending on the date immediately preceding the date of such
determination of the last reported sale price, or, if no such sale takes place
on any such day, the closing bid price, in either case as reported for
consolidated transactions on the principal national securities exchange
(including the NASDAQ National Market) on which such security is listed or
admitted for trading or (B) if such security is not listed on any exchange or
admitted for trading on the NASDAQ Stock Market, the Fair Market Value shall be
(1) in connection with a sale to a party that is not an Affiliate of the Company
in an arm's length transaction (a "Non-Affiliate Sale"), the fair market value
of such security determined in good faith by a majority of the Board of
Directors of the Company, including a majority of the Disinterested Directors,
and approved in a board resolution delivered to the Warrant Agent and (2) in
connection with any sale to an Affiliate of the Company, (a) the last price per
security at which such security was sold in a Non-Affiliate Sale within the
three-month period preceding such date of determination, (b) if clause (a) is
not applicable and the sale involves aggregate gross proceeds to the Company of
$15 million or less, the fair market value of such security determined in good
faith by a majority of the Board of Directors of the Company, including a
majority of the Disinterested Directors, and approved in a board resolution
delivered to the Warrant Agent or (c) if neither clause (a) nor clause (b) is
applicable, the fair market value of such security determined in good faith by
an Independent Financial Expert, in each case, taking into account, among other
factors deemed relevant by the Board of Directors or such Independent Financial
Expert, the trading price and volume of such security on any national securities
exchange or automated quotation system on which such security is traded.
"Fully Diluted Shares" means (i) shares of Common Stock outstanding as of a
specified date and (ii) shares of Common Stock into or for which rights,
options, warrants or other securities outstanding as of such date are or, within
180 days after the date of determination, will be exercisable, convertible or
exchangeable (including the Warrants).
"Global Warrants" means, individually and collectively, each of the
Restricted Global Warrants, in the form of Exhibit A hereto issued in accordance
with Section 3.1 hereof.
"Global Warrant Legend" means the legend set forth in Section 3.5(e)(ii),
which is required to be placed on all Global Warrants issued under this Warrant
Agreement.
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"IAI Global Warrant" means the Global Warrant in the form of Exhibit A
hereto bearing the Global Warrant Legend and the Private Placement Legend and
deposited with or on behalf of and registered in the name of the Depositary or
its nominee that will be issued in a denomination equal to the outstanding
number of the Warrants sold to Institutional Accredited Investors.
"Indenture" means the Indenture dated August 6, 1998 between the Company
and Norwest Bank Minnesota, National Association, as trustee, relating to the
Company's 14% Senior Discount Notes due 2009.
"Independent Financial Expert" means a nationally recognized investment
banking, appraisal or valuation firm reasonably acceptable to the Warrant Agent
(i) that does not (and whose directors, officers, employees and Affiliates do
not) have a direct or indirect material financial interest in the Company or any
of its Affiliates, (ii) that has not been and, at the time it is called upon to
serve as Independent Financial Expert under this Agreement, is not (and none of
its directors, officers, employees or Affiliates is) a promoter, director or
officer of the Company, (iii) that has not been retained by the Company or any
of its Affiliates for any purpose, other than to perform an equity valuation,
within the preceding twelve months, and (iv) that, in the reasonable judgment of
the Board of Directors of the Company, is otherwise qualified to serve as an
independent financial advisor. Any such Person may receive customary
compensation and indemnification by the Company for opinions or services it
provides as an Independent Financial Expert.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act, who are not also QIBs.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York are not required to be open. If a date on
which any action required to be taken under this Agreement is a Legal Holiday,
such action shall be taken at the next succeeding day that is not a Legal
Holiday, and no interest or penalty shall accrue for the intervening period.
"Non-Affiliate Sale" has the meaning assigned to such term in the
definition of Fair Market Value.
"Non-U.S. Person" means a Person who is not a U.S. Person.
"Officer" means, with respect to any Person, the Chief Executive Officer,
the President, the Chief Financial Officer, the Treasurer, the Controller, any
Vice-President the Secretary or Clerk, and any Assistant Secretary or Assistant
Clerk of such Person.
"Opinion of Counsel" means an opinion from legal counsel who is reasonably
acceptable to the Warrant Agent in form and substance reasonably acceptable to
the Warrant Agent. The counsel may be an employee of or counsel to the Company,
any subsidiary of the Company or the Warrant Agent.
"Participant" means a Person who has an account with the Depositary.
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"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust, business
trust, unincorporated organization or government or any agency or political
subdivision thereof.
"Private Placement Legend" means the legend set forth in Section 3.5(e)(i)
to be placed on all Warrants issued under this Warrant Agreement except where
otherwise permitted by the provisions of this Warrant Agreement.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Regulation S" means Regulation S promulgated under the Securities Act.
"Regulation S Global Warrant" means a Global Warrant in the form of Exhibit
A hereto bearing the Global Warrant Legend and the Private Placement Legend and
deposited with or on behalf of and registered in the name of the Depositary or
its nominee, issued in a denomination equal to the outstanding number of the
Warrants initially sold in reliance on Rule 903 of Regulation S.
"Restricted Definitive Warrant" means a Definitive Warrant bearing the
Private Placement Legend.
"Restricted Global Warrant" means a Global Warrant bearing the Private
Placement Legend.
"Restricted Warrant" means a Warrant that is a "restricted security" as
defined in Rule 144(a)(3) under the Securities Act; provided, that the Warrant
Agent shall be entitled to request and conclusively rely upon an Opinion of
Counsel with respect to whether any Warrant is a Restricted Warrant.
"Rule 144" means Rule 144 promulgated under the Securities Act.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"Rule 903" means Rule 903 promulgated under the Securities Act.
"Rule 904" means Rule 904 promulgated under the Securities Act.
"Securities Act" means the Securities Act of 1933, as amended.
"U.S. Person" means a U.S. person as defined in Rule 902(o) under the
Securities Act.
"Unrestricted Definitive Warrant" means a Definitive Warrant that is an
Unrestricted Warrant.
"Unrestricted Global Warrant" means a Global Warrant that is an
Unrestricted Warrant.
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"Unrestricted Warrant" means a Warrant other than a Restricted Warrant.
"Warrant Number" means the number of Warrant Shares issuable upon the
exercise of each Warrant.
"Warrant Registration Rights Agreement" means the Warrant Registration
Rights Agreement dated August 6, 1998 between the Company and BancAmerica
Robertson Stephens.
"Warrant Shares" has the meaning assigned to such term in the preamble to
this Agreement.
Section 2. Appointment of Warrant Agent.
The Company hereby appoints the Warrant Agent to act as agent for the
Company in accordance with the instructions set forth hereinafter in this
Agreement, and the Warrant Agent hereby accepts such appointment.
Section 3. Warrant Certificate.
3.1. Form and Dating.
(a) General.
The Warrants shall be substantially in the form of Exhibit A hereto (the
"Warrant Certificates"). The Warrants may have notations, legends or
endorsements required by law, stock exchange rule or usage. Each Warrant shall
be dated the date of the countersignature.
The terms and provisions contained in the Warrants shall constitute, and
are hereby expressly made, a part of this Warrant Agreement. The Company and the
Warrant Agent, by their execution and delivery of this Warrant Agreement,
expressly agree to such terms and provisions and to be bound thereby. However,
to the extent any provision of any Warrant conflicts with the express provisions
of this Warrant Agreement, the provisions of this Warrant Agreement shall govern
and be controlling.
(b) Global Warrants.
Warrants issued in global form shall be substantially in the form of
Exhibit A attached hereto (including the Global Warrant Legend thereon and the
"Schedule of Exchanges of Interests in the Global Warrant" attached thereto).
Warrants issued in definitive form shall be substantially in the form of Exhibit
A attached hereto (but without the Global Warrant Legend thereon and without the
"Schedule of Exchanges of Interests in the Global Warrant" attached thereto).
Each Global Warrant shall represent such of the outstanding Warrants as shall be
specified therein and each shall provide that it shall represent the number of
outstanding Warrants from time to time endorsed thereon and that the number of
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outstanding Warrants represented thereby may from time to time be reduced or
increased, as appropriate, to reflect exchanges and redemptions. Any endorsement
of a Global Warrant to reflect the amount of any increase or decrease in the
number of outstanding Warrants represented thereby shall be made by the Warrant
Agent in accordance with instructions given by the holder thereof as required by
Section 3.5 hereof.
3.2. Execution.
An Officer shall sign the Warrants for the Company by manual or facsimile
signature.
If the Officer whose signature is on a Warrant no longer holds that office
at the time a Warrant is countersigned, the Warrant shall nevertheless be valid.
A Warrant shall not be valid until countersigned by the manual signature of
the Warrant Agent. The signature shall be conclusive evidence that the Warrant
has been authenticated under this Warrant Agreement.
The Warrant Agent shall, upon a written order of the Company signed by an
Officer (a "Warrant Countersignature Order"), countersign Warrants for original
issue up to the number stated in the preamble hereto.
The Warrant Agent may appoint an agent acceptable to the Company to
countersign Warrants. Such an agent may countersign Warrants whenever the
Warrant Agent may do so. Each reference in this Warrant Agreement to a
countersignature by the Warrant Agent includes a countersignature by such agent.
Such an agent has the same rights as the Warrant Agent to deal with the Company
or an Affiliate of the Company.
3.3. Warrant Registrar.
The Company shall maintain an office or agency where Warrants may be
presented for registration of transfer or for exchange ("Warrant Registrar").
The Warrant Registrar shall keep a register of the Warrants and of their
transfer and exchange. The Company may appoint one or more co-Warrant
Registrars. The term "Warrant Registrar" includes any co-Warrant Registrar. The
Company may change any Warrant Registrar without notice to any holder. The
Company shall notify the Warrant Agent in writing of the name and address of any
Warrant Registrar or Co-Warrant Registrar. If the Company fails to appoint or
maintain another entity as Warrant Registrar, the Warrant Agent shall act as
such. The Company or any of its subsidiaries may act as Warrant Registrar.
The Depository Trust Company shall act as the Depositary with respect to
the Global Warrants until a successor shall be appointed by the Company and the
Warrant Agent. The Global Warrants shall be registered in the name of the
Depositary, or the nominee of such Depositary. So long as the Depositary or its
nominee is the registered owner of a Global Warrant it will be deemed to be the
sole owner and holder of such Global Warrant for all purposes hereunder and
under such Global Warrant.
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The Company initially appoints the Warrant Agent to act as the Warrant
Registrar with respect to the Global Warrants. References in this Agreement to
the Warrant Agent shall include the Warrant Agent in its capacity as Warrant
Registrar.
3.4. Holder Lists.
The Warrant Agent shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all holders or Warrants. If the Warrant Agent is not the Warrant Registrar, the
Company shall furnish to the Warrant Agent upon the Warrant Agent's written
request a list in such form and as of such date as the Warrant Agent may
reasonably require of the names and addresses of the holders of Warrants.
3.5. Registration of Transfers and Exchanges.
(a) Transfer and Exchange of Global Warrants. The transfer and exchange
of Global Warrants or beneficial interests therein shall be effected through the
Depositary, in accordance with this Agreement and the Applicable Procedures.
(b) Book-Entry Provisions for Global Warrants.
(i) The Global Warrants initially shall (i) be registered in the name
of Cede & Co., as the nominee of The Depository Trust Company, (ii) be
delivered to the Warrant Agent as custodian for such Depositary and (iii)
bear the Private Placement Legend.
Members of, or Participants in, the Depositary ("Agent Members") shall
have no rights under this Warrant Agreement with respect to any Global
Warrant held on their behalf by the Depositary, or the Warrant Agent as its
custodian, or under the Global Warrant, and the Depositary may be treated
by the Company, the Warrant Agent and any agent of the Company or the
Warrant Agent as the absolute owner of the Global Warrant for all purposes
whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the
Company, the Warrant Agent or any agent of the Company or the Warrant Agent
from giving effect to any written certification, proxy or other
authorization furnished by the Depositary or impair, as between the
Depositary and its Agent Members, the operation of customary practices
governing the exercise of the rights of a holder of any Warrant.
(ii) Transfers of Global Warrants shall be limited to transfers in
whole, but not in part, to the Depositary, its successors or their
respective nominees. Interests of beneficial owners in the Global Warrants
may be transferred or exchanged for Definitive Warrants in accordance with
the Applicable Procedures and the provisions of Section 3.5(c). In
addition, Definitive Warrants shall be transferred to all beneficial owners
in exchange for their beneficial interests in Global Warrants if (i) the
Company notifies the Warrant Agent that the Depositary is unwilling or
unable to continue as Depositary for any Global Warrant and a successor
depositary is not appointed by the Company and the Warrant Agent within 90
days
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of such notice or (ii) the Company, at its option, notifies the Warrant
Agent in writing that it elects to cause the issuance of Warrants in
definitive form under this Warrant Agreement.
(iii) In connection with any transfer or exchange of a portion of the
beneficial interest in any Global Warrant to beneficial owners pursuant to
this Section 3.5(b), the Warrant Agent shall (if one or more Definitive
Warrants are to be issued) reflect on its books and records the date and a
decrease in the number of Warrants represented by the Global Warrant in an
amount equal to the number of Warrants represented by the beneficial
interest in the Global Warrant to be transferred, and the Company shall
execute, and the Warrant Agent shall countersign and cause to be delivered,
one or more Definitive Warrants of like amount.
(iv) In connection with the transfer of Global Warrants as an
entirety to beneficial owners pursuant to this Section 3.5(b), the Global
Warrants shall be deemed to be surrendered to the Warrant Agent for
cancellation, and the Company shall execute, and the Warrant Agent shall
countersign and cause to be delivered to each beneficial owner identified
by the Depositary in exchange for its beneficial interest in the Global
Warrants, Definitive Warrants of authorized denominations representing, in
the aggregate, the number of Warrants theretofore represented by the Global
Warrants so transferred.
(v) Any Definitive Warrant constituting a Restricted Warrant
delivered in exchange for an interest in a Global Warrant pursuant to this
Section 3.5(b) shall, except as otherwise provided by Section 3.5(e)(i)(B),
bear the Private Placement Legend.
(vi) The registered holder of any Global Warrant 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 Warrant Agreement or the Warrants.
(c) Special Transfer Provisions.
(i) Transfers to Non-QIB Institutional Accredited Investors and Non-
U.S. Persons and other Transfers Exempt under the Securities Act. The following
provisions shall apply (x) with respect to the registration of any proposed
transfer of a Warrant constituting a Restricted Warrant to any Institutional
Accredited Investor which is not a QIB or to any Non-U.S. Person and (y) with
respect to the registration of any proposed transfer pursuant to another
available exemption from the registration requirements of the Securities Act:
(A) the Warrant Agent shall register the transfer of any Warrant
constituting a Restricted Warrant, whether or not such Warrant bears the
Private Placement Legend, if (w) the requested transfer is after the second
anniversary of the original issue date with respect thereto; provided,
however, that neither the Company nor any Affiliate of the Company has held
any beneficial interest in such security, or portion thereof, at any time
on or prior to the second
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anniversary of such issue date or (x) the requested transfer is to an
Institutional Accredited Investor pursuant to a private placement exemption
from the registration requirements of the Securities Act or (y) the
requested transfer is to a Non-U.S. Person pursuant to an exemption from
the registration requirements of the Securities Act in accordance with Rule
904 under the Securities Act or (z) the requested transfer is being made in
reliance on another exemption from the registration requirements of the
Securities Act, together, in the case of either clause (w), (x), (y) or (z)
with a certification to such effect (in substantially the form of Exhibit
B) and such other certifications, Opinions of Counsel or other information
as the Company or the Warrant Agent may reasonably require to confirm that
such transfer is being made pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities
Act; and
(B) the Warrant Agent shall register the transfer of any Warrant
constituting a Restricted Warrant, whether or not such Warrant bears the
Private Placement Legend, if the proposed transferor is an Agent Member
holding a beneficial interest in a Global Warrant, upon, receipt by the
Warrant Agent of (x) the certificate, if any, required by paragraph (A)
above and (y) instructions given in accordance with the Applicable
Procedures and the Warrant Agent's procedures,
whereupon (a) the Warrant Agent shall reflect on its books and records the date
and (if the transfer does not involve a transfer of outstanding Definitive
Warrants) a decrease in the number of Warrants represented by the applicable
Global Warrant in an amount equal to the number of Warrants represented by the
beneficial interest in the Global Warrant to be transferred (the "Transfer
Amount"), (b) if the Warrants to be transferred are to be evidenced by
Definitive Warrants, the Company shall execute and the Warrant Agent shall
countersign upon receipt of a Warrant Countersignature Order, and cause to be
delivered one or more Definitive Warrants in an aggregate number equal to the
Transfer Amount and (c) if the Warrants to be transferred are to be evidenced by
an interest in a Global Warrant, upon receipt of instructions given in
accordance with the Applicable Procedures and the Warrant Agent's procedures,
the Warrant Agent shall reflect on its books and records the date and an
increase in the number of Warrants represented by the Global Warrant in which
the transferee will hold its beneficial interest in an amount equal to the
Transfer Amount.
(ii) Transfers to QIBs. The following provisions shall apply with
respect to the registration of any proposed transfer of a Warrant constituting a
Restricted Warrant to a QIB (excluding transfers to Non-U.S. Persons):
(A) the Warrant Agent shall register the transfer if such transfer is
being made by a proposed transferor who has delivered a certification (in
substantially the form of Exhibit B) stating, or has otherwise advised the
Company and the Warrant Agent in writing, that the sale has been made in
compliance with the provisions of Rule 144A to a transferee who has advised
the Company and the Warrant Agent in writing that it is purchasing the
Warrant 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
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information and that it is aware that the Company and the transferor are
relying upon its foregoing representations in order to claim the exemption
from registration provided by Rule 144A; if the Warrant Agent or the
Company shall so request, such proposed transferor shall have delivered an
Opinion of Counsel, an officers' certificate and such other information as
the Warrant Agent or the Company may reasonably require in connection with
such proposed transfer; and
(B) if the proposed transferee is an Agent Member, and the Warrants
to be transferred consist of Definitive Warrants which after transfer are
to be evidenced by an interest in the 144A Global Warrant, upon receipt by
the Warrant Agent of instructions given in accordance with the Applicable
Procedures and the Warrant Agent's procedures, the Warrant Agent shall
reflect on its books and records the date and an increase in the number of
Warrants represented by the 144A Global Warrant in an amount equal to the
number of Definitive Warrants to be transferred, and the Warrant Agent
shall cancel the Definitive Warrants so transferred; and
(C) if the proposed transferee is an Agent Member, and the Warrants
to be transferred consist of a beneficial interest in a Global Warrant
which after transfer is to continue to be evidenced by an interest in a
Global Warrant, upon receipt by the Warrant Agent of instructions given in
accordance with the Applicable Procedures and the Warrant Agent's
procedures, the Warrant Agent shall reflect on its books and records (A)
the date, (B) a decrease in the number of Warrants represented by the
Global Warrant in which the transferor owns the beneficial interest to be
transferred in an amount equal to the number of Warrants represented by the
beneficial interest to be transferred and (C) an increase in the number of
Warrants represented by the Global Warrant in which the transferee will
hold its beneficial interest in a like amount.
(d) General. By its acceptance of any Warrant bearing the Private
Placement Legend, each holder of such a Warrant acknowledges the restrictions on
transfer of such Warrant set forth in this Warrant Agreement and in the Private
Placement Legend and agrees that it will transfer such Warrant only as provided
in this Warrant Agreement and such Warrant.
(e) Legends.
The following legends shall appear on the face of all Global Warrants
and Definitive Warrants issued under this Warrant Agreement unless specifically
stated otherwise in the applicable provisions of this Warrant Agreement.
(i) Private Placement Legend.
(A) Except as permitted by subparagraph (B) below, each Global
Warrant and each Definitive Warrant (and all Warrants issued in exchange
therefor or substitution thereof) shall bear the legend in substantially
the following form:
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS
ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5
OF THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
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"SECURITIES ACT"), AND THE SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED
HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION
FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE
144A THEREUNDER OR ANOTHER EXEMPTION UNDER THE SECURITIES ACT. THE HOLDER
OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT
(A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY
(1)(a) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (b)
IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A UNDER THE SECURITIES
ACT, (c) OUTSIDE THE UNITED STATES TO A NON-U.S. PERSON IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT, (d) TO AN
INSTITUTIONAL "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a)(1), (2), (3)
OR (7) OF THE SECURITIES ACT (AN "INSTITUTIONAL ACCREDITED INVESTOR") IN A
TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
OR (e) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, (2) TO THE COMPANY OR (3) PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH
ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY
OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT
HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE SECURITY
EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE."
(B) Upon the transfer, exchange or replacement of Warrants not
bearing the Private Placement Legend, the Warrant Agent shall deliver
Warrants that do not bear the Private Placement Legend. Upon the transfer,
exchange or replacement of Warrants bearing the Private Placement Legend,
the Warrant Agent shall deliver only Warrants that bear the Private
Placement Legend unless (i) such transfer is after the second anniversary
of the later of (x) the original issue date of such Warrants or (y) the
last date on which the Company or any Affiliate of the Company held a
beneficial interest in such Warrants (or any predecessor securities), or
any portion thereof; (ii) there is delivered to the Company and the Warrant
Agent an Opinion of Counsel reasonably satisfactory to the Company and the
Warrant Agent 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 Warrants have been sold
pursuant to an effective registration statement under the Securities Act.
(ii) Global Warrant Legend. Each Global Warrant shall bear a
legend in substantially the following form:
"THIS GLOBAL WARRANT IS HELD BY THE DEPOSITARY (AS DEFINED IN THE
WARRANT AGREEMENT GOVERNING THIS WARRANT) OR ITS
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NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS
NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE
WARRANT AGENT MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO
SECTION 3.7 OF THE WARRANT AGREEMENT, (II) THIS GLOBAL WARRANT MAY BE
EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 3.5 OF THE WARRANT
AGREEMENT, (III) THIS GLOBAL WARRANT MAY BE DELIVERED TO THE WARRANT AGENT
FOR CANCELLATION PURSUANT TO SECTION 3.8 OF THE WARRANT AGREEMENT AND (IV)
THIS GLOBAL WARRANT MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE
PRIOR WRITTEN CONSENT OF THE COMPANY.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITARY (55 WATER STREET, NEW YORK, NEW YORK) TO
THE COMPANY OR ITS AGENT FOR REGISTRATION OR TRANSFER, EXCHANGE OR PAYMENT,
AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN
SUCH OTHER NAME AS IT IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITARY (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY), 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."
(iii) Unit Legend. Each Warrant issued prior to the Separation
Date shall bear the following legend (the "Unit Legend") on the face
thereof:
"THE WARRANTS EVIDENCED BY THIS CERTIFICATE ARE INITIALLY ISSUED
AS PART OF AN ISSUANCE OF UNITS (THE "UNITS"), EACH OF WHICH CONSIST OF
$1,000 PRINCIPAL AMOUNT AT MATURITY OF THE 14% SENIOR DISCOUNT NOTES DUE
2009 OF THE COMPANY (THE "NOTES") AND ONE WARRANT (THE "WARRANT") INITIALLY
ENTITLING THE HOLDER THEREOF TO PURCHASE 1.4155 SHARES OF CLASS A COMMON
STOCK, PAR VALUE $0.01 PER SHARE, OF THE COMPANY. PRIOR TO THE EARLIEST TO
OCCUR OF (I) THE DATE THAT IS SIX MONTHS FOLLOWING THE INITIAL SALE OF THE
UNITS, (II) THE COMMENCEMENT OF AN EXCHANGE OFFER WITH RESPECT TO THE
NOTES, (III) THE DATE A SHELF REGISTRATION STATEMENT (AS DEFINED IN THE
REGISTRATION RIGHTS AGREEMENT) WITH RESPECT TO THE NOTES IS DECLARED
EFFECTIVE, (IV) A CHANGE OF CONTROL (AS DEFINED IN THE INDENTURE), OR (V)
SUCH DATE AS BANCAMERICA ROBERTSON STEPHENS MAY, IN ITS SOLE DISCRETION,
DEEM APPROPRIATE, THE WARRANTS EVIDENCED BY THIS CERTIFICATE MAY NOT BE
TRANSFERRED OR EXCHANGED SEPARATELY FROM, BUT MAY BE TRANSFERRED OR
EXCHANGED ONLY TOGETHER WITH, THE NOTES."
(f) Cancellation and/or Adjustment of Global Warrants.
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At such time as all beneficial interests in a particular Global
Warrant have been exercised or exchanged for Definitive Warrants or a particular
Global Warrant has been exercised, redeemed, repurchased or canceled in whole
and not in part, each such Global Warrant shall be returned to or retained and
canceled by the Warrant Agent in accordance with Section 3.8 hereof. At any time
prior to such cancellation, if any beneficial interest in a Global Warrant is
exercised or exchanged for or transferred to a Person who will take delivery
thereof in the form of a beneficial interest in another Global Warrant or for
Definitive Warrants, the amount of Warrants represented by such Global Warrant
shall be reduced accordingly and an endorsement shall be made on such Global
Warrant by the Warrant Agent or by the Depositary at the direction of the
Warrant Agent to reflect such reduction; and if the beneficial interest is being
exchanged for or transferred to a Person who will take delivery thereof in the
form of a beneficial interest in another Global Warrant, such other Global
Warrant shall be increased accordingly and an endorsement shall be made on such
Global Warrant by the Warrant Agent or by the Depositary at the direction of the
Warrant Agent to reflect such increase.
(g) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the
Company shall execute and the Warrant Agent shall countersign Global
Warrants and Definitive Warrants upon the Company's order or at the
Warrant Agent's request.
(ii) No service charge shall be made to a holder of a
beneficial interest in a Global Warrant or to a holder of a Definitive
Warrant for any registration of transfer or exchange, but the Company
may require payment of a sum sufficient to cover any transfer tax or
similar governmental charge payable in connection therewith.
(iii) All Global Warrants and Definitive Warrants issued upon
any registration of transfer or exchange of Global Warrants or
Definitive Warrants shall be the duly authorized, executed and issued
warrants for Common Stock of the Company, not subject to any
preemptive rights, and entitled to the same benefits under this
Warrant Agreement, as the Global Warrants or Definitive Warrants
surrendered upon such registration of transfer or exchange.
(iv) Prior to due presentment for the registration of a
transfer of any Warrant, the Warrant Agent and the Company may deem
and treat the Person in whose name any Warrant is registered as the
absolute owner of such Warrant for all purposes and neither the
Warrant Agent nor the Company shall be affected by notice to the
contrary.
(v) The Warrant Agent shall countersign Global Warrants and
Definitive Warrants in accordance with the provisions of Section 3.2
hereof.
(h) Facsimile Submissions to Warrant Agent.
All certifications, certificates and Opinions of Counsel required to
be submitted to the Warrant Agent pursuant to this Section 3.5 to effect a
registration of transfer or exchange may be submitted by facsimile.
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Notwithstanding anything herein to the contrary, as to any
certificates and/or certifications delivered to the Warrant Agent pursuant to
this Section 3.5, the Warrant Agent's duties shall be limited to confirming that
any such certifications and certificates delivered to it are in the form of
Exhibit B attached hereto. The Warrant Registrar shall not be responsible for
confirming the truth or accuracy of representations made in any such
certifications or certificates. As to any Opinions of Counsel delivered pursuant
to this Section 3.5, the Warrant Registrar may rely upon, and be fully protected
in relying upon, such opinions.
(i) Exchange.
Any holder of Warrants may, subject to the provision of this
Agreement, exchange a Definitive Warrant for a beneficial interest in a Global
Warrant, a beneficial interest in a Global Warrant for a Definitive Warrant or a
Restricted Warrant for an Unrestricted Warrant, in each case in accordance with
the Applicable Procedures and the Warrant Agent's procedures, upon delivery to
the Warrant Agent of a certification (in substantially the form of Exhibit C)
and such other certifications, Opinions of Counsel or other information as the
Company or the Warrant Agent may reasonably require.
3.6. Replacement Warrants.
If any mutilated Warrant is surrendered to the Warrant Agent or the
Company or the Warrant Agent receives evidence to its satisfaction of the
destruction, loss or theft of any Warrant, the Company shall issue and the
Warrant Agent, upon receipt of a Warrant Countersignature Order, shall
countersign a replacement Warrant if the Warrant Agent's requirements are met.
If required by the Warrant Agent or the Company, an indemnity bond must be
supplied by the holder that is sufficient in the judgment of the Warrant Agent
and the Company to protect the Company, the Warrant Agent, and any agent for
purposes of the countersignature from any loss that any of them may suffer if a
Warrant is replaced. The Company may charge for its expenses in replacing a
Warrant.
Every replacement Warrant is an additional warrant of the Company and
shall be entitled to all of the benefits of this Warrant Agreement equally and
proportionately with all other Warrants duly issued hereunder.
3.7. Temporary Warrants.
Until certificates representing Warrants are ready for delivery, the
Company may prepare and the Warrant Agent, upon receipt of a Warrant
Countersignature Order, shall countersign temporary Warrants. Temporary Warrants
shall be substantially in the form of certificated Warrants but have variations
that the Company considers appropriate for temporary Warrants and as shall be
reasonably acceptable to the Warrant Agent. Without unreasonable delay, the
Company shall prepare and the Warrant Agent shall countersign definitive
Warrants in exchange for temporary Warrants.
Holders of temporary Warrants shall be entitled to all of the benefits
of this Warrant Agreement.
14
<PAGE>
3.8. Cancellation.
The Company at any time may deliver Warrants to the Warrant Agent for
cancellation. The Warrant Registrar (if not the Warrant Agent) shall forward to
the Warrant Agent any Warrants surrendered to them for registration of transfer,
exchange or exercise. The Warrant Agent and no one else shall cancel all
Warrants surrendered for registration of transfer, exchange, exercise,
replacement or cancellation and shall destroy canceled Warrants (subject to the
record retention requirement of the Exchange Act). Certification of the
destruction of all canceled Warrants shall be delivered to the Company. The
Company may not issue new Warrants to replace Warrants that have been exercised
or that have been delivered to the Warrant Agent for cancellation.
Section 4. Separation of Warrants; Terms of Warrants; Exercise of
Warrants.
4.1. The Notes and Warrants will not be separately transferable until
the earliest to occur of (i) the date that is six months following the initial
sale of the Units, (ii) the commencement of the Exchange Offer (as defined in
the Indenture), (iii) the date a Shelf Registration Statement (as defined in the
Registration Rights Agreement) with respect to the Notes is declared effective,
(iv) a Change of Control (as defined in the Indenture) or (v) such date as
BancAmerica Robertson Stephens may, in its sole discretion, deem appropriate
(the earliest of such dates, the "Separation Date"), at which time such Warrants
shall become separately transferable. Subject to the terms of this Agreement,
each Warrant holder shall have the right, which may be exercised commencing on
the opening of business on the Separation Date and through and until 5:00 p.m.,
New York City time on August 1, 2009 (or such later date as provided in the
following paragraph) (the "Exercise Period"), to receive from the Company the
number of fully paid and nonassessable Warrant Shares which the holder may at
the time be entitled to receive on exercise of such Warrants and payment of the
exercise price (the "Exercise Price") then in effect for such Warrant Shares;
provided that holders shall be able to exercise their Warrants only if a
registration statement relating to the Warrant Shares is then in effect, or the
exercise of such Warrants is exempt from the registration requirements of the
Securities Act of 1933, as amended (the "Securities Act"), and such securities
are qualified for sale or exempt from qualification under the applicable
securities laws of the states in which the various holders of the Warrants or
other persons to whom it is proposed that the Warrant Shares be issued on
exercise of the Warrants reside. In the alternative, each holder may exercise
its right to receive Warrant Shares on a net basis, such that without the
exchange of any funds, the holder receives that number of Warrant Shares
otherwise issuable upon exercise of its Warrants less that number of Warrant
Shares having a Fair Market Value equal to the aggregate Exercise Price that
would otherwise have been paid by the holder for the Warrant Shares being
issued. Except as provided in the following paragraph, each Warrant not
exercised prior to 5:00 p.m., New York City time, on August 1, 2009 (the
"Expiration Date") shall become void and all rights thereunder and all rights in
respect thereof under this Agreement shall cease as of such time. No adjustments
as to dividends will be made upon exercise of the Warrants.
The Company shall give notice not less than 90, and not more than 120,
days prior to the Expiration Date to the registered holders of all then
outstanding Warrants to the effect that the Warrants will terminate and become
void as of 5:00 p.m., New York City time, on the Expiration Date. If the Company
fails to give such notice, the Warrants will not expire until 5:00 p.m., New
York City time, on the 90th day after the Company gives such notice; provided,
however, in no event will holders be entitled
15
<PAGE>
to any damages or other remedy for the Company's failure to give such notice
other than any such extension. The Company shall give written notice to all
Warrant holders at least 20 days prior to the establishment of a record date for
the payment of any dividend on any shares of Common Stock or the repurchase of
Common Stock from the holders thereof.
4.2. In order to exercise all or any of the Warrants represented by a
Warrant Certificate, (i) in the case of Definitive Warrants, the holder thereof
must surrender for exercise the Warrant Certificate to the Company at the office
of the Warrant Agent at its corporate trust office, (ii) in the case of a book-
entry interest in a Global Warrant, the exercising Participant whose name
appears on a securities position listing of the Depositary as the holder of such
book-entry interest must comply with the Depositary's procedures relating to the
exercise of such book-entry interest in such Global Warrant and (iii) in the
case of both Global Warrants and Definitive Warrants, the holder thereof or the
Participant, as applicable, must deliver to the Company at the office of the
Warrant Agent the form of election to purchase on the reverse thereof duly
filled in and signed, which signature shall be medallion guaranteed by an
institution which is a member of a Securities Transfer Association recognized
signature guarantee program, and upon payment to the Warrant Agent for the
account of the Company of the Exercise Price, which is set forth in the form of
Warrant Certificate as adjusted as herein provided, for the number of Warrant
Shares in respect of which such Warrants are then exercised. In addition, if the
holder is exercising Warrants sold pursuant to Regulation S, such holder must
certify in writing that it is not a U.S. Person and that the Warrant is not
being exercised on behalf of a U.S. Person or provide a written Opinion of
Counsel to the effect that the Warrant and the securities delivered upon
exercise thereof have been registered under the Securities Act or are exempt
from registration thereunder. Payment of the aggregate Exercise Price shall be
made (i) in cash, by wire transfer or by certified or official bank check
payable to the order of the Company or (ii) on a net basis in the manner
provided in Section 4.1 hereof.
4.3. Subject to the provisions of Section 5 hereof, upon compliance
with Section 4.2 above, the Company shall deliver or cause to be delivered with
all reasonable dispatch, to or upon the written order of the holder and in such
name or names as the Warrant holder or Participant may designate, a certificate
or certificates for the number of whole Warrant Shares issuable upon the
exercise of such Warrants or other securities or property to which such holder
is entitled hereunder, together with cash as provided in Section 10 hereof;
provided that if any consolidation, merger or lease or sale of assets is
proposed to be effected by the Company as described in Section 8.11 hereof, or a
tender offer or an exchange offer for shares of Common Stock is made, upon such
surrender of Warrants and payment of the Exercise Price as aforesaid, the
Company shall, as soon as possible, but in any event not later than two Business
Days thereafter, deliver or cause to be delivered the full number of Warrant
Shares issuable upon the exercise of such Warrants in the manner described in
this sentence or other securities or property to which such holder is entitled
hereunder, together with cash as provided in Section 10 hereof. Such certificate
or certificates shall be deemed to have been issued and any person so designated
to be named therein shall be deemed to have become a holder of record of such
Warrant Shares as of the date of the surrender of such Warrants and payment of
the Exercise Price.
4.4. The Warrants shall be exercisable, at the election of the holders
thereof, either in full or from time to time in part. If less than all the
Warrants represented by a Definitive Warrant are exercised, such Definitive
Warrant shall be surrendered and a new Definitive Warrant of the same tenor
16
<PAGE>
and for the number of Warrants which were not exercised shall be executed by the
Company and delivered to the Warrant Agent and the Warrant Agent shall
countersign the new Definitive Warrant, registered in such name or names as may
be directed in writing by the holder, and shall deliver the new Definitive
Warrant to the Person or Persons entitled to receive the same. The Warrant Agent
shall make such notations on Schedule A to each Global Warrant as are required
to reflect any change in the number of Warrants represented by such Global
Warrant resulting from any exercise in accordance with the terms hereof.
4.5. All Warrant Certificates surrendered upon exercise of Warrants
shall be canceled by the Warrant Agent. Such canceled Warrant Certificates shall
then be disposed of by the Warrant Agent in a manner satisfactory to the
Company. The Warrant Agent shall account promptly to the Company with respect to
Warrants exercised and concurrently pay to the Company all monies received by
the Warrant Agent for the purchase of the Warrant Shares through the exercise of
such Warrants.
4.6. The Warrant Agent shall keep copies of this Agreement and any
notices given or received hereunder available for inspection by the holders
during normal business hours at its office. The Company shall supply the Warrant
Agent from time to time with such numbers of copies of this Agreement as the
Warrant Agent may request.
Section 5. Payment of Taxes.
The Company will pay all documentary stamp taxes attributable to the
initial issuance of Warrant Shares upon the exercise of Warrants; provided,
however, that the Company shall not be required to pay any tax or taxes which
may be payable in respect of any transfer involved in the issue of any Warrant
Certificates or any certificates for Warrant Shares in a name other than that of
the registered holder of a Warrant Certificate surrendered upon the exercise of
a Warrant, and the Company shall not be required to issue or deliver such
Warrant Certificates unless or until the person or persons requesting the
issuance thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been paid.
Section 6. Reservation of Warrant Shares.
6.1. The Company will at all times reserve and keep available, free
from preemptive rights, out of the aggregate of its authorized but unissued
Common Stock or its authorized and issued Common Stock held in its treasury, for
the purpose of enabling it to satisfy any obligation to issue Warrant Shares
upon exercise of Warrants, the maximum number of shares of Common Stock which
may then be deliverable upon the exercise of all outstanding Warrants.
6.2. The Company or, if appointed, the transfer agent for the Common
Stock (the "Transfer Agent") and every subsequent transfer agent for any shares
of the Company's capital stock issuable upon the exercise of any of the rights
of purchase aforesaid will be irrevocably authorized and directed at all times
to reserve such number of authorized shares as shall be required for such
purpose. The Company will keep a copy of this Agreement on file with the
Transfer Agent and with every subsequent transfer agent for any shares of the
Company's capital stock issuable upon the exercise of the
17
<PAGE>
rights of purchase represented by the Warrants. The Warrant Agent is hereby
irrevocably authorized to requisition from time to time from such Transfer Agent
the stock certificates required to honor outstanding Warrants upon exercise
thereof in accordance with the terms of this Agreement. The Company will supply
such Transfer Agent with duly executed certificates for such purposes and will
provide or otherwise make available any cash which may be payable as provided in
Section 10. The Company will furnish such Transfer Agent a copy of all notices
of adjustments and certificates related thereto, transmitted to each holder
pursuant to Section 11 hereof.
6.3. Before taking any action which would cause an adjustment pursuant
to Section 8 hereof to reduce the Exercise Price below the then par value (if
any) of the Warrant Shares, the Company will take any corporate action which
may, in the opinion of its counsel (which may be counsel employed by the
Company), be necessary in order that the Company may validly and legally issue
fully paid and nonassessable Warrant Shares at the Exercise Price as so
adjusted.
6.4. The Company covenants that all Warrant Shares which may be issued
upon exercise of Warrants will, upon issue, be fully paid, nonassessable, free
of preemptive rights and free from all taxes, liens, charges and security
interests with respect to the issue thereof.
Section 7. Obtaining Stock Exchange Listings.
The Company will from time to time take all action which may be
necessary so that the Warrant Shares, immediately upon their issuance upon the
exercise of Warrants, will be listed on the principal securities exchanges and
markets within the United States of America, if any, on which other shares of
Common Stock are then listed.
Section 8. Adjustment of Exercise Price and Number of Warrant Shares
Issuable.
The Exercise Price and the number of Warrant Shares issuable upon the
exercise of each Warrant are subject to adjustment from time to time upon the
occurrence of the events enumerated in this Section 8. For purposes of this
Section 8, "Common Stock" means shares now or hereafter authorized of any class
of common stock of the Company and any other stock of the Company, however
designated, that has the right (subject to any prior rights of any class or
series of preferred stock) to participate in any distribution of the assets or
earnings of the Company without limit as to per share amount.
8.1. Adjustment for Change in Capital Stock.
If the Company:
(i) pays a dividend or makes a distribution on its Common
Stock in shares of its Common Stock;
(ii) subdivides its outstanding shares of Common Stock into a
greater number of shares;
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<PAGE>
(iii) combines its outstanding shares of Common Stock into a
smaller number of shares;
(iv) makes a distribution on its Common Stock in shares of its
capital stock other than Common Stock; or
(v) issues by reclassification or conversion of its Common
Stock any shares of its capital stock,
then the Warrant Number in effect immediately prior to such action shall be
proportionately adjusted so that the holder of any Warrant thereafter exercised
may receive the aggregate number and kind of shares of capital stock of the
Company which he would have owned immediately following such action if such
Warrant had been exercised immediately prior to such action.
The adjustment shall become effective immediately after the record
date in the case of a dividend or distribution and immediately after the
effective date in the case of a subdivision, combination or reclassification.
Such adjustment shall be made successively whenever any event listed
above shall occur.
8.2. Adjustment for Rights Issue.
If the Company distributes any rights, options or warrants to all
holders of its Common Stock entitling them to purchase shares of Common Stock or
securities convertible into, or exchangeable or exercisable for, Common Stock at
a price per share (or with an initial conversion, exchange or exercise price)
less than the Fair Market Value per share on the record date specified below,
the Warrant Number shall be adjusted in accordance with the following formula:
W' = W x O + N
-------------------------
O + N x P
-----
M
where:
W' = the adjusted Warrant Number.
W = the Warrant Number immediately prior to such adjustment.
O = the number of Fully Diluted Shares outstanding on the record date.
N = the number of additional shares of Common Stock offered or otherwise
issuable upon exercise of such rights, options or warrants.
P = the offering price per share of the additional shares offered or
otherwise issuable.
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<PAGE>
M = the Fair Market Value per share of Common Stock on the record date.
The adjustment shall be made successively whenever any such rights,
options or warrants are issued and shall become effective immediately after the
record date for the determination of stockholders entitled to receive the
rights, options or warrants. If at the end of the period during which such
rights, options or warrants are exercisable, not all rights, options or warrants
shall have been exercised, the Warrant Number shall be immediately readjusted to
what it would have been if "N" in the above formula had been the number of
shares actually issued.
8.3. Adjustment for Other Distributions.
If the Company distributes to all or any holders of its Common Stock
(i) evidences of indebtedness of the Company or any of its Subsidiaries, (ii)
any assets (including cash) of the Company or any of its Subsidiaries or (iii)
any rights, options or warrants to acquire any of the foregoing, the Warrant
Number shall be adjusted in accordance with the following formula:
W' = W x M
-------
M - F
where:
W' = the adjusted Warrant Number.
W = the Warrant Number immediately prior to the record date or, if
applicable, the date of distribution mentioned above.
M = the Fair Market Value per share of Common Stock on the record date
mentioned below.
F = the fair market value on the record date of the indebtedness, assets,
securities, rights, options or warrants so distributed applicable to
one share of Common Stock. The Board of Directors shall determine the
fair market value in such manner as it deems reasonable under the
circumstances.
The adjustment shall be made successively whenever any such
distribution is made and shall become effective immediately after the record
date for the determination of stockholders entitled to receive the distribution
(or, if no record date is established, on the date of distribution). If an
adjustment shall be made pursuant to this Section 8.3 as a result of the
issuance of rights, options or warrants and at the end of the period during
which such rights, options or warrants are exercisable, not all such rights,
options or warrants shall have been exercised, the Warrant shall be immediately
readjusted as if "F" in the above formula was the fair market value on the
record date of the indebtedness or assets actually distributed upon exercise of
such rights, options or warrants divided by the number of shares of Common Stock
outstanding on the record date.
This Section 8.3 does not apply to cash dividends or distributions
declared by the Board of Directors of the Company, provided that the Company has
provided written notice of any such
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<PAGE>
dividend to the holders of the Warrants at least 20 business days prior to the
record date with respect thereto in accordance with Section 11. In addition,
this Section 8.3 does not apply to the transactions referred to in Section 8.1
or to rights, options or warrants referred to in Section 8.2.
8.4. Adjustment for Certain Common Stock Issues.
If the Company issues shares of Common Stock (other than any issuance
pursuant to a Non-Affiliate Sale) for a consideration per share less than the
Fair Market Value per share of Common Stock on the date the Company fixes the
offering price of such additional shares, the Warrant Number shall be adjusted
in accordance with the formula:
W' = W x A
---------
O + P
-
M
where:
W' = the adjusted Warrant Number.
W = the Warrant Number immediately prior to any such issuance.
O = the number of Fully Diluted Shares outstanding immediately prior to
the issuance of such additional shares.
P = the aggregate consideration received for the issuance of such
additional shares of Common Stock.
M = the Fair Market Value per share on the date of issuance of such
additional shares of Common Stock.
A = the number of Fully Diluted Shares outstanding immediately after the
issuance of such additional shares of Common Stock.
The adjustment shall be made successively whenever any such issuance
is made, and shall become effective immediately after such issuance.
This Section 8.4 does not apply to:
(i) any of the transactions described in Section 8.1 or the
issuance of Common Stock pursuant to any transaction
described in Sections 8.2 or 8.3;
(ii) the issuance of Common Stock in connection with (a) the
exercise of Warrants or (b) the conversion, exercise or
exchange of any options, warrants or other securities
convertible into or exchangeable for Common Stock which
are issued after the date hereof in a transaction
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described in Section 8.5 and in compliance with all other
applicable provisions of this Agreement;
(iii) the issuance of Common Stock pursuant to any option,
warrant or other convertible or exchangeable security
outstanding on the date hereof;
(iv) Common Stock issued in a bona fide public offering
pursuant to a firm commitment underwriting by a nationally
recognized investment banking firm; and
(v) the issuance of Common Stock pursuant to any employee
benefit, compensation or incentive arrangement approved by
a majority of the Board of Directors of the Company,
including a majority of the Disinterested Directors.
8.5. Adjustments for Convertible Securities Issue.
If the Company after the date hereof issues any options, warrants or
other securities convertible into or exchangeable or exercisable for Common
Stock, or securities convertible into or exchangeable or exercisable for Common
Stock (other than securities issued in any Non-Affiliate Sale or in transactions
described in Sections 8.3 or 8.4), for a consideration per share of Common Stock
initially deliverable upon conversion or exchange of such securities (including
the amount of consideration paid to the Company for issuance of each option,
warrant or other security) less than the Fair Market Value per share on the date
of issuance of such securities, the Warrant Number shall be adjusted in
accordance with the formula:
W' = W x O + D
-----
O + P
-
M
where:
W' = the adjusted Warrant Number.
W = the Warrant Number immediately prior to any such issuance.
O = the number of Fully Diluted Shares outstanding immediately prior to
the issuance of such securities.
P = the aggregate consideration received for the issuance of such
securities.
M = the Fair Market Value per share on the date of issuance of such
securities.
D = the maximum number of shares of Common Stock deliverable upon
conversion or in exchange for or upon exercise of such securities at
the initial conversion, exchange or exercise rate.
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<PAGE>
The adjustment shall be made successively whenever any such issuance
is made, and shall become effective immediately after such issuance.
If all of the Common Stock deliverable upon conversion or exchange of
such securities has not been issued when such securities are no longer
outstanding, then the Warrant Number shall promptly be readjusted to the Warrant
Number which would then be in effect had the adjustment upon the issuance of
such securities been made on the basis of the actual number of shares of Common
Stock issued upon conversion or exchange of such securities.
This Section 8.5 does not apply to:
(i) convertible securities issued in a bona fide public
offering pursuant to a firm commitment underwriting by a
nationally recognized investment banking firm;
(ii) the issuance by the Company of options, warrants or other
securities convertible into exchangeable or exercisable
for Common Stock pursuant to any employee benefit,
compensation or incentive arrangement approved by a
majority of the Board of Directors of the Company,
including a majority of the Disinterested Directors; and
(iii) transactions described in Section 8.2.
8.6. Consideration Received.
For purposes of any computation respecting consideration received
pursuant to Sections 8.4 and 8.5, the following shall apply:
(i) in the case of the issuance of shares of Common Stock or
securities convertible into or exchangeable or exercisable
for Common Stock, for cash, the consideration shall be the
gross amount of such cash, provided that in no case shall
any deduction be made for any commissions, discounts or
other costs, fees or expenses incurred by the Company for
any underwriting of the issue or otherwise in connection
with the sale and issuance of such shares;
(ii) in the case of the issuance of Common Stock, or securities
convertible into or exchangeable or exercisable for Common
Stock, for a consideration in whole or in part other than
cash, the consideration other than cash shall be deemed to
be the fair market value thereof as determined in good
faith by the Board of Directors (irrespective of the
accounting treatment thereof), whose determination shall
be conclusive, and described in a board resolution
delivered to the Warrant Agent; and
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<PAGE>
(iii) in the case of the issuance of securities convertible into
or exchangeable or exercisable for shares of Common Stock,
the aggregate consideration received therefor shall be
deemed to be the consideration received by the Company for
the issuance of such securities plus the additional
minimum consideration, if any, to be received by the
Company upon the conversion, exchange or exercise thereof
(the consideration in each case to be determined in the
same manner as provided in clauses (i) and (ii) of this
Section 8.6).
8.7. When De Minimis Adjustment May Be Deferred.
No adjustment in the Warrant Number need be made unless the adjustment
would require an increase or decrease of at least 1% in the Warrant Number. Any
adjustments that are not made shall be carried forward and taken into account in
any subsequent adjustment, provided that no such adjustment shall be deferred
after the date on which the Warrants become exercisable.
All calculations under this Section 8 shall be made to the nearest
1/100th of a share.
8.8. When No Adjustment Required.
If an adjustment is made upon the establishment of a record date for a
distribution subject to Sections 8.1, 8.2 or 8.3 and such distribution is
subsequently canceled, the Warrant Number then in effect shall be readjusted,
effective as of the date when the Board of Directors of the Company determines
to cancel such distribution, to that which would have been in effect if such
record date had not been fixed.
No adjustment need to be made for a change in the par value, or from
par value to no par value, or from no par value to par value, of the Common
Stock.
To the extent the Warrants become convertible into cash, no adjustment
need be made thereafter as to the cash. Interest will not accrue on the cash.
8.9. Notice of Adjustment.
Whenever the Warrant Number is adjusted, the Company shall provide the
notices required by Section 11.
8.10. Voluntary Reduction.
The Company from time to time may, as the Board of Directors deems
appropriate, reduce the Exercise Price by any amount for any period of time if
the period is at least 20 days and if the reduction is irrevocable during the
period; provided, however, that in no event may the Exercise Price be less than
the par value of a share of Common Stock.
Whenever the Exercise Price is reduced, the Company shall mail to
Warrant holders a notice of the reduction. The Company shall mail the notice at
least 15 days before the date the reduced
24
<PAGE>
Exercise Price takes effect. The notice shall state the reduced Exercise Price
and the period it will be in effect.
A reduction in the Exercise Price does not change or adjust the
Warrant Number otherwise in effect for purposes of Sections 8.1, 8.2, 8.3, 8.4
and 8.5.
8.11. Reorganization of the Company.
In case of any capital reorganization or the consolidation or merger
of the Company with or into another corporation (other than a merger or
consolidation in which the Company is the continuing corporation and which does
not result in any reclassification of the outstanding shares of Common Stock
into shares of other stock or other securities, cash or property), or the sale
of the assets and property of the Company as an entirety or substantially as an
entirety (collectively, such actions being hereinafter referred to as
"Reorganizations"), there shall thereafter be deliverable upon exercise of any
Warrant (in lieu of the number of shares of Common Stock theretofore
deliverable) the number of shares of stock or other securities or property to
which a holder of the number of shares of Common Stock that would otherwise have
been deliverable upon the exercise of such Warrant would have been entitled upon
such Reorganization if such Warrant had been exercised in full immediately prior
to such Reorganization. In case of any Reorganization, appropriate adjustment,
as determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a board resolution delivered to the Warrant
Agent, shall be made in the application of the provisions herein set forth with
respect to the rights and interests of holders of Warrants so that the
provisions set forth herein shall thereafter be applicable, as nearly as
possible, in relation to any shares or other property thereafter deliverable
upon exercise of Warrants.
The Company shall not effect any such Reorganization unless prior to
or simultaneously with the consummation thereof the successor corporation (if
other than the Company) resulting from such Reorganization or the corporation
purchasing such assets or other appropriate corporation or entity shall
expressly assume, by a supplemental Warrant Agreement executed and delivered to
the Warrant Agent (and a notice of which shall be delivered to the holders of
the Warrants) the obligation to deliver to each such holder such shares of
stock, securities, cash or assets as, in accordance with the foregoing
provisions, such holder may be entitled to purchase, and all other obligations
and liabilities under this Agreement. If this Section 8.11 applies, Sections
8.1, 8.2, 8.3, 8.4 and 8.5 hereof do not apply.
8.12. Warrant Agent's Disclaimer.
The Warrant Agent has no duty to determine when an adjustment under
this Section 8 should be made, how it should be made or what it should be. The
Warrant Agent has no duty to determine whether any provisions of a supplemental
Warrant Agreement under Section 8.11 are correct. The Warrant Agent makes no
representation as to the validity or value of any securities or assets issued
upon exercise of Warrants. The Warrant Agent shall not be responsible for the
Company's failure to comply with this Section 8.
8.13. When Issuance or Payment May Be Deferred.
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In any case in which this Section 8 shall require that an adjustment
in the Warrant Number be made effective as of a record date for a specified
event, the Company may elect to defer until the occurrence of such event (i)
issuing to the holder of any Warrant exercised after such record date the
Warrant Shares and other capital stock of the Company, if any, issuable upon
such exercise over and above the Warrant Shares and other capital stock of the
Company, if any, issuable prior to such record date upon such exercise on the
basis of the Exercise Price and (ii) paying to such holder any amount in cash in
lieu of a fractional share pursuant to Section 10; provided, however, that the
Company shall deliver to such holder a due bill or other appropriate instrument
evidencing such holder's right to receive such additional Warrant Shares, other
capital stock and cash upon the occurrence of the event requiring such
adjustment.
8.14. Adjustment in Exercise Price.
Upon each adjustment of the Warrant Number pursuant to this Section 8,
the Exercise Price applicable to each Warrant outstanding prior to the making of
the adjustment in the Warrant Number shall thereafter be adjusted to reflect an
adjusted Exercise Price (calculated to the nearest hundredth) obtained from the
following formula:
E' = E x W
---
W'
where:
E' = the adjusted Exercise Price for each Warrant following the adjustment
of the Warrant Number.
E = the Exercise Price prior to adjustment.
W' = the adjusted Warrant Number.
W = the Warrant Number prior to adjustment.
provided that in no event shall the Exercise Price be less than the par value of
each share of capital stock deliverable upon the exercise of the Warrant for one
Warrant Share.
8.15. Form of Warrants.
Upon each adjustment of the Exercise Price or the number or kind of
shares purchasable upon the exercise of the Warrants, each Warrant outstanding
immediately prior to the making of such adjustment shall thereafter evidence the
right to purchase the number and kind of shares then purchasable upon the
exercise of the Warrants, after giving effect to such adjustment, at the
adjusted Exercise Price. The Company may elect on or after any adjustment of the
Exercise Price or the number or kind of shares purchasable upon the exercise of
the Warrants to cause to be distributed to registered holders of Warrant
Certificates either Warrant Certificates representing the additional Warrants
issuable pursuant to the adjustment, or substitute Warrant Certificates to
replace all outstanding Warrant Certificates.
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Section 9. No Dilution or Impairment.
9.1. If any event shall occur as to which the provisions of Section 8
are not strictly applicable but the failure to make any adjustment would
adversely affect the purchase rights represented by the Warrants in accordance
with the essential intent and principles of such Section, then, in each such
case, the Company shall appoint an Independent Financial Expert, which shall
give its opinion upon the adjustment, if any, on a basis consistent with the
essential intent and principles established in Section 8, necessary to preserve,
without dilution, the purchase rights, represented by the Warrants. Upon receipt
of such opinion, the Company will promptly file a copy thereof with the Warrant
Agent, mail a copy thereof to the holders of the Warrants and make the
adjustments described therein.
9.2. The Company will not, by amendment of its articles of
incorporation or through any consolidation, merger, reorganization, transfer of
assets, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms of the
Warrants, but will at all times in good faith assist in the carrying out of all
such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the holder of the Warrants against
dilution or other impairment. Without limiting the generality of the foregoing,
the Company (1) will take all such action as may be necessary or appropriate in
order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock on the exercise of the Warrants from time
to time outstanding and (2) will not take any action which results in any
adjustment of the Exercise Price or the Warrant Number if the total number of
Warrant Shares issuable after the action upon the exercise of all of the
Warrants would exceed the total number of shares of Common Stock then authorized
by the Company's articles of incorporation and available for the purposes of
issue upon such exercise.
Section 10. Fractional Interests. The Company shall not be required to
issue fractional Warrant Shares on the exercise of Warrants. If more than one
Warrant shall be presented for exercise in full at the same time by the same
holder, the number of full Warrant Shares which shall be issuable upon the
exercise thereof shall be computed on the basis of the aggregate number of
Warrant Shares purchasable on exercise of the Warrants so presented. If any
fraction of a Warrant Share would, except for the provisions of this Section 10,
be issuable on the exercise of any Warrants (or specified portion thereof), the
Company shall pay an amount in cash equal to the same fraction of the Fair
Market Value (as determined by the Company) of one Warrant Share on the day
immediately preceding the date the Warrant is presented for exercise, multiplied
by such fraction.
Section 11. Notice to Warrant Holders. Upon any adjustment of the
Warrant Number pursuant to Section 8, the Company shall within 15 days
thereafter: (i) cause to be filed with the Warrant Agent a certificate of a firm
of independent public accountants of recognized standing selected by the Board
of Directors of the Company (who may be the regular auditors of the Company)
setting forth the Warrant Number and Exercise Price after giving effect to such
adjustment and setting forth in reasonable detail the method of calculation and
the facts upon which such calculations are based, which certificate shall be
conclusive evidence of the correctness of the matters set forth therein; and
(ii) cause to be given to each of the registered holders of the Warrant
Certificates at such registered holder's address appearing on the Warrant
register written notice of such adjustments by first-class mail, postage
prepaid. Where
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<PAGE>
appropriate, such notice may be given in advance and included as a part of the
notice required to be mailed under the other provisions of this Section 11.
In case:
(a) The Company shall authorize the issuance to all holders of shares
of Common Stock of Common Stock or rights, options or warrants to subscribe for
or purchase shares of Common Stock or of any other subscription rights or
warrants; or
(b) The Company shall authorize the distribution to all holders of
shares of Common Stock of assets including, without limitation, cash dividends
or distributions, evidences of its indebtedness or other securities; or
(c) of any consolidation or merger to which the Company is a party and
for which approval of any stockholders of the Company is required, or of the
conveyance or transfer of the properties and assets of the Company substantially
as an entirety, or of any reclassification or change of Common Stock issuable
upon exercise of the Warrants (other than a change in par value, or from par
value to no par value, or from no par value to par value, or as a result of a
subdivision or combination), or a tender offer or exchange offer for shares of
Common Stock; or
(d) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company; or
(e) The Company proposes to take any other action which would require
an adjustment of the Warrant Number or Exercise Price pursuant to Section 8;
then the Company shall cause to be filed with the Warrant Agent and shall cause
to be given to each of the registered holders of the Warrant certificates at its
address appearing on the Warrant register, at least 20 business days prior to
the applicable record date, or promptly in the case of events for which there is
no record date, by first-class mail, postage prepaid, a written notice stating
(i) the date as of which the holders of record of shares of Common Stock to be
entitled to receive any such dividends, rights, options, warrants or
distributions are to be determined, or (ii) the initial expiration date set
forth in any tender offer or exchange offer for shares of Common Stock, or (iii)
the date on which any such consolidation, merger, conveyance, transfer,
dissolution, liquidation or winding up is expected to become effective or
consummated, and the date as of which it is expected that holders of record of
shares of Common Stock shall be entitled to exchange such shares for securities
or other property, if any, deliverable upon such reclassification,
consolidation, merger, conveyance, transfer, dissolution, liquidation or winding
up. The failure to give the notice required by this Section 11 or any defect
therein shall not affect the legality or validity of any distribution, right,
option, warrant, consolidation, merger, conveyance, transfer, lease,
dissolution, liquidation or winding up, or the vote upon any action.
Nothing contained in this Agreement or in any of the Warrant
Certificates shall be construed as conferring upon the holders thereof the right
to vote or to consent or to receive notice as stockholders in respect of the
meetings of stockholders or the election of Directors of the Company or any
other matter, or any rights whatsoever as stockholders of the Company.
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Section 12. Merger, Consolidation or Change of Name of Warrant Agent.
Any corporation into which the Warrant Agent may be merged or with
which it may be consolidated, or any corporation resulting from any merger or
consolidation to which the Warrant Agent shall be a party, or any corporation
succeeding to the business of the Warrant Agent, shall be the successor to the
Warrant Agent hereunder without the execution or filing of any paper or any
further act on the part of any of the parties hereto, provided that such
corporation would be eligible for appointment as a successor warrant agent under
the provisions of Section 14. In case at the time such successor to the Warrant
Agent shall succeed to the agency created by this Agreement, and in case at that
time any of the Warrant Certificates shall have been countersigned but not
delivered, any such successor to the Warrant Agent may adopt the
countersignature of the original Warrant Agent; and in case at that time any of
the Warrant Certificates shall not have been countersigned, any successor to the
Warrant Agent may countersign such Warrant Certificates either in the name of
the predecessor Warrant Agent or in the name of the successor to the Warrant
Agent; and in all such cases such Warrant Certificates shall have the full force
and effect provided in tile Warrant Certificates and in this Agreement.
In case at any time the name of the Warrant Agent shall be changed and
at such time any of the Warrant Certificates shall have been countersigned but
not delivered, the Warrant Agent whose name has been changed may adopt the
countersignature under its prior name, and in case at that time any of the
Warrant Certificates shall not have been countersigned, the Warrant Agent may
countersign such Warrant Certificates either in its prior name or in its changed
name, and in all such cases such Warrant Certificates shall have the full force
and effect provided in the Warrant Certificates and in this Agreement.
Section 13. Warrant Agent.
The Warrant Agent undertakes the duties and obligations imposed by
this Agreement upon the following terms and conditions, by all of which the
Company and the holders of Warrants, by their acceptance thereof, shall be
bound:
(a) The duties of the Warrant Agent shall be determined by the express
provisions of this Warrant Agreement and no implied covenants or obligations
shall be read into this Warrant Agreement against the Warrant Agent.
(b) The statements contained herein and in the Warrant Certificates
shall be taken as statements of the Company and the Warrant Agent assumes no
responsibility for the correctness of any of the same except such as describe
the Warrant Agent or action taken or to be taken by it. The Warrant Agent
assumes no responsibility with respect to the distribution of the Warrant
Certificates except as herein otherwise provided.
(c) The Warrant Agent shall not be responsible for any failure of the
Company to comply with any of the covenants contained in this Agreement or in
the Warrant Certificates to be compiled with by the Company.
(d) Before the Warrant Agent acts or refrains from acting, the Warrant
Agent may consult at any time with counsel satisfactory to it (who may be
counsel for the Company) and the Warrant
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<PAGE>
Agent shall incur no liability or responsibility, to the Company or to any
holder of any Warrant Certificate in respect of any action taken, suffered or
omitted by it hereunder in good faith and in accordance with the opinion or the
advice of such counsel.
(e) The Warrant Agent shall incur no liability or responsibility to
the Company or to any holder of any Warrant Certificate for any action taken in
reliance on any Warrant Certificate, certificate of shares, notice, resolution,
waiver, consent, order, certificate, or other paper, document or instrument
believed by it to be genuine and to have been signed, sent or presented by the
proper party or parties.
(f) The Company agrees to pay to the Warrant Agent reasonable
compensation for all services rendered by the Warrant Agent in the execution of
this Agreement, to reimburse the Warrant Agent for all expenses, taxes and
governmental charges and other charges of any kind and nature incurred by the
Warrant Agent in the execution of this Agreement and to indemnify the Warrant
Agent and save it harmless against any and all liabilities, including judgments,
costs and counsel fees, for anything done or omitted by the Warrant Agent in the
execution of this Agreement except as a result of its negligence, bad faith or
willful misconduct.
(g) The Company shall indemnify the Warrant Agent against any and all
losses, liabilities or expenses incurred by it arising out of or in connection
with the acceptance or administration of its duties under this Warrant
Agreement, including the costs and expenses of enforcing this Warrant Agreement
against the Company (including this Section 13(g)) and defending itself or
investigating against any claim (whether asserted by the Company or any Warrant
holder or any other person) or liability in connection with the exercise or
performance of any of its powers or duties hereunder, except to the extent any
such loss, liability or expense may be attributable to its negligence, bad faith
or willful misconduct. The Warrant Agent shall notify the Company promptly of
any claim for which it may seek indemnity. Failure by the Warrant Agent to so
notify the Company shall not relieve the Company of its obligations hereunder.
The Company shall defend the claim and the Warrant Agent shall cooperate in the
defense. The Warrant Agent may have separate counsel and the Company shall pay
for reasonable fees and expenses of such counsel. The Company need not pay for
any settlement made without its consent. All rights of action under this
Agreement or under any of the Warrants may be enforced by the Warrant Agent
without the possession of any of the Warrant Certificates or the production
thereof at any trial or other proceeding relative thereto, and any such action,
suit or proceeding instituted by the Warrant Agent shall be brought in its name
as Warrant Agent and any recovery of judgment shall be for the ratable benefit
of the registered holders of the Warrants, as their respective rights or
interests may appear.
(h) The Warrant Agent, and any stockholder, director, officer or
employee of it, may buy, sell or deal in any of the Warrants or other securities
of the Company or become pecuniarily interested in any transaction in which the
Company may be interested, or contract with or lend money to the Company or
otherwise act as fully and freely as though it were not Warrant Agent under this
Agreement. Nothing herein shall preclude the Warrant Agent from acting in any
other capacity for the Company or for any other legal entity.
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(i) The Warrant Agent shall act hereunder solely as agent for the
Company, and its duties shall be determined solely by the provisions hereof. The
Warrant Agent shall not be liable for anything which it may do or refrain from
doing in connection with this Agreement except for its own negligence or bad
faith.
(j) The Warrant Agent shall not at any time be under any duty or
responsibility to any holder of any Warrant to make or cause to be made any
adjustment of the Exercise Price or number of the Warrant Shares or other
securities or property deliverable as provided in this Agreement, or to
determine whether any facts exist which may require any of such adjustments, or
with respect to the nature or extent of any such adjustments, when made, or with
respect to the method employed in making the same. The Warrant Agent shall not
be accountable with respect to the legality, validity or value or the kind or
amount of any Warrant Shares or of any securities or property which may at any
time be issued or delivered upon the exercise of any Warrant or with respect to
whether any such Warrant Shares or other securities will when issued be validly
issued and fully paid and nonassessable, and makes no representation with
respect thereto.
(k) The Warrant Agent shall not be required to take notice or be
deemed to have notice of any fact, event or determination (including, without
limitation, any dates other than the end of the Exercise Period or events
defined in this Agreement or the designation of any Person as an Affiliate),
under this Agreement unless and until the Warrant Agent shall be specifically
notified in writing by the Company or any holder of such fact, event or
determination.
(l) No provision of this Agreement shall require the Warrant Agent to
expand or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of its rights if
there shall be reasonable grounds for believing that repayment of such funds or
adequate indemnification against such risk or liability is not reasonably
assured to it.
(m) The Warrant Agent may act through its attorneys or agents and
shall not be responsible for the willful misconduct or negligence of any agent
appointed with due care.
Section 14. Change of Warrant Agent.
If the Warrant Agent shall become incapable of acting as Warrant
Agent, the Company shall appoint a successor to such Warrant Agent. If the
Company shall fail to make such appointment within a period of 30 days after it
has been notified in writing of such incapacity by the Warrant Agent or by the
registered holder of a Warrant, then the registered holder of any Warrant may
apply to any court of competent jurisdiction for the appointment of a successor
to the Warrant Agent. Pending appointment of a successor to such Warrant Agent,
either by the Company or by such a court, the duties of the Warrant Agent shall
be carried out by the Company. After appointment the successor to the Warrant
Agent shall be vested with the same powers, rights, duties and responsibilities
as if it had been originally named as Warrant Agent without further act or deed;
but the former Warrant Agent shall deliver and transfer to the successor to the
Warrant Agent any property at the time held by it hereunder and execute and
deliver any further assurance, conveyance, act or deed necessary for the
purpose. Failure to give any notice provided for in this Section 14, however, or
any defect therein, shall not affect the legality or validity of the
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appointment of a successor to the Warrant Agent. The Warrant Agent shall at all
times be an institution that meets the eligibility requirements for a trustee
under the Indenture.
Section 15. Registration.
Holders shall be able to exercise their Warrants only if a
registration statement relating to the Warrant Shares is then in effect, or the
exercise of such Warrants is exempt from the registration requirements of the
Securities Act, and such securities are qualified for sale or exempt from
qualification under the applicable securities laws of the states in which the
various holders of the Warrants or other persons to whom it is proposed that the
Warrant Shares be issued on exercise of the Warrants reside.
Section 16. Reports.
(a) Whether or not required by the rules and regulations of the
Securities and Exchange Commission (the "Commission"), so long as any Warrants
are outstanding, the Company shall furnish to the Warrant Agent and the holders
of Warrants (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 a "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and,
with respect to the annual information only, a report thereon by the Company's
certified independent accountants 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. In addition, whether or not required by the rules
and regulations of the Commission, the Company shall file a copy of all such
information and reports the Commission for public availability (unless the
Commission shall not accept such a filing) and make such information available
to securities analysts and prospective investors upon request.
(b) The Company shall provide the Warrant Agent with a sufficient
number of copies of all such reports that the Warrant Agent may be required to
deliver to the holders of the Warrants under this Section 16.
Section 17. Notices to the Company and Warrant Agent.
Any notice or demand authorized by this Agreement to be given or made
by the Warrant Agent or by the registered holder of any Warrant to or on the
Company shall be sufficiently given or made when and if deposited in the mail,
first class or registered, postage prepaid, addressed (until another address is
filed in writing by the Company with the Warrant Agent), as follows:
Globe Holdings, Inc.
456 Bedford Street
Fall River, Massachusetts 02720
Attention: Lawrence R. Walsh
with a copy to:
Kirkland & Ellis
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200 East Randolph Drive
Chicago, Illinois 60601
Attention: Laurie T. Gunther
In case the Company shall fail to maintain such office or agency or
shall fail to give such notice of the location or of any change in the location
thereof, presentations may be made and notices and demands may be served at the
principal office of the Warrant Agent.
Any notice pursuant to this Agreement to be given by the Company or by
the registered holder(s) of any Warrant Certificate to the Warrant Agent shall
be sufficiently given when and if deposited in the mail, first-class or
registered. postage prepaid, addressed (until another address is filed in
writing by the Warrant Agent with the Company) to the Warrant Agent as follows:
Norwest Bank Minnesota, National Association
Norwest Center
Sixth and Marquette
Minneapolis, Minnesota 55479
Attention: Corporate Trust Services
Section 18. Supplements and Amendments.
From time to time, the Company and the Warrant Agent, without consent
of the holders of the Warrants, may amend or supplement the Warrant Agreement
for certain purposes, including curing defects or inconsistencies or making
chances that do not materially adversely affect the rights of any holder. Any
amendment or supplement to the Warrant Agreement that has a material adverse
effect on the interests of the holders of the Warrants requires the written
consent of the holders of a majority of the then outstanding Warrants (excluding
Warrants held by the Company or any of its Affiliates). The consent of each
holder of the Warrants is required for any amendment pursuant to which the
Exercise Price would be increased or the number of Warrant Shares or other
securities or property purchasable upon exercise of Warrants would be decreased
(other than pursuant to adjustments provided for in the Warrant Agreement as
generally described above). Notwithstanding anything in this Agreement to the
contrary, no supplement or amendment that changes the rights and duties of the
Warrant Agent under this Agreement will be effective against the Warrant Agent
without the execution of such supplement or amendment by the Warrant Agent.
Section 19. Successors.
All the covenants and provisions of this Agreement by or for the
benefit of the Company or the Warrant Agent shall bind and inure to the benefit
of their respective successors and assigns hereunder.
Section 20. Termination.
This Agreement shall terminate at 5:00 p.m., New York City time on
August 1, 2009, or on such later date to which the Exercise Period shall have
been extended pursuant to Section 4.1.
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Notwithstanding the foregoing, this Agreement will terminate on any earlier date
if all Warrants have been exercised. The provisions of Section 13, regarding
indemnification, shall survive such termination.
Section 21. Governing Law.
This Agreement and each Warrant Certificate issued hereunder 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 internal laws of said State.
Section 22. Benefits of This Agreement.
Nothing in this Agreement shall be construed to give to any person or
corporation other than the Company, the Warrant Agent and the registered holders
of the Warrant Certificates any legal or equitable right, remedy or claim under
this Agreement; but this Agreement shall be for the sole and exclusive benefit
of the Company, the Warrant Agent and the registered holders of the Warrant
Certificates.
Section 23. Counterparts.
This Agreement may be executed in any number of counterparts and each
of such counterparts shall for all purposes be deemed to be an original, and all
such counterparts shall together constitute but one and the same instrument.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties hereto have caused this Warrant
Agreement to be duly executed, as of the day and year first above written.
GLOBE HOLDINGS, INC.
By: /s/ Thomas A. Rodgers, III
----------------------------------
Name: Thomas A. Rodgers, III
Title: President
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Warrant Agent
By: /s/ Curtis D. Schwegman
----------------------------------
Name: Curtis D. Schwegman
Title: Assistant Vice President
<PAGE>
EXHIBIT A
FORM OF WARRANT
[Face of Warrant Certificate]
THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE
SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN
THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER
MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER OR ANOTHER EXEMPTION UNDER THE
SECURITIES ACT. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE
BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED ONLY (1)(a) TO A PERSON WHO THE SELLER REASONABLY BELIEVES
IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT) PURCHASING FOR ITS OWN ACCOUNT IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A UNDER THE SECURITIES ACT, (b) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED
STATES TO A NON-U.S. PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
904 UNDER THE SECURITIES ACT OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT PROVIDED THAT IN THE CASE OF
A TRANSFER PURSUANT TO CLAUSE (d) SUCH TRANSFER IS EFFECTED BY THE DELIVERY TO
THE TRANSFEREE OF DEFINITIVE SECURITIES REGISTERED IN ITS NAME (OR ITS NOMINEE'S
NAME) IN THE BOOKS MAINTAINED BY THE REGISTRAR, AND IS SUBJECT TO THE RECEIPT BY
THE REGISTRAR (AND THE COMPANY, IF ITS SO REQUESTS) OF A CERTIFICATION OF THE
TRANSFEROR AND AN OPINION OF COUNSEL TO THE EFFECT THAT SUCH TRANSFER IS IN
COMPLIANCE WITH THE SECURITIES ACT, (ii) TO THE COMPANY OR (iii) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND, IN EACH CASE, IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES
OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH
SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE SECURITIES
EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE.
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE WARRANT
AGREEMENT HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE
DEPOSITORY TRUST COMPANY (THE "DEPOSITARY") OR A NOMINEE OF THE DEPOSITARY OR A
SUCCESSOR. THIS SECURITY IS NOT EXCHANGEABLE FOR SECURITIES REGISTERED IN THE
NAME OF A PERSON OTHER THAN THE
A-1
<PAGE>
DEPOSITARY OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
WARRANT AGREEMENT, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF
THIS SECURITY AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY
A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE
DEPOSITARY) MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN
THE WARRANT AGREEMENT.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITARY (55 WATER STREET, NEW YORK, NEW YORK) TO THE COMPANY OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IT IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY (AND ANY PAYMENT IS
MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITARY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF GLOBAL SECURITIES SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO THE DEPOSITARY, ITS SUCCESSORS OR THEIR RESPECTIVE NOMINEES.
INTERESTS OF BENEFICIAL OWNERS IN THE GLOBAL SECURITIES MAY BE TRANSFERRED OR
EXCHANGED FOR CERTIFICATED SECURITIES IN ACCORDANCE WITH THE RULES AND
PROCEDURES OF THE DEPOSITARY AND THE PROVISIONS OF SECTION 3.5(c) OF THE WARRANT
AGREEMENT. IN ADDITION, CERTIFICATED SECURITIES SHALL BE TRANSFERRED TO ALL
BENEFICIAL OWNERS IN EXCHANGE FOR THEIR BENEFICIAL INTERESTS IN GLOBAL
SECURITIES IF (i) THE COMPANY NOTIFIES THE REGISTRAR THAT THE DEPOSITARY IS
UNWILLING OR UNABLE TO CONTINUE AS DEPOSITARY FOR ANY GLOBAL SECURITY AND A
SUCCESSOR DEPOSITARY IS NOT APPOINTED BY THE ISSUER WITHIN 90 DAYS OF SUCH
NOTICE OR (ii) THE COMPANY, AT ITS OPTION, NOTIFIES THE REGISTRAR IN WRITING
THAT IT ELECTS TO CAUSE THE ISSUANCE OF SECURITIES IN DEFINITIVE FORM UNDER THE
WARRANT AGREEMENT.
THE WARRANTS EVIDENCED BY THIS CERTIFICATE ARE INITIALLY ISSUED AS
PART OF AN ISSUANCE OF UNITS (THE "UNITS"), EACH OF WHICH CONSIST OF $1,000
PRINCIPAL AMOUNT AT MATURITY OF 14% SENIOR DISCOUNT NOTES DUE 2009 OF THE
COMPANY AND ONE WARRANT ("WARRANT") INITIALLY ENTITLING THE HOLDER THEREOF TO
PURCHASE 1.4155 SHARES OF CLASS A COMMON STOCK, PAR VALUE $0.01 PER SHARE, OF
THE COMPANY. PRIOR TO THE EARLIEST TO OCCUR OF (I) THE DATE THAT IS SIX MONTHS
FOLLOWING THE INITIAL SALE OF THE UNITS, (II) THE COMMENCEMENT OF AN EXCHANGE
OFFER (AS DEFINED IN THE REGISTRATION RIGHTS AGREEMENT) WITH RESPECT TO THE
NOTES, (III) THE DATE A SHELF REGISTRATION STATEMENT (AS DEFINED IN THE
REGISTRATION RIGHTS AGREEMENT) WITH RESPECT
A-2
<PAGE>
TO THE NOTES IS DECLARED EFFECTIVE, (IV) A CHANGE OF CONTROL (AS DEFINED IN THE
INDENTURE), OR (V) SUCH DATE AS BANCAMERICA ROBERTSON STEPHENS MAY, IN ITS SOLE
DISCRETION, DEEM APPROPRIATE, THE WARRANTS EVIDENCED BY THIS CERTIFICATE MAY NOT
BE TRANSFERRED OR EXCHANGED SEPARATE FROM. BUT MAY BE TRANSFERRED OR EXCHANGED
ONLY TOGETHER WITH, THE NOTES.
A-3
<PAGE>
EXERCISABLE ON OR AFTER THE SEPARATION DATE
No. __________ CUSIP No. _________
__________ Warrants
Warrant Certificate
GLOBE HOLDINGS, INC.
This Warrant Certificate certifies that ______________, or registered
assigns, is the registered holder of Warrants expiring August 1, 2009 (the
"Warrants") to purchase Class A Common Stock, $.01 par value per share ("Common
Stock"), of Globe Holdings, Inc. (the "Company"). Each Warrant entitles the
holder upon exercise to receive from the Company, commencing on the Separation
Date (as defined in the Warrant Agreement) and through and until 5:00 p.m. New
York City Time on August 1, 2009 (or on such later date to which the Exercise
Period shall have been extended pursuant to Section 4.1 of the Warrant
Agreement), 1.4155 fully paid and nonassessable shares of Common Stock as set
forth in the Warrant Agreement, subject to adjustment as set forth in Sections 8
and 9 of the Warrant Agreement, at the initial exercise price (the "Exercise
Price") of $0.01 per share payable in lawful money of the United States of
America upon surrender of this Warrant Certificate and payment of the Exercise
Price at the office or agency of the Warrant Agent, but only subject to the
conditions set forth herein and in the Warrant Agreement referred to on the
reverse hereof. Notwithstanding the foregoing, Warrants may be exercised without
the exchange of funds pursuant to the net exercise provisions of Section 4 of
the Warrant Agreement. The Exercise Price and number of Warrant Shares issuable
upon exercise of the Warrants are subject to adjustment upon the occurrence of
certain events set forth in the Warrant Agreement. No Warrant may be exercised
after 5:00 p.m., New York City Time, on August 1, 2009 (or such later date
provided in Section 4.1 of the Warrant Agreement), and to the extent not
exercised by such time such Warrants shall become void. Reference is hereby made
to the further provisions of this Warrant Certificate set forth on the reverse
hereof and such further provisions shall for all purposes have the same effect
as though fully set forth at this place. This Warrant Certificate shall not be
valid unless countersigned by the Warrant Agent, as such term is used in the
Warrant Agreement. This Warrant Certificate shall be governed and construed in
accordance with the internal laws of the State of New York.
A-4
<PAGE>
IN WITNESS WHEREOF, Globe Holdings, Inc. has caused this Warrant
Certificate to be signed by its duly authorized officers and may cause its
corporate seal to be affixed hereunto or imprinted hereon.
Dated: August 6, 1998
GLOBE HOLDINGS, INC.
By:
----------------------------------
Name:
Title:
By:
----------------------------------
Name:
Title:
Countersigned:
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as Warrant Agent
By:
--------------------------------------
Name:
Title:
A-5
<PAGE>
[Reverse of Warrant Certificate]
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants expiring August 1, 2009 entitling the holder on
exercise to receive shares of Common Stock, and are issued or to be issued
pursuant to a Warrant Agreement dated as of August 6, 1998 (the "Warrant
Agreement") and a Warrant Registration Rights Agreement dated as of August 6,
1998 (the "Warrant Registration Rights Agreement"), both duly executed and
delivered by the Company to Norwest Bank Minnesota, National Association, as
warrant agent (the "Warrant Agent"), which Warrant Agreement and Warrant
Registration Rights Agreement are hereby incorporated by reference in and made a
part of this instrument and are hereby referred to for a description of the
rights, limitation of rights, obligations, duties and immunities thereunder of
the Warrant Agent, the Company and the holders (the words "holders" or "holder"
meaning the registered holders or registered holder) of the Warrants. Copies of
the Warrant Agreement and the Warrant Registration Rights Agreement may be
obtained by the holder hereof upon written request to the Company.
Warrants may be exercised at any time on or after the Separation Date,
and on or before August 1, 2009 (or such later date to which the Exercise Period
shall have been extended pursuant to Section 4.1 of the Warrant Agreement);
provided that holders shall be able to exercise their Warrants only if a
registration statement relating to the Warrant Shares is then in effect, or the
exercise of such Warrants is exempt from the registration requirements of the
Securities Act of 1933, as amended (the "Securities Act"), and such securities
are qualified for sale or exempt from qualification under the applicable
securities laws of the states in which the various holders of the Warrants or
other persons to whom it is proposed that the Warrant Shares be issued on
exercise of the Warrants reside. In order to exercise all or any of the Warrants
represented by this Warrant Certificate, (i) in the case of Definitive Warrants,
the holder must surrender for exercise this Warrant Certificate to the Warrant
Agent at its corporate trust office set forth in Section 17 of the Warrant
Agreement, (ii) in the case of a book-entry interest in a Global Warrant, the
exercising Participant whose name appears on a securities position listing of
the Depositary as the holder of such book-entry interest must comply with the
Depositary's procedures relating to the exercise of such book-entry interest in
such Global Warrant and (iii) in the case of both Global Warrants and Definitive
Warrants, the holder thereof or the Participant, as applicable, must deliver to
the Warrant Agent the form of election to purchase on the reverse hereof duly
filled in and signed, which signature shall be a medallion guaranteed by an
institution which is a member of a Securities Transfer Association recognized
signature guarantee program, and upon payment to the Warrant Agent for the
account of the Company of the Exercise Price, as adjusted as provided in the
Warrant Agreement, for the number of Warrant Shares in respect of which such
Warrants are then exercised. No adjustment shall be made for any dividends on
any Common Stock issuable upon exercise of this Warrant, provided that the
Company complies with the notice provisions set forth in Sections 8.3 and 11 of
the Warrant Agreement.
The Warrant Agreement provides that upon the occurrence of certain
events the number of shares of Common Stock or other securities issuable upon
exercise of the Warrants evidenced hereby may, subject to certain conditions, be
adjusted. If the Warrant Number is adjusted, the Warrant Agreement provides that
the Exercise Price set forth on the face hereof may be adjusted. No fractions of
a share of Common Stock will be issued upon the exercise of any Warrant, but the
Company will pay the cash value thereof determined as provided in the Warrant
Agreement.
A-6
<PAGE>
Warrant Certificates, when surrendered at the office of the Warrant
Agent by the registered holder thereof in person or by legal representative or
attorney duly authorized in writing, may be exchanged, in the manner and subject
to the limitations provided in the Warrant Agreement, but without payment of any
service charge, for another Warrant Certificate or Warrant Certificates of like
tenor evidencing in the aggregate number of Warrants.
Upon due presentation for registration of transfer of this Warrant
Certificate at the office of the Warrant Agent a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of Warrants shall be issued to the transferee(s) in exchange for this Warrant
Certificate, subject to the limitations provided in the Warrant Agreement,
without charge except for any tax or other governmental charge imposed in
connection therewith.
The Company and the Warrant Agent may deem and treat the registered
holder(s) thereof as the absolute owner(s) of this Warrant Certificate
(notwithstanding any notation of ownership or other writing hereon made by
anyone), for the purpose of any exercise hereof, of any distribution to the
holder(s) hereof, and for all other purposes, and neither the Company nor the
Warrant Agent shall be affected by any notice to the contrary. Neither the
Warrants nor this Warrant Certificate entities any holder hereof to any rights
of a stockholder of the Company.
A-7
<PAGE>
Form of Election to Purchase
(To Be Executed Upon Exercise Of Warrant)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to receive __________ shares of Common
Stock and herewith tenders payment for such shares to the order of the Company
in the amount of $________ in accordance with the terms hereof unless the holder
is exercising Warrants pursuant to the net exercise provisions of Section 4 of
the Warrant Agreement in which case the holder shall tender Warrants having a
fair market value (as provided in the Warrant Agreement) equal to the Exercise
Price of the Warrants being exercised by such holder. The undersigned requests
that a certificate for such shares be registered in the name of
______________________________, whose address is ______________________________
and that such shares be delivered to _________________________ whose address is
______________________________. If said number of shares is less than all of the
shares of Common Stock purchasable hereunder, the undersigned requests that a
new Warrant Certificate representing the remaining balance of such shares be
registered in the name of _____________, whose address is ____________________,
and that such Warrant Certificate be delivered to ______________, whose address
is ____________________.
Date: _____________, ____
-----------------------------------------
(Signature)
-----------------------------------------
(Signature Guaranteed)
A-8
<PAGE>
SCHEDULE A
SCHEDULE OF EXCHANGES
OF INTERESTS IN THE GLOBAL WARRANT
The initial number of Warrants evidenced by this Global Warrant shall
be _______________. The following decreases/increases in the number of Warrants
evidenced by this Warrant have been made:
<TABLE>
<CAPTION>
Total Number of
Warrants
Decrease in Increase in Evidenced by
Number of Number of this
Warrants Warrants Global Warrant Notation Made
Date of Evidenced by Evidenced by Following such by or on
Decrease/ this Global this Global Decrease/ Behalf of
Increase Warrant Warrant Increase Warrant Agent
--------- ------------ ------------ --------------- -------------
<S> <C> <C> <C> <C>
- ----------- ------------ ------------ --------------- -------------
- ----------- ------------ ------------ --------------- -------------
- ----------- ------------ ------------ --------------- -------------
- ----------- ------------ ------------ --------------- -------------
- ----------- ------------ ------------ --------------- -------------
- ----------- ------------ ------------ --------------- -------------
- ----------- ------------ ------------ --------------- -------------
- ----------- ------------ ------------ --------------- -------------
- ----------- ------------ ------------ --------------- -------------
- ----------- ------------ ------------ --------------- -------------
- ----------- ------------ ------------ --------------- -------------
- ----------- ------------ ------------ --------------- -------------
- ----------- ------------ ------------ --------------- -------------
- ----------- ------------ ------------ --------------- -------------
- ----------- ------------ ------------ --------------- -------------
- ----------- ------------ ------------ --------------- -------------
</TABLE>
A-9
<PAGE>
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
Globe Holdings, Inc.
456 Bedford Street
Fall River, Massachusetts 02720
Attention: Lawrence R. Walsh
Norwest Bank Minnesota, National Association
Norwest Center
Sixth and Marquette
Minneapolis, Minnesota 55479-0069
Attention: Corporate Trust Services
Re: Warrants to Purchase Shares of Common Stock
-----------------------------------------------------------------
(CUSIP __________)
Reference is hereby made to the Warrant Agreement, dated as of August
6, 1998 (the "Warrant Agreement"), between Globe Holdings, Inc., as issuer (the
"Company"), and Norwest Bank Minnesota, National Association, as Warrant Agent.
Capitalized terms used but not defined herein shall have the meanings given to
them in the Warrant Agreement.
_______________, (the "Transferor") owns and proposes to transfer the
Warrant[s] or interest in such Warrant[s] specified in Annex A hereto, in the
amount of ________________ in such Warrant[s] or interests (the "Transfer"), to
________________ (the "Transferee"), as further specified in Annex A hereto. In
connection with the Transfer, the Transferor hereby certifies that:
[CHECK ALL THAT APPLY]
1. [_] Check if Transferee will take delivery of a beneficial interest in the
144A Global Warrant or a Definitive Warrant Pursuant to Rule 144A. The Transfer
is being effected pursuant to and in accordance with Rule 144A under the United
States Securities Act of 1933, as amended (the "Securities Act"), and,
accordingly, the Transferor hereby further certifies that the beneficial
interest or Definitive Warrant is being transferred to a Person that the
Transferor reasonably believed and believes is purchasing the beneficial
interest or Definitive Warrant for its own account, or for one or more accounts
with respect to which such Person exercises sole investment discretion, and such
Person and each such account is a "qualified institutional buyer" within the
meaning of Rule 144A in a transaction meeting the requirements of Rule 144A and
such Transfer is in compliance with any applicable blue sky securities laws of
any state of the United States. Upon consummation of the proposed Transfer in
accordance with the terms of the Warrant Agreement, the transferred beneficial
interest or Definitive Warrant will be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed
B-1
<PAGE>
on the 144A Global Warrant and/or the Definitive Warrant and in the Warrant
Agreement and the Securities Act.
2. [_] Check if Transferee will take delivery of a beneficial interest in the
Regulation S Global Warrant or a Definitive Warrant pursuant to Regulation S.
The Transfer is being effected pursuant to and in accordance with Rule 903 or
Rule 904 under the Securities Act and, accordingly, the Transferor hereby
further certifies that (i) the Transfer is not being made to a person in the
United States and (x) at the time the buy order was originated the Transferee
was outside the United States or such Transferor and any Person acting on its
behalf reasonably believed and believes that the Transferee was outside the
United States or (y) the transaction was executed in, on or through the
facilities of a designated offshore securities market and neither such
Transferor nor any Person acting on its behalf knows that the transaction was
prearranged with a buyer in the United States, (ii) no directed selling efforts
have been made in contravention of the requirements of Rule 903(a) or Rule
904(a) of Regulation S under the Securities Act and, (iii) the transaction is
not part of a plan or scheme to evade the registration requirements of the
Securities Act and (iv) if the proposed transfer is being made prior to the
expiration of the "restricted period" (as defined in Rule 903 under the
Securities Act), the transfer is not being made to a U.S. Person or for the
account or benefit of a U.S. Person (other than an Initial Purchaser). Upon
consummation of the proposed transfer in accordance with the terms of the
Warrant Agreement, the transferred beneficial interest or Definitive Warrant
will be subject to the restrictions on Transfer enumerated in the Private
Placement Legend printed on the Regulation S Global Warrant and/or the
Definitive Warrant and in the Warrant Agreement and the Securities Act.
3. [_] Check and complete if Transferee will take delivery of a beneficial
interest in the IAI Global Warrant or a Definitive Warrant pursuant to any
provision of the Securities Act other than Rule 144A or Regulation S. The
Transfer is being effected in compliance with the transfer restrictions
applicable to beneficial interests in Restricted Global Warrants and Restricted
Definitive Warrants and pursuant to and in accordance with the Securities Act
and any applicable blue sky securities laws of any state of the United States,
and accordingly the Transferor hereby further certifies that (check one):
(a) [_] such Transfer is being effected pursuant to and in accordance
with Rule 144 under the Securities Act;
or
(b) [_] such Transfer is being effected to the Company or a subsidiary
thereof;
or
(c) [_] such Transfer is being effected pursuant to an effective
registration statement under the Securities Act and in compliance with the
prospectus delivery requirements of the Securities Act;
or
B-2
<PAGE>
(d) [_] such Transfer is being effected to an Institutional Accredited
Investor and pursuant to an exemption from the registration requirements of the
Securities Act other than Rule 144A, Rule 144 or Rule 904, and the Transferor
hereby further certifies that it has not engaged in any general solicitation
within the meaning of Regulation D under the Securities Act and the Transfer
complies with the transfer restrictions applicable to beneficial interests in a
Restricted Global Warrant or Restricted Definitive Warrants and the requirements
of the exemption claimed, which certification is supported by (1) a certificate
executed by the Transferee in the form of Exhibit D to the Warrant Agreement and
(2) an Opinion of Counsel provided by the Transferor or the Transferee (a copy
of which the Transferor has attached to this certification), to the effect that
such Transfer is in compliance with the Securities Act. Upon consummation of the
proposed transfer in accordance with the terms of the Warrant Agreement, the
transferred beneficial interest or Definitive Warrant will be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed on
the IAI Global Warrant and/or the Definitive Warrants and in the Warrant
Agreement and the Securities Act.
4. [_] Check if Transferee will take delivery of a beneficial interest in an
Unrestricted Global Warrant or of an Unrestricted Definitive Warrant.
(a) [_] Check if Transfer is pursuant to Rule 144. (i) The Transfer is
being effected pursuant to and in accordance with Rule 144 under the Securities
Act and in compliance with the transfer restrictions contained in the Warrant
Agreement and any applicable blue sky securities laws of any state of the United
States and (ii) the restrictions on transfer contained in the Warrant Agreement
and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act. Upon consummation of the proposed Transfer
in accordance with the terms of the Warrant Agreement, the transferred
beneficial interest or Definitive Warrant will no longer be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed on
the Restricted Global Warrants, on Restricted Definitive Warrants and in the
Warrant Agreement.
(b) [_] Check if Transfer is Pursuant to Regulation S. (i) The
Transfer is being effected pursuant to and in accordance with Rule 903 or Rule
904 under the Securities Act and in compliance with the transfer restrictions
contained in the Warrant Agreement and any applicable blue sky securities laws
of any state of the United States and (ii) the restrictions on transfer
contained in the Warrant Agreement and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act. Upon
consummation of the proposed Transfer in accordance with the terms of the
Warrant Agreement, the transferred beneficial interest or Definitive Warrant
will no longer be subject to the restrictions on transfer enumerated in the
Private Placement Legend printed on the Restricted Global Warrants, on
Restricted Definitive Warrants and in the Warrant Agreement.
(c) [_] Check if Transfer is Pursuant to Other Exemption. (i) The
Transfer is being effected pursuant to and in compliance with an exemption from
the registration requirements of the Securities Act other than Rule 144, Rule
903 or Rule 904 and in compliance with the transfer restrictions contained in
the Warrant Agreement and any applicable blue sky securities laws of any State
of the United States and (ii) the restrictions on transfer contained in the
Warrant Agreement and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act. Upon consummation of the proposed
Transfer in accordance with the terms of the Warrant Agreement, the
B-3
<PAGE>
transferred beneficial interest or Definitive Warrant will not be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed on
the Restricted Global Warrants or Restricted Definitive Warrants and in the
Warrant Agreement.
B-4
<PAGE>
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
----------------------------------------
[Insert Name of Transferor]
By:
----------------------------------
Name:
Title:
Dated: ________ __, ____
B-5
<PAGE>
ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) [_] a beneficial interest in the:
(i) [_] 144A Global Warrant (CUSIP ____), or
(ii) [_] Regulation S Global Warrant (CUSIP ____), or
(iii) [_] IAI Global Warrant (CUSIP _____); or
(b) [_] a Restricted Definitive Warrant.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) [_] a beneficial interest in the:
(i) [_] 144A Global Warrant (CUSIP _____), or
(ii) [_] Regulation S Global Warrant (CUSIP _____), or
(iii) [_] IAI Global Warrant (CUSIP _____); or
(lv) [_] Unrestricted Global Warrant (CUSIP _____); or
(b) [_] a Restricted Definitive Warrant; or
(c) [_] an Unrestricted Definitive Warrant,
in accordance with the terms of the Warrant Agreement.
B-6
<PAGE>
EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
Globe Holdings, Inc.
456 Bedford Street
Fall River, Massachusetts 02720
Attention: Lawrence R. Walsh
Norwest Bank Minnesota, National Association
Norwest Center
Sixth and Marquette
Minneapolis, Minnesota 55479-0069
Attention: Corporate Trust Services
Re: Warrants to Purchase Shares of Common Stock
-----------------------------------------------------------------
(CUSIP __________)
Reference is hereby made to the Warrant Agreement, dated as of August
6, 1998 (the "Warrant Agreement"), between Globe Holdings, Inc., as issuer (the
"Company"), and Norwest Bank Minnesota, National Association, as Warrant Agent.
Capitalized terms used but not defined herein shall have the meanings given to
them in the Warrant Agreement.
__________, (the "Owner") owns and proposes to exchange the Warrant[s]
or interest in such Warrant[s] specified herein, in the amount of __________ in
such Warrant[s] or interests (the "Exchange"). In connection with the Exchange,
the Owner hereby certifies that:
1. Exchange of Restricted Definitive Warrants or Beneficial Interests in a
Restricted Global Warrant for Unrestricted Definitive Warrants or Beneficial
Interests in an Unrestricted Global Warrant
(a) [_] Check if Exchange is from beneficial interest in a Restricted
Global Warrant to beneficial interest in an Unrestricted Global Warrant. In
connection with the Exchange of the Owner's beneficial interest in a Restricted
Global Warrant for a beneficial interest in an Unrestricted Global Warrant in an
equal amount, the Owner hereby certifies (i) the beneficial interest is being
acquired for the Owner's own account without transfer, (ii) such Exchange has
been effected in compliance with the transfer restrictions applicable to the
Global Warrants and pursuant to and in accordance with the United States
Securities Act of 1933, as amended (the "Securities Act"), (iii) the
restrictions on transfer contained in the Warrant Agreement and the Private
Placement Legend are not required in order to maintain compliance with the
Securities Act and (iv) the beneficial interest in an Unrestricted Global
Warrant is being acquired in compliance with any applicable blue sky securities
laws of any state of the United States.
C-1
<PAGE>
(b) [_] Check if Exchange is from beneficial interest in a Restricted
Global Warrant to Unrestricted Definitive Warrant. In connection with the
Exchange of the Owner's beneficial interest in a Restricted Global Warrant for
an Unrestricted Definitive Warrant, the Owner hereby certifies (i) the
Definitive Warrant is being acquired for the Owner's own account without
transfer, (ii) such Exchange has been effected in compliance with the transfer
restrictions applicable to the Restricted Global Warrants and pursuant to and in
accordance with the Securities Act, (iii) the restrictions on transfer contained
in the Warrant Agreement and the Private Placement Legend are not required In
order to maintain compliance with the Securities Act and (iv) the Definitive
Warrant is being acquired in compliance with any applicable blue sky securities
laws of any state of the United States.
(c) [_] Check if Exchange is from Restricted Definitive Warrant to
Beneficial interest in an Unrestricted Global Warrant. In connection with the
Owner's Exchange of a Restricted Definitive Warrant for a beneficial interest in
an Unrestricted Global Warrant, the Owner hereby certifies (i) the beneficial
interest is being acquired for the Owner's own account without transfer, (ii)
such Exchange has been effected in compliance with the transfer restrictions
applicable to Restricted Definitive Warrants and pursuant to and in accordance
with the Securities Act. (iii) the restrictions on transfer contained in the
Warrant Agreement and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act and (iv) the beneficial interest is
being acquired in compliance with any applicable blue sky securities laws of any
state of the United States.
(d) [_] Check if Exchange is from Restricted Definitive Warrant to
Unrestricted Definitive Warrant. In connection with the Owner's Exchange of a
Restricted Definitive Warrant for an Unrestricted Definitive Warrant, the Owner
hereby certifies (i) the Unrestricted Definitive Warrant is being acquired for
the Owner's own account without transfer, (ii) such Exchange has been effected
in compliance with the transfer restrictions applicable to Restricted Definitive
Warrants and pursuant to and in accordance with the Securities Act, (iii) the
restrictions on transfer contained in the Warrant Agreement and the Private
Placement Legend are not required in order to maintain compliance with the
Securities Act and (iv) the Unrestricted Definitive Warrant is being acquired in
compliance with any applicable blue sky securities laws of any state of the
United States.
2. Exchange of Restricted Definitive Warrants or Beneficial Interests in
Restricted Global Warrants for Restricted Definitive Warrants or Beneficial
Interests in Restricted Global Warrants.
(a) [_] Check if Exchange is from beneficial interest in a Restricted
Global Warrant to Restricted Definitive Warrant. In connection with the Exchange
of the Owner's beneficial interest in a Restricted Global Warrant for a
Restricted Definitive Warrant with an equal amount, the Owner hereby certifies
that the Restricted Definitive Warrant is being acquired for the Owner's own
account without transfer. Upon consummation of the proposed Exchange in
accordance with the terms of the Warrant Agreement, the Restricted Definitive
Warrant issued will continue to be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted Definitive
Warrant and in the Warrant Agreement and the Securities Act.
C-2
<PAGE>
(b) [_] Check if Exchange is from Restricted Definitive Warrant to
beneficial interest in a Restricted Global Warrant. In connection with the
Exchange of the Owner's Restricted Definitive Warrant for a beneficial interest
in the [CHECK ONE][_] 144A Global Warrant, [_] Regulation S Global Warrant, [_]
IAI Global Warrant with an equal amount, the Owner hereby certifies (i) the
beneficial interest is being acquired for the Owner's own account without
transfer and (ii) such Exchange has been effected in compliance with the
transfer restrictions applicable to the Restricted Global Warrants and pursuant
to and in accordance with the Securities Act, and in compliance with any
applicable blue sky securities laws of any state of the United States. Upon
consummation of the proposed Exchange in accordance with the terms of the
Warrant Agreement, the beneficial interest issued will be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed on
the relevant Restricted Global Warrant and in the Warrant Agreement and the
Securities Act.
C-3
<PAGE>
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
-----------------------------------------
[Insert Name of Owner]
By:
----------------------------------
Name:
Title:
Dated: ____________, ____
C-4
<PAGE>
EXHIBIT D
FORM OF CERTIFICATE FROM
ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
Globe Holdings, Inc.
456 Bedford Street
Fall River, Massachusetts 02720
Attention: Lawrence R. Walsh
Norwest Bank Minnesota, National Association
Norwest Center
Sixth and Marquette
Minneapolis, Minnesota 55479-0069
Attention: Corporate Trust Services
Re: Warrants to Purchase Shares of Common Stock
-----------------------------------------------------------------
(CUSIP __________)
Reference is hereby made to the Warrant Agreement, dated as of August
6, 1998 (the "Warrant Agreement"), between Globe Holdings, Inc., as issuer (the
"Company"), and Norwest Bank Minnesota, National Association, as Warrant Agent.
Capitalized terms used but not defined herein shall have the meanings given to
them in the Warrant Agreement.
In connection with our proposed purchase of ______________ amount of:
(a) [_] a beneficial interest in a Global Warrant, or
(b) [_] a Definitive Warrant,
we confirm that:
1. We understand that any subsequent transfer of the Warrants or any
interest therein is subject to certain restrictions and conditions set forth in
the Warrant Agreement and the undersigned agrees to be bound by, and not to
resell, pledge or otherwise transfer the Warrants or any interest therein except
in compliance with, such restrictions and conditions and the United States
Securities Act of 1933, as amended (the "Securities Act").
2. We understand that the offer and sale of the Warrants have not been
registered under the Securities Act, and that the Warrants and any interest
therein may not be offered or sold except as permitted in the following
sentence. We agree, on our own behalf and on behalf of any accounts for which we
are acting as hereinafter stated, that if we should sell the Warrants or any
interest therein, we will do so only (A) to the Company or any subsidiary
thereof, (B) in accordance with Rule 144A under the Securities Act to a
"qualified institutional buyer" (as defined therein), (c) to an institutional
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"accredited investor" (as defined below) that, prior to such transfer, furnishes
(or has furnished on its behalf by a U.S. broker-dealer) to you and to the
Company a signed letter substantially in the form of this letter and an Opinion
of Counsel in form reasonably acceptable to the Company to the effect that such
transfer is in compliance with the Securities Act. (D) outside the United States
in accordance with Rule 904 of Regulation S under the Securities Act, (E)
pursuant to the provisions of Rule 144(k) under the Securities Act (or any
successor provision) or (F) pursuant to an effective registration statement
under the Securities Act, and we further agree to provide to any person
purchasing the Definitive Warrant or beneficial interest in a Global Warrant
from us in a transaction meeting the requirements of clauses (A) through (E) of
this paragraph a notice advising such purchaser that resales thereof are
restricted as stated herein.
3. We understand that, on any proposed resale of the Warrants or
beneficial interest therein, we will be required to furnish to you and the
Company such certifications, legal opinions and other information as you and the
Company may reasonably require to confirm that the proposed sale complies with
the foregoing restrictions. We further understand that the Warrants purchased by
us will bear a legend to the foregoing effect. We further understand that any
subsequent transfer by us of the Warrants or beneficial interest therein
acquired by us must be effected through one of the Initial Purchasers.
4. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of our investment in the Warrants, and we and
any accounts for which we are acting are each able to bear the economic risk of
our or its investment.
5. We are acquiring the Warrants or beneficial interest therein
purchased by us for our own account or for one or more accounts (each of which
is an institutional "accredited investor") as to each of which we exercise sole
investment discretion.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby.
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Exhibit 4.6
EXECUTION COPY
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WARRANT REGISTRATION RIGHTS AGREEMENT
Dated as of August 6, 1998
Among
Globe Holdings, Inc.
and
BancAmerica Robertson Stephens
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<PAGE>
WARRANT REGISTRATION RIGHTS AGREEMENT, dated as of August 6, 1998 (this
"Agreement"), between Globe Holdings, Inc., a Massachusetts corporation (the
"Company"), and BancAmerica Robertson Stephens (the "Initial Purchaser").
Pursuant to the terms of a Purchase Agreement effective as of July 30, 1998
(the "Purchase Agreement"), between the Company and Initial Purchaser, the
Company has agreed to issue and sell to the Initial Purchaser an aggregate of
49,086 warrants (each, a "Warrant") to be issued pursuant to the provisions of a
Warrant Agreement (the "Warrant Agreement"), to be dated as of the date hereof,
between the Company and Norwest Bank Minnesota, National Association (the
"Warrant Agent"), each Warrant initially entitling the holder thereof to
purchase 1.4155 shares of Common Stock (as defined below) of the Company at an
exercise price of $.01 per share, as part of 49,086 units (the "Units"), each
Unit consisting of $1,000 principal amount at maturity of 14% Senior Discount
Notes due 2009 of the Company (each a "Note" and collectively, the "Notes") to
be issued pursuant to the provisions of an Indenture dated as of the date hereof
(the "Indenture") between the Company and Norwest Bank Minnesota, National
Association, and one Warrant. The Note and the Warrant included in each Unit
will become separately transferable at the close of business upon the earliest
to occur of (i) the date that is six months after the Issue Date (as defined
below); (ii) the commencement of an exchange offer with respect to the Notes
undertaken pursuant to the Registration Rights Agreement (as defined below),
(iii) the date a Shelf Registration Statement (as defined in the Registration
Rights Agreement) with respect to the Notes is declared effective, (iv) a Change
of Control (as defined below) and (v) such date as the Initial Purchaser may in
its sole discretion deem appropriate.
In consideration of the foregoing and of the mutual agreements contained
herein and in the Purchase Agreement, the Company and the Warrant Agent hereby
agree as follows:
1. Definitions.
As used in this Agreement, the following capitalized defined terms shall
have the following meanings:
"Auditors" means, at any time, the independent auditors of the Company at
such time.
"Board" means the board of directors of the Company from time to time.
"Comfort Letter" has the meaning specified in Section 3 hereof.
"Commission" means the United States Securities and Exchange Commission.
"Common Shares" means the shares of the Common Stock of the Company.
"Common Stock" means the Class A Common Stock, $0.01 par value, of the
Company.
"Company" has the meaning specified in the preamble to this Agreement.
"Company Shares" has the meaning specified in Section 2 hereof.
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"Cutback Notice" has the meaning specified in Section 2 hereof.
"Expiration Date" means August 1, 2009.
"Holders" means the record holders of the Warrants and the record holders
of Warrant Shares (or other securities) received upon exercise thereof.
"Includible Secondary Shares" has the meaning specified in Section 2
hereof.
"Indenture" has the meaning specified in the preamble to this Agreement.
"Initial Purchaser" has the meaning specified in the preamble to this
Agreement.
"Issue Date" means the date the Warrants are originally issued under the
Warrant Agreement.
"Managing Underwriter" has the meaning specified in Section 2 hereof.
"Notes" has the meaning specified in the recitals to this Agreement.
"Opinion" has the meaning specified in Section 3 hereof.
"Other Shares" has the meaning specified in Section 2 hereof.
"Piggy-back Registration Rights" has the meaning specified in Section 2
hereof.
"Purchase Agreement" has the meaning specified in the preamble to this
Agreement.
"Registration Agreement" means the Registration Agreement dated as of July
31, 1998, as amended from time to time, among the Company and the other
signatories thereto.
"Registration Rights Agreement" means the Registration Rights Agreement
dated the date hereof between the Company and the Initial Purchaser.
"Registration Statement" has the meaning specified in Section 2 hereof.
"Resale Shelf" has the meaning specified in Section 3 hereof.
"Resales Registration Statement" has the meaning specified in Section 9
hereof.
"Securities Act" means the United States Securities Act of 1933, as
amended.
"Units" has the meaning specified in the preamble to this Agreement.
"Warrant" has the meaning specified in the preamble to this Agreement.
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"Warrant Agent" has the meaning specified in the preamble to this
Agreement.
"Warrant Agreement" has the meaning specified in the preamble to this
Agreement.
"Warrant Registration Statement" has the meaning specified in Section 3
hereof.
"Warrant Shares" means the Common Shares issuable upon exercise of the
Warrants, such other securities as shall be issuable upon the exercise of
the Warrants, or the Common Shares or such other securities received upon
the exercise thereof.
2. Piggy-Back Registration Rights.
(a) If the Company proposes to file a Registration Statement with the
Commission respecting an offering of any shares of Common Stock (or other
securities) issuable upon exercise of the Warrants (other than (i) an
offering registered solely on Form S-4 or S-8 or any successor form thereto
and (ii) the initial public offering of shares of Common Stock (or other
securities) issuable upon exercise of the Warrants if no shareholder of the
Company participates therein), the Company shall give prompt written notice
to all the Holders of Warrants or Common Shares or such other securities
received upon exercise thereof at least 30 days prior to the initial filing
of the registration statement relating to such offering (the "Registration
Statement"). Each such Holder shall have the right, within 20 days after
delivery of such notice, to request in writing that the Company include all
or a portion of such of the Warrant Shares in such Registration Statement
("Piggy-back Registration Rights"). The Company shall include in the public
offering all of the Warrant Shares that a Holder has requested be included,
unless the underwriter for the public offering or the underwriter managing
the public offering (in either case, the "Managing Underwriter") delivers a
notice (a "Cutback Notice") pursuant to Section 2(b) or 2(c) hereof. The
Managing Underwriter may deliver one or more Cutback Notices at any time
prior to the execution of the underwriting agreement for the public
offering.
(b) If a proposed public offering (i) includes both securities to be
offered for the account of the Company ("Company Shares") and shares to be
sold by shareholders and (ii) Company Shares have a priority over the
inclusion of any Other Shares (as defined below) in such public offering,
the provisions of this Section 2(b) shall be applicable if the Managing
Underwriter delivers a Cutback Notice stating that, in its opinion, the
number of Common Shares that selling shareholders propose to sell therein,
whether or not such selling shareholders have the right to include shares
therein (the "Other Shares"), plus the number of Warrant Shares that the
Holders have requested to be sold therein, plus the Company Shares, exceeds
the maximum number of shares specified by the Managing Underwriter in such
Cutback Notice which can be sold in an orderly manner in such offering
within a price range acceptable to the Company (or to the holders of Other
Shares initially requesting registration if the offering is being effected
pursuant to a "demand" registration). Such maximum number of shares that
may be so sold, excluding the Company Shares, are referred to as the
"Includible Shares."
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If the Managing Underwriter delivers such Cutback Notice, the Company shall
be entitled to include all of the Company Shares in the public offering and
each requesting Holder shall be entitled to include in the public offering
up to its pro rata portion of the Includible Shares on a pro rata basis
with the holders of any Other Shares that are proposed to be sold in such
public offering.
(c) If a proposed public offering is (i) entirely a secondary
offering or (ii) shares to be sold by selling shareholders in such public
offering have a priority over the inclusion of any Company Shares therein,
the provisions of this Section 2(c) shall be applicable if the Managing
Underwriter delivers a Cutback Notice stating that, in its opinion, the
aggregate number of Warrant Shares and Other Shares proposed to be sold
therein exceeds the maximum number of shares (the "Includible Secondary
Shares") specified by the Managing Underwriter in such Cutback Notice which
can be sold in an orderly manner in such offering within a price range
acceptable to the Company (or to the holders of Other Shares initially
requesting registration if the offering is being effected pursuant to a
"demand" registration). If the Managing Underwriter delivers such Cutback
Notice, each requesting Holder shall be entitled to include in the public
offering up to its pro rata portion of the Includible Secondary Shares on a
pro rata basis with the holders of any Other Shares that are proposed to be
sold in such public offering.
(d) Subject to the foregoing, the underwriting agreement for such
public offering shall provide that each requesting Holder shall have the
right to sell its Warrant Shares to the underwriters and that the
underwriters shall purchase the Warrant Shares at the price paid by the
underwriters for the Common Shares sold by the Company and/or selling
shareholders, as the case may be.
3. Shelf Registration.
(a) If only the Company sells Common Shares in an initial public
offering or all of the Warrant Shares have not been sold in a public
offering, the Company shall, upon the request of one or more Holders of
Warrants, use its best efforts to cause to be filed pursuant to Rule 415
under the Securities Act a shelf registration statement on the appropriate
form (the "Warrant Registration Statement") covering the issuance of the
Warrant Shares upon exercise of the Warrants and shall use its best efforts
to cause the Warrant Registration Statement to become effective under the
Securities Act by the later of (i) 180 days after the closing date of the
initial public offering and (ii) the first anniversary of the Issue Date;
provided, however, that if the Commission shall request that the Company
register the resale of the Warrant Shares instead of the issuance thereof,
the Warrant Registration Statement shall register such resale as opposed to
such issuance. The Company shall use reasonable efforts to keep the Warrant
Registration Statement continuously effective until such time as all
Warrants have been exercised or have expired or in the case the proviso in
the foregoing sentence shall apply, until such time as all Warrant Shares
have been resold. Prior to filing the Warrant Registration Statement or any
amendment thereto, the Company shall provide a copy thereof to the Initial
Purchaser and its counsel and afford them a reasonable time to comment
thereon.
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(b) If the Warrant Registration Statement shall register the sale of
the Warrant Shares (a "Resale Shelf") as provided in Section 3(a)(2) above,
the Company agrees to:
(i) make available for inspection by a representative of the
Holders, any underwriter participating in any disposition pursuant to
such Resale Shelf and attorneys and accountants designated by the
Holders, at reasonable times and in a reasonable manner, financial and
other records, documents and properties of the Company that are
pertinent to the conduct of due diligence customary for an
underwritten offering, and cause the officers, directors and employees
of the Company to supply all information reasonably requested by any
such representative, underwriter, attorney or accountant in connection
with a Resale Shelf; provided, however, that such persons shall first
agree in writing with the Company that any information that is
reasonably and in good faith designated by the Company in writing as
confidential at the time of delivery of such information shall be kept
confidential by such persons, unless and to the extent that disclosure
of such information is required by law or such information becomes
generally available to the public other than as a result of a
disclosure or failure to safeguard such information by such person;
(ii) use its best efforts to cause all Warrant Shares sold under
a Resale Shelf to be listed on any securities exchange or any
automated quotation system on which similar securities issued by the
Company are then listed, to the extent such Warrant Shares satisfy
applicable listing requirements;
(iii) provide a reasonable number of copies of the prospectus
included in such Resale Shelf to Holders that are selling Warrant
Shares pursuant to such Resale Shelf;
(iv) cause to be provided to the Warrant Agent, on behalf of the
Holders and beneficial owners of Warrant Shares, upon the
effectiveness of such Resale Shelf, a customary "10b-5" opinion of
independent counsel (an "Opinion") and a customary "cold comfort"
letter of independent auditors (a "Comfort Letter");
(v) cause to be provided to Holders and beneficial owners of
Warrant Shares an Opinion and Comfort Letter with respect to each Form
10-K and Form 10-Q, including any amendments thereto, that is
incorporated by reference in such Resale Shelf; and
(vi) notify the Warrant Agent, for distribution to the Holders,
(A) when the Resale Shelf has become effective and when any post-
effective amendment thereto has been filed and becomes effective, (B)
of any request by the Commission or any state securities authority for
amendments and supplements to the Resale Shelf or of any material
request by the Commission or any state securities authority for
additional information after the Resale Shelf has become effective,
(C) of the issuance by the Commission or any state securities
authority of any stop order suspending the effectiveness of the Resale
Shelf or the initiation of any proceedings for that purpose, (D) if,
between the effective date of the Resale Shelf and the closing
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of any sale of Warrant Shares covered thereby, the representations and
warranties of the Company contained in any underwriting agreement,
securities sales agreement or other similar agreement, including this
Agreement, relating to disclosure cease to be true and correct in all
material respects or if the Company receives any notification with
respect to the suspension of the qualification of the Warrant Shares
for sale in any jurisdiction or the initiation of any proceeding for
such purpose, (E) of the happening of any event during the period the
Resale Shelf is effective such that such Resale Shelf or the related
prospectus contains an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to
make statements therein not misleading and (F) of any determination by
the Company that a post-effective amendment to a Registration
Statement would be appropriate. The Holders hereby agree to suspend
use of the prospectus contained in a Resale Shelf upon receipt of such
notice under clause (E) or (F) above until the Company has amended or
supplemented such prospectus to correct such misstatement or omission.
4. Suspension.
Notwithstanding the foregoing, during any consecutive 365-day period, the
Company shall have the privilege to suspend availability of the Warrant
Registration Statement and the related prospectus for (a) up to two 30-
consecutive-day periods, except during the 30 days immediately prior to the
Expiration Date, if the Board determines in good faith that there is a valid
purpose for such suspension and provides notice of such determination to the
Holders at their addresses appearing in the register of Warrants maintained by
the Warrant Agent and (b) five additional, non-consecutive three day periods,
except during the 30 day period immediately prior to the Expiration Date, if the
Board determines in good faith that the Company cannot provide adequate
disclosure during such period due to circumstances beyond its control.
5. Blue Sky.
The Company shall use its reasonable best efforts to register or qualify
the Warrant Shares proposed to be sold or issued pursuant to the Registration
Statement or the Warrant Registration Statement under all applicable securities
or "blue sky" laws of all jurisdictions in the United States in which any Holder
of Warrants may or may be deemed to purchase Warrant Shares upon the exercise of
Warrants or resale of the Warrant Shares, as the case may be, and shall use its
reasonable best efforts to maintain such registration or qualification through
the earlier of (A) the date upon which all Warrants have been exercised or all
Warrant Shares have been resold, as the case may be, under the Warrant Shelf
Registration Statement and (B) the Expiration Date; provided, however, that the
Company shall not be required to (i) qualify as a foreign corporation or as a
broker or a dealer in securities in any jurisdiction where it would not
otherwise be required to qualify but for this Section 5, (ii) file any general
consent to service of process or (iii) subject itself to taxation in any
jurisdiction if it is not otherwise so subject.
6. Accuracy of Disclosure.
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The Company (and its successors) represents and warrants to each Holder
(and each beneficial owner of a Warrant or Warrant Share) and agrees for the
benefit of each Holder (and each beneficial owner of a Warrant or Warrant Share)
that, except during any period in which the availability of the Warrant
Registration Statement has been suspended, (i) the Warrant Registration
Statement and the documents incorporated by reference therein will not contain
any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein not misleading; and (ii) the prospectus
delivered to such Holder upon its exercise of Warrants or pursuant to which such
Holder sells its Warrant Shares, as the case may be, and the documents
incorporated by reference therein will not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading; provided, however, that the representations and warranties set forth
in this Section 6 do not apply to statements or omissions made in reliance on
and in conformity with information relating to the Holders furnished to the
Company in writing by or on behalf of the Holders expressly for use in the
Warrant Registration Statement or any such prospectus.
7. Indemnity.
The Company hereby agrees to indemnify each beneficial owner of a Warrant
and each person, if any, who controls any beneficial owner of a Warrant within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Securities Exchange Act of 1934 (the "Exchange Act"), or is under common control
with, or is controlled by, any beneficial owner of a Warrant (whether or not it
is, at the time the indemnity provided for in this Section 7 is sought, such a
beneficial owner), from and against all losses, damages or liabilities which
such beneficial owner or any such controlling or affiliated person suffers as a
result of any breach, on the date of any exercise of a Warrant by such
beneficial owner or the resale of any Warrant Share by such Holder, in either
case pursuant to the Warrant Registration Statement, of the representations,
warranties or agreements contained in Section 6. Each beneficial owner of a
Warrant Share sold pursuant to a Resale Shelf, by accepting its beneficial
ownership of a Warrant, hereby (i) agrees to provide the Company with
information with respect to it that the Company reasonably requests in
connection with any Resale Shelf and (ii) agrees, severally and not jointly, to
indemnify the Company, its directors and officers and each person, if any, who
controls the Company within the meaning of either Section 15 of the Securities
Act or Section 20 of the Exchange Act against any liability incurred by it or
such controlling person as a result of any misstatement of information provided
by such beneficial owner to the Company in writing expressly for inclusion in
the Resale Shelf.
8. Expenses.
All expenses incident to the Company's performance of or compliance with
its obligations under this Agreement will be borne by the Company, regardless of
whether a Registration Statement or Warrant Registration Statement becomes
effective, including without limitation (i) all Commission or National
Association of Securities Dealers, Inc. registration and filing fees, (ii) all
reasonable fees and expenses incurred in connection with compliance with state
securities or "blue sky" laws, (iii) all reasonable expenses of any persons
incurred by or on behalf of the Company in preparing or assisting in preparing,
word processing, printing and distributing any registration statement, any
prospectus, any amendments or supplements thereto and other documents relating
to the performance of and compliance with this Agreement, (iv) the reasonable
fees (including legal
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fees and expenses) and disbursements of the Warrant Agent, (v) the reasonable
fees and disbursements of counsel for the Company and (vi) the fees and
disbursements, if any, of the Auditors, but in each case excluding (x) fees and
disbursements of counsel retained by the participating Holders and (y) the
Holders' share of underwriting discounts and commissions.
9. Resale Shelf Registration Statement.
In the event that the Initial Purchaser or any successor thereto, in its
opinion, becomes an Affiliate (as such term is defined in Rule 144 under the
Securities Act) of the Company, or any successor thereto, the Company (or its
successor) shall use its best efforts to cause to be filed as soon as
practicable after receiving notice thereof from such Initial Purchaser (or its
successor) a shelf registration statement (the "Resales Registration Statement")
under the Securities Act providing for the resale by such Initial Purchaser (or
its successor) of all Warrants and Common Shares it acquires from time to time
and to have such shelf registration statement declared effective by the
Commission. The provisions of this Agreement concerning the Warrant Registration
Statement shall apply to the Resales Registration Statement as if such Resales
Registration Statement were the Warrant Registration Statement (except that the
Company (or its successor) will use its best efforts to keep the Resales
Registration Statement effective until the earlier of (i) the Expiration Date
and (ii) such time as the Initial Purchaser shall, in its opinion, cease to be
an Affiliate of the Company, as evidenced by written notice sent promptly upon
such event). Notwithstanding anything to the contrary herein, the Company shall
not be required to effect a Resales Registration Statement if the Initial
Purchaser shall have ceased to make a market in the Warrants and Common Stock.
10. Miscellaneous.
(a) No Inconsistent Agreements. The Company agrees that it will not
enter into any agreement which is inconsistent with the rights granted to
the Holders of Warrants or Warrant Shares in this Agreement or otherwise
conflicts with the provisions hereof. The Company represents that the
rights granted to the Holders hereunder do not in any way conflict with and
are not inconsistent with the rights granted to the holders of the
Company's other issued and outstanding securities under any agreements
after giving effect to any consents and amendments received on or prior to
the date hereof.
(b) 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 outstanding Warrants affected by
such amendment, modification, supplement, waiver or consent; provided that
any amendment, modification or supplement to this Agreement which, in the
good faith opinion of the Board of Directors of the Company (and evidenced
by a resolution of such board), does not adversely affect any Holder, shall
not be subject to such requirement for written consent.
(c) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, telex, telecopier, or any courier guaranteeing overnight
delivery (i) if to a Holder, at the most
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current address given by such Holder to the Company by means of a notice
given in accordance with the provisions of this Section 10(c); (ii) if to
the Company, initially at the Company's address set forth in the Warrant
Agreement and thereafter at such other address, notice of which is given in
accordance with the provisions of this Section 10(c); and (iii) if to the
Warrant Agent, initially at the Warrant Agent address set forth in the
Warrant Agreement and thereafter at such other address, notice of which is
given in accordance with the provisions of this Section 10(c).
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five
business days after being deposited in the mail, postage prepaid, if
mailed; when answered back, if telexed; when receipt is acknowledged, if
telecopied; and on the next business day if timely delivered to an air
courier guaranteeing overnight delivery.
(d) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors, assigns and transferees of
each of the parties, including, without limitation, subsequent Holders;
provided that nothing herein shall be deemed to permit any assignment,
transfer or other disposition of Warrants in violation of the terms of the
Purchase Agreement or the Warrant Agreement. If any transferee of any
Holder shall acquire Warrants, in any manner, whether by operation of law
or otherwise, such Warrants shall be held subject to all of the terms of
this Agreement and the Warrant Agreement, and by taking and holding such
Warrants such person shall be conclusively deemed to have agreed to be
bound by and to perform all of the terms and provisions of this Agreement
or the Warrant Agreement and such person shall be entitled to receive the
benefits hereof.
(e) Purchases and Sales of Warrants. The Company shall not, and shall
use its best efforts to cause its affiliates (as defined in Rule 405 under
the Securities Act) not to, purchase and then resell or otherwise transfer
any Warrants other than Warrants acquired and canceled.
(f) Third Party Beneficiary. The Holders shall be third party
beneficiaries of the agreements made hereunder between the Company and the
Warrant Agent, and each Holder shall have the right to enforce such
agreements directly to the extent it deems such enforcement necessary or
advisable to protect its rights or the rights of Holders hereunder.
Notwithstanding anything to the contrary contained herein, Section 9 hereof
shall not be amended, modified or supplemented without the prior written
consent of BancAmerica Robertson Stephens and the Company's obligations
under Section 9 will survive the termination of this Agreement and the
performance of all other obligations under this Agreement.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
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(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. This Agreement shall be governed by the laws of
the State of New York.
(j) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any
circumstance, is held invalid, illegal or unenforceable, the validity,
legality and enforceability of any such provision in every other respect
and of the remaining provisions contained herein shall not be affected or
impaired thereby.
(k) Waiver of Immunity. To the extent that the Company has or
hereafter may acquire any immunity from jurisdiction of any court or from
any legal process (whether through service of notice, attachment prior to
judgement, attachment in aid of execution, execution or otherwise) with
respect to itself or its property, it hereby irrevocably waives such
immunity in respect of their obligations under this Agreement to the
fullest extent permitted by law.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
Globe Holdings, Inc.
By /s/ Thomas A. Rodgers, III
------------------------------
Name: Thomas A. Rodgers, III
Title: President
BancAmerica Robertson Stephens
By /s/ Thomas J. McGrath
------------------------------
Name: Thomas J. McGrath
Title: Managing Director
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Globe Holdings, Inc.
Exhibit 12.1 Statement Re: Computation of ratio of earnings to fixed charges
<TABLE>
<CAPTION>
Fiscal Year Ended: December 31, Six Months Ended: June 30,
----------------------------------------------------------- --------------------------
Pro forma Pro forma
1993 1994 1995 1996 1997 1997 1997 1998 1998
---- ---- ---- ---- ---- --------- ---- ---- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fixed Charges:
- --------------
Interest expense 2,256 3,646 6,027 5,347 4,067 23,576 2,145 1,812 11,534
Interest capitalized 0 1,558 422 0 506 635 176 352 469
Interest portion of rental expense 21 22 18 6 7 7 3 4 4
Net amortization of debt discount
and issuance expense 490 438 297 151 94 5,195 55 41 2,802
------ ------ ------ ------ ------ ------ ------ ------ ------
2,767 5,664 6,764 5,504 4,674 29,413 2,379 2,209 14,809
Earnings:
- ---------
Consolidated pretax income from
continuing operations 14,884 6,706 4,127 13,346 25,232 (111) 14,016 17,678 4,702
Fixed charges per above 2,767 5,664 6,764 5,504 4,674 29,413 2,379 2,209 14,809
Less interest capitalized 0 1,558 422 0 506 635 176 352 469
------ ------ ------ ------ ------ ------ ------ ------ ------
17,651 10,812 10,469 18,850 29,400 28,667 16,219 19,535 19,042
Ratio of earnings to
fixed charges 8.38 1.91 1.55 3.42 6.29 0.97(a) 6.82 8.84 1.29
==================================================================================================================================
</TABLE>
(a) Earnings on a Pro Forma basis for the full year ended December 31, 1997
were inadequate to cover fixed charges by $746.
<PAGE>
Exhibit 21.1
Subsidiaries of Globe Holdings, Inc.:
1. Globe Manufacturing Corp. (Alabama corporation)
<PAGE>
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 reports dated March 24, 1998 (except Note 12, as to which the date is
August 6, 1998) in the Registration Statement (Form S-4 No. 333-00000) and
related Prospectus of Globe Holdings, Inc. for the registration of $49,086,000
of its 14% Senior Discount Notes due 2009, Series B.
/s/ Ernst & Young LLP
Providence, Rhode Island
September 28, 1998
<PAGE>
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)
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
(Exact name of trustee as specified in its charter)
A U.S. National Banking Association 41-1592157
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national Identification No.)
bank)
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479
(Address of principal executive offices) (Zip code)
Stanley S. Stroup, General Counsel
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479
(612) 667-1234
(Agent for Service)
-------------------------------
GLOBE HOLDINGS, INC.
(Exact name of obligor as specified in its charter)
Massachusetts 04-2017769
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
456 Bedford Street
Fall River, Massachusetts 02720
(Address of principal executive offices) (Zip code)
-------------------------------
14% Senior Discount Notes due 2009, Series B
(Title of the indenture securities)
================================================================================
<PAGE>
Item 1. General Information. Furnish the following information as to the
trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
Comptroller of the Currency
Treasury Department
Washington, D.C.
Federal Deposit Insurance Corporation
Washington, D.C.
The Board of Governors of the Federal Reserve System
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
Item 2. Affiliations with Obligor. If the obligor is an affiliate of the
trustee, describe each such affiliation.
None with respect to the trustee.
No responses are included for Items 3-14 of this Form T-1 because the obligor is
not in default as provided under Item 13.
Item 15. Foreign Trustee. Not applicable.
Item 16. List of Exhibits. List below all exhibits filed as a part of this
Statement of Eligibility. Norwest Bank incorporates
by reference into this Form T-1 the exhibits
attached hereto.
Exhibit 1. a. A copy of the Articles of Association of the trustee
now in effect.*
Exhibit 2. a. A copy of the certificate of authority of the trustee
to commence business issued June 28, 1872, by the
Comptroller of the Currency to The Northwestern
National Bank of Minneapolis.*
b. A copy of the certificate of the Comptroller of the
Currency dated January 2, 1934, approving the
consolidation of The Northwestern National Bank of
Minneapolis and The Minnesota Loan and Trust Company
of Minneapolis, with the surviving entity being titled
Northwestern National Bank and Trust Company of
Minneapolis.*
c. A copy of the certificate of the Acting Comptroller of
the Currency dated January 12, 1943, as to change of
corporate title of Northwestern National Bank and
Trust Company of Minneapolis to Northwestern National
Bank of Minneapolis.*
<PAGE>
d. A copy of the letter dated May 12, 1983 from the
Regional Counsel, Comptroller of the Currency,
acknowledging receipt of notice of name change
effective May 1, 1983 from Northwestern National Bank
of Minneapolis to Norwest Bank Minneapolis, National
Association.*
e. A copy of the letter dated January 4, 1988 from the
Administrator of National Banks for the Comptroller of
the Currency certifying approval of consolidation and
merger effective January 1, 1988 of Norwest Bank
Minneapolis, National Association with various other
banks under the title of "Norwest Bank Minnesota,
National Association."*
Exhibit 3. A copy of the authorization of the trustee to exercise
corporate trust powers issued January 2, 1934, by the
Federal Reserve Board.*
Exhibit 4. Copy of By-laws of the trustee as now in effect.*
Exhibit 5. Not applicable.
Exhibit 6. The consent of the trustee required by Section 321(b) of
the Act.
Exhibit 7. A copy of the latest report of condition of the trustee
published pursuant to law or the requirements of its
supervising or examining authority.**
Exhibit 8. Not applicable.
Exhibit 9. Not applicable.
* Incorporated by reference to exhibit number 25 filed with
registration statement number 33-66026.
** Incorporated by reference to exhibit number 25 filed with
registration statement number 333-62999.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the
trustee, Norwest Bank Minnesota, National Association, a national banking
association organized and existing under the laws of the United States of
America, has duly caused this statement of eligibility to be signed on its
behalf by the undersigned, thereunto duly authorized, all in the City of
Minneapolis and State of Minnesota on the 22nd day of September 1998.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
/s/ Curtis D. Schwegman
-----------------------
Curtis D. Schwegman
Assistant Vice President
<PAGE>
EXHIBIT 6
September 22, 1998
Securities and Exchange Commission
Washington, D.C. 20549
Gentlemen:
In accordance with Section 321(b) of the Trust Indenture Act of 1939, as
amended, the undersigned hereby consents that reports of examination of the
undersigned made by Federal, State, Territorial, or District authorities
authorized to make such examination may be furnished by such authorities to the
Securities and Exchange Commission upon its request therefor.
Very truly yours,
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
/s/ Curtis D. Schwegman
--------------------------
Curtis D. Schwegman
Assistant Vice President
<PAGE>
LETTER OF TRANSMITTAL
TO TENDER FOR EXCHANGE
14% SENIOR DISCOUNT NOTES DUE 2009
OF
GLOBE HOLDINGS, INC.
PURSUANT TO THE PROSPECTUS DATED , 1998
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 1998, UNLESS EXTENDED.
TO: NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
By Registered or Certified Mail: Overnight Courier:
Norwest Bank Minnesota, National Norwest Bank Minnesota, National
Association Association
P.O. Box 1517 Norwest Center
Minneapolis, Minnesota 55480-1517 6th and Marquette Avenue
Attention: Corporate Trust Services Minneapolis, Minnesota 55479-0113
Attention: Corporate Trust Services
By Hand: Facsimile Transmission:
Norwest Bank Minnesota, National (For Eligible Institutions Only)
Association (612) 667-4927
NorthStar East, 12th Floor Confirm by Telephone:
608 Second Avenue South, North Star (612) 667-9764
East
Minneapolis, Minnesota 55479-0113
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF THIS LETTER OF TRANSMITTAL 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.
The undersigned acknowledges receipt of the Prospectus, dated
, 1998 (the "Prospectus") of Globe Holdings, Inc. (the "Company") and this
Letter of Transmittal (the "Letter of Transmittal"), which together describe
the Company's offer (the "Exchange Offer") to exchange $1,000 principal amount
at maturity of its 14% Senior Discount Notes due 2009, Series B (the "Exchange
Notes"), which have been registered under the Securities Act of 1933, as
amended (the "Securities Act"), pursuant to a Registration Statement, for each
$1,000 principal amount at maturity of its outstanding 14% Senior Discount
Notes due 2009 (the "Notes"), of which $49,086,000 principal amount at
maturity is outstanding. The term "Expiration Date" shall mean 5:00 p.m., New
York City time, on , 1998, unless the Company, in its sole
discretion, extends the Exchange Offer, in which case the term shall mean the
latest date and time to which the Exchange Offer is extended. The term
"Holder" with respect to the Exchange Offer means any person in whose name
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.
Capitalized terms used but not defined herein have the respective meanings set
forth in the Prospectus.
This Letter of Transmittal is to be used by holders of Notes if (i)
certificates representing the Notes are to be physically delivered to the
Exchange Agent herewith, (ii) tender of the Notes is to be made by book-entry
transfer to the Exchange Agent's account at The Depository Trust Company (the
"Book-Entry Transfer Facility") pursuant to the procedures set forth in the
Prospectus under the caption "The Exchange Offer--Procedures for Tendering" by
any financial institution that is a participant in the Book-Entry Transfer
Facility and whose name appears on a security position listing as the owner of
Notes
<PAGE>
to the extent provided herein or (iii) tender of the Notes is to be made
according to the guaranteed delivery procedures described in the Prospectus
under the caption "The Exchange Offer--Guaranteed Delivery Procedures." See
Instruction 2. Delivery of documents to the Book-Entry Transfer Facility does
not constitute delivery to the Exchange Agent.
Notwithstanding the foregoing, valid acceptance of the terms of the Exchange
Offer may be effected by a participant in the Book-Entry Transfer Facility
tendering Notes through the Book-Entry Transfer Facility's Automated Tender
Offer Program ("ATOP") where the Exchange Agent receives an Agent's Message
prior to the Expiration Date. Accordingly, such participant must
electronically transmit its acceptance to the Book-Entry Transfer Facility
through ATOP, and then the Book-Entry Transfer Facility will edit and verify
the acceptance, execute a book-entry delivery to the Exchange Agent's account
at the Book-Entry Transfer Facility and send an Agent's Message to the
Exchange Agent for its acceptance. By tendering through ATOP, participants in
the Book-Entry Transfer Facility will expressly acknowledge receipt of this
Letter of Transmittal and agree to be bound by its terms and the Company will
be able to enforce such agreement against such Book-Entry Transfer Facility
participants.
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. Holders who wish to tender their Notes must
complete this letter in its entirety.
[_]CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution: _____________________________________________
Account Number: ____________________________________________________________
Transaction Code Number: ___________________________________________________
Principal Amount of Tendered Notes: ________________________________________
If Holders desire to tender Notes pursuant to the Exchange Offer and (i)
time will not permit this Letter of Transmittal, certificates representing
Notes, an Agent's Message or other required documents to reach the Exchange
Agent prior to the Expiration Date, or (ii) the procedures for book-entry
transfer cannot be completed prior to the Expiration Date, such Holders may
effect a tender of such Notes in accordance with the guaranteed delivery
procedures set forth in the Prospectus under the caption "The Exchange Offer--
Guaranteed Delivery Procedures." See Instruction 2 below.
[_]CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY DELIVERED TO THE EXCHANGE AGENT AND COMPLETE THE
FOLLOWING (SEE INSTRUCTION 2):
Name of Registered or Acting Holder(s): ____________________________________
Window Ticket No. (if any): ________________________________________________
Date of Execution of Notice of Guaranteed Delivery: ________________________
Name of Eligible Institution
that Guaranteed Delivery: __________________________________________________
If Delivered by Book-Entry Transfer,
the Account Number: ________________________________________________________
Transaction Code Number: ___________________________________________________
[_]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.
2
<PAGE>
PLEASE NOTE: THE COMPANY HAS AGREED THAT, FOR A PERIOD OF 180 DAYS AFTER
THE EXPIRATION DATE, IT WILL MAKE COPIES OF THE PROSPECTUS AVAILABLE TO ANY
PARTICIPATING BROKER-DEALER FOR USE IN CONNECTION WITH RESALES OF THE
EXCHANGE NOTES.
Name: ______________________________________________________________________
Address: ___________________________________________________________________
----------------------------------------------------------------------------
Attention: _________________________________________________________________
List below the Notes to which this Letter of Transmittal relates. If the
space provided below is inadequate, the certificate numbers and principal
amount of Notes should be listed on a separate signed schedule affixed hereto.
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL CAREFULLY BEFORE COMPLETING
BOX 1
DESCRIPTION OF NOTES
<TABLE>
- --------------------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL AMOUNT
AGGREGATE PRINCIPAL AT MATURITY
NAME(S) AND ADDRESS(ES) OF AMOUNT AT MATURITY TENDERED (MUST BE
REGISTERED HOLDER(S) CERTIFICATE REPRESENTED AN INTEGRAL MULTIPLE
(PLEASE FILL IN, IF BLANK) NUMBER(S)* BY CERTIFICATE(S) OF $1,000)**
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Total
- --------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed by Holders tendering by book-entry transfer.
** Unless indicated in the column labeled "Principal Amount at Maturity
Tendered," any tendering Holder of Notes will be deemed to have tendered
the entire aggregate principal amount at maturity represented by the
column labeled "Aggregate Principal Amount at Maturity Represented by
Certificate(s)." If the space provided above is inadequate, list the
certificate numbers and principal amounts at maturity on a separate signed
schedule and affix the list to this Letter of Transmittal.
The minimum permitted tender is $1,000 in principal amount at maturity of
Notes. All other tenders must be in integral multiples of $1,000.
3
<PAGE>
BOX 2 BOX 3
SPECIAL REGISTRATION SPECIAL DELIVERY
INSTRUCTIONS INSTRUCTIONS
(See Instructions 4, 5 and 6) (See Instructions 4, 5 and 6)
To be completed ONLY if To be completed ONLY if
certificates for Notes in a certificates for Notes in a
principal amount at maturity not principal amount at maturity not
tendered, or Exchange Notes issued tendered, or Exchange Notes issued
in exchange for Notes accepted for in exchange for Notes accepted for
exchange, are to be issued in a exchange, are to be sent to an
name other than the name appearing address other than the address
in Box 1 above. appearing in Box 1 above, or if Box
2 is filled in, to an address other
than the address appearing in Box
2.
Issue certificate(s) to:
Name _______________________________
(Please Print) Deliver certificate(s) to:
Address ____________________________ Name _______________________________
------------------------------------ (Please Print)
(Include Zip Code)
------------------------------------ Address ____________________________
(Tax Identification or Social ------------------------------------
Security Number) (Include Zip Code)
------------------------------------
(Tax Identification or Social
Security Number)
BOX 4
BROKER-DEALER STATUS
[_]Check this box if the Beneficial Owner of the Notes is a Participating
Broker-Dealer and such Participating Broker-Dealer acquired the Notes for
its own account as a result of market-making activities or other trading
activities. IF THIS BOX IS CHECKED, A COPY OF THIS LETTER OF TRANSMITTAL
MUST BE RECEIVED WITHIN FIVE BUSINESS DAYS AFTER THE EXPIRATION DATE BY
GLOBE HOLDINGS, INC., ATTENTION LAWRENCE R. WALSH, VIA FACSIMILE (508)
674-3580.
4
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Subject to the terms and conditions of the Exchange Offer, the undersigned
hereby tenders to the Company the principal amount at maturity of Notes
indicated above.
Subject to and effective upon the acceptance for exchange of the principal
amount at maturity of 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 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) with respect to the
tendered Notes with the full power of substitution to (i) present such Notes
and all evidences of transfer and authenticity to, or transfer ownership of,
such Notes on the account books maintained by the Book-Entry Transfer Facility
to, or upon, the order of, the Company, (ii) deliver certificates for such
Notes to the Company and deliver all accompanying evidences of transfer and
authenticity to, or upon the order of, the Company and (iii) present such
Notes for transfer on the books of the Company and receive all benefits and
otherwise exercise all rights of beneficial ownership of such Notes, all in
accordance with the terms of the Exchange Offer.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Notes tendered
hereby and that the Company will acquire good, valid and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances
and not subject to any adverse claims, when the same are acquired by the
Company. The undersigned hereby further represents that any Exchange Notes
acquired in exchange for Notes tendered hereby will have been acquired in the
ordinary course of business of the person receiving such Exchange Notes,
whether or not such person is the undersigned, that neither the undersigned
nor any other such person has any arrangement or understanding with any person
to participate in the distribution of such Exchange Notes and that neither the
undersigned nor any such other person is an "affiliate," as defined in Rule
405 under the Securities Act, of the Company. In addition, the undersigned and
any such person acknowledge that (a) any person participating in the Exchange
Offer for the purpose of distributing the Exchange Notes must, in the absence
of an exemption therefrom, comply with the registration and prospectus
delivery requirements of the Securities Act in connection with a secondary
resale of the Exchange Notes and cannot rely on the position of the staff of
the Securities and Exchange Commission enunciated in no-action letters and (b)
failure to comply with such requirements in such instance could result in the
undersigned or such person incurring liability under the Securities Act for
which the undersigned or such person is not indemnified by the Company. 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 Notes tendered hereby.
If the undersigned is not a broker-dealer, the undersigned represents that it
is not engaged in and does not intend to engage in, a distribution of Exchange
Notes. If the undersigned is a broker-dealer that will receive Exchange Notes
for its own account in exchange for Notes that were acquired as a result of
market-making activities or other trading activities, it acknowledges that it
will deliver a Prospectus in connection with any resale of such Exchange
Notes, however, by so acknowledging and by delivering a Prospectus, the
undersigned will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. Unless otherwise notified in accordance with
the instructions set forth herein in Box 4 under "Broker-Dealer Status," the
Company will assume that the undersigned is not a Participating Broker-Dealer.
For purposes of the Exchange Offer, the Company shall be deemed to have
accepted validly tendered Notes when, as and if the Company has given notice
thereof to the Exchange Agent.
If any Notes tendered herewith are not accepted for exchange pursuant to the
Exchange Offer for any reason, certificates for any such unaccepted Notes will
be returned, without expense, to the undersigned at the address shown below or
to a different address as may be indicated herein in Box 3 under "Special
Delivery Instructions" as promptly as practicable after the Expiration Date.
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
representative, successors and assigns.
5
<PAGE>
The undersigned understands that tenders of 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, subject only to withdrawal of such
tenders on the terms set forth in the Prospectus under the caption "The
Exchange Offer--Withdrawal of Tenders."
Unless otherwise indicated in Box 2 under "Special Registration
Instructions," please issue the certificates representing the Exchange Notes
issued in exchange for the Notes accepted for exchange and any certificates
for Notes not tendered or not exchanged, in the name(s) of the registered
holder of the Notes appearing in Box 1 above. Similarly, unless otherwise
indicated in Box 3 under "Special Delivery Instructions," please send the
certificates, if any, representing the Exchange Notes issued in exchange for
the Notes accepted for exchange and any certificates for Notes not tendered or
not exchanged (and accompanying documents, as appropriate) to the undersigned
at the address shown below in the undersigned's signature(s). In the event
that the box entitled "Special Registration Instructions" and the box entitled
"Special Delivery Instructions" both are completed, please issue the
certificates representing the Exchange Notes issued in exchange for the Notes
accepted for exchange in the name(s) of, and return any certificates for Notes
not tendered or not exchanged to, the person(s) so indicated. The undersigned
understands that the Company has no obligation pursuant to the "Special
Registration Instructions" and "Special Delivery Instructions" to transfer any
Notes from the name of the registered Holder(s) thereof if the Company does
not accept for exchange any of the Notes so tendered.
Holders who wish to tender their Notes and (i) whose Notes are not
immediately available or (ii) who cannot deliver the Notes, an Agent's
Message, this Letter of Transmittal or any other documents required hereby to
the Exchange Agent prior to the Expiration Date, may tender their Notes
according to the guaranteed delivery procedures set forth in the Prospectus
under the caption "The Exchange Offer--Guaranteed Delivery Procedures." See
Instruction 2.
6
<PAGE>
The lines below must be signed by the registered holder(s) exactly as their
name(s) appear(s) on the 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 Notes to
which this Letter of Transmittal relate are held of record by two or more
joint holders, then all such holders must sign this Letter of Transmittal.
SIGNATURES
x
----------------------------------------------------- ----------------------
Date
x
----------------------------------------------------- ----------------------
Date
Area Code and Telephone Number: _____________________
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, then such person must (i) set forth his or her full
title below and (ii) submit evidence satisfactory to the Company of such
person's authority so to act. See Instruction 5.
Name(s): _____________________________________________________________________
(Please Print)
Capacity: ____________________________________________________________________
Address: _____________________________________________________________________
(Include Zip Code)
MEDALLION SIGNATURE GUARANTEE
(If required by Instruction 5)
Certain Signatures must be Guaranteed by an Eligible Institution
Signature(s) Guaranteed by an Eligible Institution: __________________________
(Authorized Signature)
------------------------------------------------------------------------------
(Title)
------------------------------------------------------------------------------
(Name of Firm)
------------------------------------------------------------------------------
(Address, Include Zip Code)
------------------------------------------------------------------------------
(Area Code and Telephone Number)
7
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES FOR NOTES OR
BOOK-ENTRY CONFIRMATIONS. Certificates representing the tendered Notes (or a
confirmation of book-entry transfer of such Notes into the Exchange Agent's
account with the Book-Entry Transfer Facility), as well as a properly
completed and duly executed copy of this Letter of Transmittal (or, in the
case of a book-entry transfer, an Agent's Message), a Substitute Form W-9 and
any other documents required by this Letter of Transmittal must be received by
the Exchange Agent at its address set forth herein prior to the Expiration
Date. The method of delivery of certificates for Notes and all other required
documents is at the election and sole risk of the tendering holder and
delivery will be deemed made only when actually received by the Exchange
Agent. If delivery is by mail, registered mail with return receipt requested,
properly insured, is recommended. As an alternative to delivery by mail, the
holder may wish to use an overnight or hand delivery service. In all cases,
sufficient time should be allowed to assure timely delivery. Neither the
Company nor the Exchange Agent is under an obligation to notify any tendering
holder of the Company's acceptance of tendered Notes prior to the completion
of the Exchange Offer.
2. GUARANTEED DELIVERY PROCEDURES. Holders who wish to tender their Notes
but whose Notes are not immediately available and who cannot deliver their
certificates for Notes (or comply with the procedures for book-entry transfer
prior to the Expiration Date), the Letter of Transmittal and any other
documents required by the Letter of Transmittal to the Exchange Agent prior to
the Expiration Date must tender their Notes according to the guaranteed
delivery procedures set forth below. Pursuant to such procedures:
(i) such tender must be made by or through a firm which is a member 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 (an "Eligible Institution");
(ii) prior to the Expiration Date, the Exchange Agent must have received
from the holder and the Eligible Institution a properly completed and duly
executed Notice of Guaranteed Delivery (by facsimile transmission, mail, or
hand delivery) setting forth the name and address of the holder, the
certificate number or numbers of the tendered Notes, and the principal
amount at maturity of tendered Notes and stating that the tender is being
made thereby and guaranteeing that, within five New York Stock Exchange
trading days after the Expiration Date, the Letter of Transmittal (or
facsimile thereof) (or, in the case of a book-entry transfer, an Agent's
Message), together with the tendered Notes (or a confirmation of book-entry
transfer of such Notes into the Exchange Agent's account with the Book-
Entry Transfer Facility) and any other required documents will be deposited
by the Eligible Institution with the Exchange Agent; and
(iii) the certificates representing the tendered Notes in proper form for
transfer (or a confirmation of book-entry transfer of such Notes into the
Exchange Agent's account with the Book-Entry Transfer Facility), together
with this Letter of Transmittal (or facsimile thereof), properly completed
and duly executed, with any required signature guarantees (or, in the case
of a book-entry transfer, an Agent's Message) and all other documents
required by the Letter of Transmittal must be received by the Exchange
Agent within five New York Stock Exchange trading days after the Expiration
Date.
Failure to complete the guaranteed delivery procedures outlined above will
not, of itself, affect the validity or effect a revocation of any Letter of
Transmittal form properly completed and executed by a Holder who attempted to
use the guaranteed delivery procedure.
3. TENDER BY HOLDER. Only a registered holder of Notes may tender such Notes
in the Exchange Offer. Any beneficial owner of Notes who is not the registered
holder and who wishes to tender should arrange with such Holder to execute and
deliver this Letter of Transmittal on such owner's behalf or must, prior to
completing and executing this Letter of Transmittal and delivering such Notes,
either make appropriate arrangements to register ownership of the Notes in
such owner's name or obtain a properly completed bond power from the
registered holder.
8
<PAGE>
4. PARTIAL TENDERS. Tenders of Notes will be accepted only in integral
multiples of $1,000 in principal amount at maturity. If less than the entire
principal amount at maturity of Notes is tendered, the tendering holder should
fill in the principal amount at maturity tendered in the column labeled
"Principal Amount at Maturity Tendered" of the box entitled "Description of
Notes" (Box 1) above. The entire principal amount at maturity of Notes
delivered to the Exchange Agent will be deemed to have been tendered unless
otherwise indicated. If the entire principal amount at maturity of Notes is
not tendered, Notes for the principal amount at maturity of Notes not tendered
and Exchange Notes exchanged for any Notes tendered will be sent to the holder
at his or her registered address, unless a different address is provided in
the appropriate box on this Letter of Transmittal, as soon as practicable
following the Expiration Date.
5. SIGNATURES ON THE LETTER OF TRANSMITTAL; BOND POWERS AND ENDORSEMENTS;
MEDALLION GUARANTEE OF SIGNATURE. If this Letter of Transmittal is signed by
the registered holder(s) of the Notes tendered herewith, the signatures must
correspond with the name(s) as written on the face of the tendered Notes
without alteration, enlargement, or any change whatsoever.
If any of the tendered Notes are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal. If any tendered
Notes are held in different names on several Notes, it will be necessary to
complete, sign, and submit as many separate copies of the Letter of
Transmittal documents as there are names in which tendered Notes are held.
If this Letter of Transmittal is signed by the registered holder, and
Exchange Notes are to be issued and any untendered or unaccepted principal
amount at maturity of Notes are to be reissued or returned to the registered
holder, then, the registered holder need not and should not endorse any
tendered Notes nor provide a separate bond power. In any other case, the
registered holder must either properly endorse the Notes tendered or transmit
a properly completed separate bond power with this Letter of Transmittal
(executed exactly as the name(s) of the registered holder(s) appear(s) on such
Notes), with the signature(s) on the endorsement or bond power guaranteed by
an Eligible Institution unless such certificates or bond powers are signed by
an Eligible Institution.
If this Letter of Transmittal or any Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations, or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing and evidence satisfactory to the
Company of their authority to so act must be submitted with this Letter of
Transmittal.
No medallion signature guarantee is required if this Letter of Transmittal
is signed by the registered holder(s) of the Notes tendered herewith and the
Exchange Notes (and any Notes not tendered or not accepted) are to be issued
directly to such registered holder(s) and neither the "Special Registration
Instructions" (Box 2) nor the "Special Delivery Instructions" (Box 3) has been
completed. In all other cases, all signatures on this Letter of Transmittal
must be guaranteed by an Eligible Institution.
6. SPECIAL REGISTRATION AND DELIVERY INSTRUCTIONS. Tendering holders should
indicate, in the applicable box, the name and address in which the Exchange
Notes and/or substitute Notes for principal amounts at maturity not tendered
or not accepted for exchange are to be sent, if different from the name and
address or account of the person signing this Letter of Transmittal. In the
case of issuance in a different name, the employer identification number or
social security number of the person named must also be indicated and the
tendering holders should complete the applicable box.
If no such instructions are given, the Exchange Notes (and any Notes not
tendered or not accepted) will be issued in the name of and sent to the
registered holder of the Notes.
7. TRANSFER TAXES. The Company will pay all transfer taxes, if any,
applicable to the sale and transfer of Notes to it or its order pursuant to
the Exchange Offer. If, however, a transfer tax is imposed for any reason
other than the transfer and sale of Notes to the Company or its order pursuant
to the Exchange Offer, then the amount of any such transfer taxes (whether
imposed on the registered holder or on any other person) will be payable by
the tendering holder. If satisfactory evidence of payment of such taxes or
exemption from taxes therefrom is not submitted with this Letter of
Transmittal, the amount of transfer taxes will be billed directly to such
tendering holder.
9
<PAGE>
Except as provided in this Instruction 7, it will not be necessary for
transfer tax stamps to be affixed to the Notes listed in this Letter of
Transmittal.
8. TAX IDENTIFICATION NUMBER. Federal income tax law requires that a holder
of any Notes which are accepted for exchange must provide the Company (as
payor) with its correct taxpayer identification number ("TIN"), which, in the
case of a holder who is an individual, is his or her social security number.
If the Company is not provided with the correct TIN, the Holder may be subject
to a $50 penalty imposed by Internal Revenue Service. (If withholding results
in an over-payment of taxes, a refund may be obtained.) Certain holders
(including, among other, 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" for additional instructions.
To prevent backup withholding, each tendering holder must provide such
holder's correct TIN by completing the Substitute Form W-9 set forth herein,
certifying that the TIN provided is correct (or that such holder is awaiting a
TIN), and that (i) the holder has not been notified by the Internal Revenue
Service that such holder is subject to backup withholding as a result of
failure to report interest or dividends or (ii) the Internal Revenue Service
has notified the holder that such holder is no longer subject to backup
withholding. If the Notes are registered in more than one name or are not in
the name of the actual owner, see the enclosed "Guidelines for Certification
of Taxpayer Identification Number on Substitute Form W-9" for information on
which TIN to report.
The Company reserves the right in its sole discretion to take whatever steps
are necessary to comply with the Company's obligation regarding backup
withholding.
9. VALIDITY OF TENDERS. All questions as to the validity, form, eligibility
(including time of receipt), and acceptance of tendered Notes will be
determined by the Company, in its sole discretion, which determination will be
final and binding. The Company reserves the right to reject any and all Notes
not validly tendered or any Notes, the Company's acceptance of which would, in
the opinion of the Company or its counsel, be unlawful. The Company also
reserves the right to waive any conditions of the Exchange Offer or defects or
irregularities in tenders of Notes as to any ineligibility of any holder who
seeks to tender Notes in the Exchange Offer. The interpretation of the terms
and conditions of the Exchange Offer (including this Letter of Transmittal and
the instructions hereto) by the Company shall be final and binding on all
parties. Unless waived, any defects or irregularities in connection with
tenders of Notes must be cured within such time as the Company shall
determine. The Company will use reasonable efforts to give notification of
defects or irregularities with respect to tenders of Notes, but shall not
incur any liability for failure to give such notification.
10. 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
tendered Notes.
11. NO CONDITIONAL TENDER. No alternative, conditional, irregular, or
contingent tender of Notes will be accepted.
12. MUTILATED, LOST, STOLEN, OR DESTROYED NOTES. Any tendering holder whose
Notes have been mutilated, lost, stolen, or destroyed should contact the
Exchange Agent at the address indicated above for further instruction.
13. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Requests for information
and for additional copies of the Prospectus may be directed to the Exchange
Agent at the address set forth on the first page of this Letter of
Transmittal. Holders may also contact their broker, dealer, commercial bank,
trust company, or other nominee for assistance concerning the Exchange Offer.
14. ACCEPTANCE OF TENDERED NOTES AND ISSUANCE OF EXCHANGE NOTES; RETURN OF
NOTES. Subject to the terms and conditions of the Exchange Offer, the Company
will accept for exchange all validly tendered Notes as soon as practicable
after the Expiration Date and will issue Exchange Notes therefor as soon as
practicable thereafter. For purposes of the Exchange Offer, the Company shall
be deemed to have accepted tendered Notes when, as and if the Company has
given notice thereof to the Exchange Agent. If any tendered Notes are not
exchanged pursuant to the Exchange Offer for any reason, such unexchanged
Notes will be returned, without expense, to the undersigned at the address
shown above or at a different address as may be indicated under "Special
Delivery Instructions."
10
<PAGE>
15. WITHDRAWAL. Tenders may be withdrawn only pursuant to the limited
withdrawal rights set forth in the Prospectus under the caption "The Exchange
Offer--Withdrawal of Tenders."
PAYOR'S NAME: GLOBE MANUFACTURING CORP.
- -------------------------------------------------------------------------------
Part 1--PLEASE PROVIDE Social Security Number
YOUR TAXPAYER or TIN
IDENTIFICATION NUMBER
("TIN") IN THE BOX AT
RIGHT AND CERTIFY BY
SIGNING AND DATING BELOW
SUBSTITUTE / /
FORM W-9 ---------------------------------------------------------
DEPARTMENT OF THE
TREASURY Part 2--Check the box if you are NOT subject to backup
withholding under the provisions of section
3408(a)(1)(C) of the 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 backup withholding. [_]
Part 3--
INTERNAL REVENUE Awaiting
SERVICE TIN ^ [_]
PAYER'S REQUEST ---------------------------------------------------------
FOR
TAXPAYER Name (if joint names, list first and circle the name
IDENTIFICATION of the person or entity whose number you enter in Part
NUMBER ("TIN") I below. See instructions if your name has changed.)
---------------------------------------------------------
---------------------------------------------------------
CERTIFICATION--UNDER THE PENALTIES OF
PERJURY, I CERTIFY THAT THE INFORMATION
PROVIDED ON THIS FORM IS TRUE, CORRECT
AND COMPLETE.
Address
---------------------------------------------------------
City, State and ZIP Code
---------------------------------------------------------
SIGNATURE ___________ DATE ______________
List account number(s) here (optional)
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 ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
11
<PAGE>
NOTICE OF GUARANTEED DELIVERY
WITH RESPECT TO
GLOBE HOLDINGS, INC.
14% SENIOR DISCOUNT NOTES DUE 2009
This form must be used by a holder of 14% Senior Discount Notes due 2009
(the "Notes") of Globe Holdings, Inc. (the "Company"), who wishes to tender
Notes to the Exchange Agent pursuant to the guaranteed delivery procedures
described in the section of the Prospectus entitled "The Exchange Offer--
Guaranteed Delivery Procedures," and in Instruction 2 to the related Letter of
Transmittal. Any holder who wishes to tender Notes pursuant to such guaranteed
delivery procedures must ensure that the Exchange Agent receives this Notice
of Guaranteed Delivery prior to the Expiration Date of the Exchange Offer.
Capitalized terms not defined herein have the meanings ascribed to them in the
Letter of Transmittal.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
1998, UNLESS EXTENDED (THE "EXPIRATION DATE").
TO: NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
(THE "EXCHANGE AGENT")
By Registered or Certified Mail: Overnight Courier:
Norwest Bank Minnesota, National Norwest Bank Minnesota, National
Association Association
P.O. Box 1517 Norwest Center
Minneapolis, Minnesota 55480-1517 6th and Marquette Avenue
Attention: Corporate Trust Services Minneapolis, Minnesota 55479-0113
Attention: Corporate Trust Services
By Hand: Facsimile Transmission:
Norwest Bank Minnesota, National (For Eligible Institutions Only)
Association (612) 667-4927
NorthStar East, 12th Floor Confirm by Telephone:
608 Second Avenue South, North Star (612) 667-9764
East
Minneapolis, Minnesota 55479-0113
DELIVERY OF THIS FORM TO AN ADDRESS, OR TRANSMISSION VIA FACSIMILE, OTHER
THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on the
Letter of Transmittal 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 signature box on the Letter of
Transmittal.
LADIES AND GENTLEMEN:
The undersigned hereby tenders to the Company, upon the terms and subject to
the conditions set forth in the Prospectus and the related Letter of
Transmittal, receipt of which is hereby acknowledged, the principal amount at
maturity of Notes set forth below pursuant to the guaranteed delivery
procedures set forth in the Prospectus and in Instruction 2 of the Letter of
Transmittal.
<PAGE>
The undersigned hereby tenders the Notes listed below:
<TABLE>
<CAPTION>
CERTIFICATE
NUMBER(S)
(IF KNOWN)
OF NOTES OR
ACCOUNT
NUMBER AT
THE BOOK- AGGREGATE PRINCIPAL AGGREGATE PRINCIPAL
ENTRY AMOUNT AT MATURITY AMOUNT AT MATURITY
FACILITY REPRESENTED TENDERED
- -------------------------------------------------------
<S> <C> <C>
- -------------------------------------------------------
- -------------------------------------------------------
</TABLE>
PLEASE SIGN AND COMPLETE
- --------------------------------------------------------------------------------
Signatures of Registered Holder(s) Date: , 1998
or Address: ___________________________
Authorized Signatory: ______________
------------------------------------
------------------------------------ Area Code and Telephone No.: _______
------------------------------------
Name of Registered Holder(s): ______
This Notice of Guaranteed Delivery must be signed by the Holder(s) exactly
as their name(s) appear on certificates for Notes or on a security position
listing as the owner of Notes, or by person(s) authorized to become
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): ________________________________________________________________
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
2
<PAGE>
GUARANTEE
(Not to be used for signature guarantee)
The undersigned, a firm which is a member of a registered national
securities exchange or of the National Association of Securities Dealers,
Inc., or is a commercial bank or trust company having an office or
correspondent in the United States, or is otherwise an "eligible guarantor
institution" within the meaning of Rule 17Ad-15 under the Securities
Exchange Act of 1934, as amended, guarantees that either the Notes tendered
hereby in proper form for transfer (or confirmation of the book-entry
transfer of such Notes into the Exchange Agent's account at Book-Entry
Transfer Facility as described in the Prospectus under the caption "The
Exchange Offer--Guaranteed Delivery Procedures"), together with a properly
completed Letter of Transmittal (or facsimile thereof) (or, in the case of a
book-entry transfer, an Agent's Message) and any other required documents
will be received by the Exchange Agent by 5:00 p.m., New York City time, on
the third New York Stock Exchange trading day following the Expiration Date.
Name of Firm: ______________________ ------------------------------------
Authorized Signature
Address: ___________________________ Name: ______________________________
------------------------------------ Title: _____________________________
Area Code and Telephone No.: _______ Date: , 1998
- --------------------------------------------------------------------------------
DO NOT SEND NOTES WITH THIS FORM. ACTUAL SURRENDER OF NOTES MUST BE MADE
PURSUANT TO, AND BE ACCOMPANIED BY, AN EXECUTED LETTER OF TRANSMITTAL.
3
<PAGE>
INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY
1. Delivery of this Notice of Guaranteed Delivery. A properly completed and
duly executed copy of this Notice of Guaranteed Delivery and any other
documents required by this Notice of Guaranteed Delivery must be received by
the Exchange Agent at its address set forth herein prior to the Expiration
Date. The method of delivery of this Notice of Guaranteed Delivery and any
other required documents to the Exchange Agent is at the election and sole
risk of the holder, and the delivery will be deemed made only when actually
received by the Exchange Agent. If delivery is by mail, registered mail with
return receipt requested, properly insured, is recommended. As an alternative
to delivery by mail, the holders may wish to consider using an overnight or
hand delivery service. In all cases, sufficient time should be allowed to
assure timely delivery. For a description of the guaranteed delivery
procedures, see Instruction 2 of the Letter of Transmittal.
2. Signatures on this Notice of Guaranteed Delivery. If this Notice of
Guaranteed Delivery is signed by the registered holder(s) of the Notes
referred to herein, the signature must correspond with the name(s) written on
the face of the Notes without alteration, enlargement, or any change
whatsoever. If this Notice of Guaranteed Delivery is signed by a participant
of the Book-Entry Transfer Facility whose name appears on a security position
listing as the owner of Notes, the signature must correspond with the name
shown on the security position listing as the owner of the Notes.
If this Notice of Guaranteed Delivery is signed by a person other than the
registered holder(s) of any Notes listed or a participant of the Book-Entry
Transfer Facility, this Notice of Guaranteed Delivery must be accompanied by
appropriate bond powers, signed as the name of the registered holder(s)
appears on the Notes or signed as the name of the participant shown on the
Book-Entry Transfer Facility's security position listing.
If this Notice of Guaranteed Delivery is signed 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 should so
indicate when signing and submit with the Letter of Transmittal evidence
satisfactory to the Company of such person's authority to so act.
3. Requests for Assistance or Additional Copies. Requests for information
and additional copies of the Prospectus may be directed to the Exchange Agent
at the address set forth on the first page of this Notice of Guaranteed
Delivery. Holders may also contact their broker, dealer, commercial bank,
trust company, or other nominee for assistance concerning the Exchange Offer.
4
<PAGE>
INSTRUCTIONS TO REGISTERED HOLDER AND/OR
BOOK-ENTRY TRANSFER FACILITY PARTICIPANT FROM BENEFICIAL OWNER
OF
GLOBE HOLDINGS, INC.
14% SENIOR DISCOUNT NOTES DUE 2009
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
1998, UNLESS EXTENDED (THE "EXPIRATION DATE").
To Registered Holder and/or Participant of the Book-Entry Transfer Facility:
The undersigned hereby acknowledges receipt of the Prospectus, dated
, 1998 (the "Prospectus"), of Globe Holdings, Inc. (the "Company"),
and the accompanying Letter of Transmittal (the "Letter of Transmittal"), that
together constitute the Company's offer (the "Exchange Offer") to exchange
$1,000 principal amount at maturity of its 14% Senior Discount Notes due 2009,
Series B (the "Exchange Notes"), for each $1,000 principal amount at maturity
of its outstanding 14% Senior Discount Notes due 2009 (the "Notes").
Capitalized terms used but not defined herein have the meanings ascribed to
them in the Prospectus.
This will instruct you, the registered holder and/or book-entry transfer
facility participant, as to the action to be taken by you relating to the
Exchange Offer with respect to the Notes held by you for the account of the
undersigned.
The aggregate face amount of the Notes held by you for the account of the
undersigned is (FILL IN AMOUNT):
$ of the 14% Senior Discount Notes due 2009.
With respect to the Exchange Offer, the undersigned hereby instructs you
(CHECK APPROPRIATE BOX):
[_]TO TENDER the following Notes held by you for the account of the
undersigned (INSERT PRINCIPAL AMOUNT AT MATURITY OF NOTES TO BE
TENDERED): $
[_]NOT TO TENDER any Notes held by you for the account of the undersigned.
If the undersigned instructs you to tender the Notes held by you for the
account of the undersigned, it is understood that you are authorized (a) to
make, on behalf of the undersigned (and the undersigned, by its signature
below, hereby makes to you), the representations and warranties contained in
the Letter of Transmittal that are to be made with respect to the undersigned
as a beneficial owner, including but not limited to the representations that
(i) the undersigned's principal residence is in the state of (fill in state)
, (ii) the undersigned is acquiring the Exchange Notes in
the ordinary course of business of the undersigned, (iii) the undersigned is
not participating, does not intend to participate, and has no arrangement or
understanding with any person to participate in the distribution of the
Exchange Notes, (iv) the undersigned acknowledges that any person
participating in the Exchange Offer for the purpose of distributing the
Exchange Notes must comply with the registration and prospectus delivery
requirements of the Securities Act of 1933, as amended (the "Act"), in
connection with a secondary resale transaction of the Exchange Notes acquired
by such person and cannot rely on the position of the staff of the Securities
and Exchange Commission set forth in no-action letters that are discussed in
the section of the Prospectus entitled "The Exchange Offer--Resale of the
Exchange Notes," and (v) the undersigned is not an "affiliate," as defined in
Rule 405 under the Act, of the Company; (b) to agree, on behalf of the
undersigned, as set forth in the Letter of Transmittal; and (c) to take such
other action as necessary under the Prospectus or the Letter of Transmittal to
effect the valid tender of such Notes.
(Continued on back)
<PAGE>
PLEASE NOTE: THE COMPANY HAS AGREED THAT, FOR A PERIOD OF 180 DAYS AFTER THE
EXPIRATION DATE, IT WILL MAKE COPIES OF THE PROSPECTUS AVAILABLE TO ANY
PARTICIPATING BROKER-DEALER FOR USE IN CONNECTION WITH RESALES OF THE EXCHANGE
NOTES.
[_]Check this box if the Beneficial Owner of the Notes is a Participating
Broker-Dealer and such Participating Broker-Dealer acquired the Notes for
its own account as a result of market-making activities or other trading
activities. IF THIS BOX IS CHECKED, A COPY OF THESE INSTRUCTIONS MUST BE
RECEIVED WITHIN FIVE BUSINESS DAYS AFTER THE EXPIRATION DATE BY GLOBE
HOLDINGS, INC., ATTENTION LAWRENCE R. WALSH, VIA FACSIMILE (508) 674-
3580.
SIGN HERE
Name of beneficial owner(s): ________________________________________________
Signature(s): _______________________________________________________________
Name (please print): ________________________________________________________
Address: ____________________________________________________________________
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Telephone number: ___________________________________________________________
Taxpayer Identification or Social Security Number: __________________________
Date: _______________________________________________________________________
-2-
