<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 4, 1999
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
NCI BUILDING SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 3448 76-0127701
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
7301 FAIRVIEW
HOUSTON, TEXAS 77041
(713) 466-7788
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
ROBERT J. MEDLOCK
EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
7301 FAIRVIEW
HOUSTON, TEXAS 77041
(713) 466-7788
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------
WITH A COPY TO:
RANDALL G. RAY, ESQ.
GARDERE & WYNNE, L.L.P.
1601 ELM STREET, SUITE 3000
DALLAS, TEXAS 75201-4761
(214) 999-4544
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
------------------------
If the only 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, 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(b)
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
<TABLE>
<CAPTION>
PROPOSED PROPOSED
TITLE OF EACH CLASS OF AMOUNT TO MAXIMUM OFFERING MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PRICE PER UNIT OFFERING PRICE REGISTRATION FEE(1)
<S> <C> <C> <C> <C>
Senior Subordinated Notes due 2009...... $125,000,000 100% $125,000,000 $ 34,750
</TABLE>
(1) Calculated in accordance with Rule 457(f) under the Securities Act of 1933.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION JUNE 4, 1999
THIS PROSPECTUS IS SUBJECT TO COMPLETION OR AMENDMENT. WE HAVE FILED A
REGISTRATION STATEMENT RELATING TO THESE NOTES WITH THE SEC. THESE NOTES MAY NOT
BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED BEFORE THE TIME THE REGISTRATION
STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY, NOR SHALL THERE BE ANY SALE OF, THESE NOTES IN
ANY JURISDICTION IN WHICH THE OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL
BEFORE REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF THE
JURISDICTION.
<PAGE>
PROSPECTUS
OFFER TO EXCHANGE ALL OUTSTANDING
9 1/4% SERIES A SENIOR SUBORDINATED NOTES DUE 2009
FOR
9 1/4% SERIES B SENIOR SUBORDINATED NOTES DUE 2009
OF
[LOGO]
- --------------------------------------------------------------------------------
We hereby offer, upon the terms and conditions described in this prospectus,
to exchange all of our outstanding 9 1/4% Series A Senior Subordinated Notes due
2009 for our registered 9 1/4% Series B Senior Subordinated Notes due 2009. The
Series A notes were issued on May 5, 1999 and, as of the date of this
prospectus, an aggregate principal amount of $125.0 million is outstanding. The
terms of the Series B notes are identical in all material respects to the terms
of the outstanding Series A notes, except that the Series B notes are registered
under the Securities Act of 1933 and will be freely transferable in accordance
with the transfer provisions of the indenture.
PLEASE CONSIDER THE FOLLOWING:
- Our offer to exchange Series A notes for Series B notes will be open
until 5:00 p.m., New York City time, on , 1999, unless we
extend the offer.
- You should also carefully review the procedures for tendering your Series
A notes beginning on page 61 of this prospectus.
- If you do not tender your Series A notes, you will continue to hold
unregistered securities and your ability to transfer them could be
adversely affected.
- No public market currently exists for our notes. We do not intend to list
the Series B notes on any securities exchange and, therefore, no active
public market is anticipated.
INFORMATION ABOUT THE NOTES:
- The Series B notes will mature on May 1, 2009.
- We will pay interest on the Series B notes at an annual rate of 9 1/4% on
May 1 and November 1 of each year, starting on November 1, 1999.
- We have the option to redeem all or a portion of the Series B notes on or
after May 1, 2004 at a redemption price equal to 100% of the principal
amount of the Series B notes plus a premium declining ratably to par,
plus accrued interest.
- At any time on or before May 1, 2002 we may redeem up to 35% of the
original principal amount of the Series B notes at a redemption price of
109.250% of the principal amount plus accrued interest with money we
raise in specified equity offerings.
- Our obligations under the Series B notes will not be secured, will rank
junior to all our senior debt and will rank equally to all of our
existing and future senior subordinated debt.
SEE "RISK FACTORS" BEGINNING ON PAGE 12 FOR INFORMATION YOU SHOULD CONSIDER IN
CONNECTION WITH THE EXCHANGE OFFER AND BEFORE INVESTING IN THE SERIES B NOTES.
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED
OF THE SERIES B NOTES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
, 1999
<PAGE>
FORWARD-LOOKING STATEMENTS
Some of the statements contained in this prospectus discuss future
expectations, contain projections of results of operations or financial
condition or state other "forward-looking" information. Those statements may be
affected by known and unknown risks, uncertainties and other factors that could
cause the actual results to differ materially from those contemplated by the
statements. The forward-looking information is based on various factors and was
derived using numerous assumptions. Important factors that could cause our
actual results to be materially different from the forward-looking statements
are disclosed in the "Risk Factors" section and throughout this prospectus.
2
<PAGE>
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION CONTAINED ELSEWHERE IN THIS
PROSPECTUS. THIS SUMMARY MAY NOT CONTAIN ALL OF THE INFORMATION THAT YOU SHOULD
CONSIDER IN CONNECTION WITH THE EXCHANGE OFFER AND BEFORE INVESTING IN THE
SERIES B NOTES. YOU SHOULD READ THE ENTIRE PROSPECTUS CAREFULLY, INCLUDING THE
"RISK FACTORS" SECTION AND THE FINANCIAL STATEMENTS, BEFORE MAKING AN INVESTMENT
DECISION.
NCI
We are one of North America's largest integrated manufacturers of metal
products for the nonresidential building industry. We operate 39 manufacturing
and distribution facilities located in 17 states and Mexico. We sell metal
components and engineered building systems, offering one of the most extensive
metal product lines in the building industry with well-recognized brand names.
We believe that our leading market positions and strong track record of growth
in sales and EBITDA have resulted from our focus on:
- Controlling operating and administrative costs
- Managing working capital and fixed assets
- Developing new markets
- Successfully identifying strategic growth opportunities
We believe that metal products have gained and continue to gain a greater
share of the new construction and repair and retrofit markets. This is due to
increasing acceptance and recognition of the benefits of metal products in
building applications. Metal components offer builders, designers, architects
and end-users several advantages, including lower long-term costs, longer life,
attractive aesthetics and design flexibility. Similarly, engineered building
systems offer a number of advantages over traditional construction alternatives,
including shorter construction time, more efficient use of materials, lower
construction costs, greater ease of expansion and lower maintenance costs.
In May 1998, we acquired Metal Building Components, Inc. ("MBCI"), for a
purchase price of $588.5 million. The MBCI acquisition, which doubled our
revenue base, made us the largest domestic manufacturer of nonresidential metal
components and significantly improved our product mix. On a pro forma basis
giving effect to the MBCI acquisition, our sales were $876.5 million and our
EBITDA was $130.2 million for the 12-month period ended January 31, 1999.
METAL COMPONENTS. We are the largest domestic supplier of metal components
to the nonresidential building industry and have a market share at least twice
that of our largest competitor. We are also one of the largest suppliers in the
U.S. of roll-up doors for self-storage facilities. We design, manufacture, sell
and distribute one of the widest selections of components for a variety of new
construction applications as well as repair and retrofit uses.
The following are the types of components we sell:
<TABLE>
<S> <C>
- - Metal roof and wall systems - Fascia
- - Overhead doors - Mansard accessories
- - Interior and exterior doors - Trim accessories
</TABLE>
Our components are used in the following markets:
<TABLE>
<S> <C>
- - Industrial - Commercial
- - Governmental - Agricultural
- - Community - Residential
</TABLE>
3
<PAGE>
In addition to metal components manufacturing, we are also one of the
largest independent providers of hot roll and light gauge metal coil coating and
painting services and products. We coat and paint hot roll metal coils for our
own use in metal components manufacturing, supplying substantially all of our
internal metal coating and painting requirements. Our own use accounts for about
50% of our production. We also coat and paint hot roll metal coils and light
gauge metal for third parties for a variety of applications, including heating
and air conditioning systems, water heaters, lighting fixtures and office
furniture.
We market our metal components products and metal coating and painting
services nationwide primarily through a direct sales force under several brand
names. These brand names include "Metal Building Components," "American Building
Components," "DBCI," "MBCI," "IPS," "Metal Coaters," "Metal-Prep," "DOUBLECOTE"
and "Midwest Metal Coatings." On a pro forma basis giving effect to the MBCI
acquisition, our sales of metal components and coating and painting services
were $597.8 million for the 12-month period ended January 31, 1999. This
represented 68.2% of our total sales.
ENGINEERED BUILDING SYSTEMS. We are one of the largest domestic suppliers
of engineered building systems. We design, manufacture and market engineered
building systems, self-storage building systems and metal home framing systems
for commercial, industrial, agricultural, governmental, community and
residential uses. We market these systems nationwide through authorized builder
networks totaling over 1,200 builders and a direct sales force under several
brand names. These brand names include "Metallic Buildings," "Mid-West Steel
Buildings," "A & S Buildings," "All American Systems," "Steel Systems" and
"Mesco." Our sales of engineered building systems were $278.7 million for the
12-month period ended January 31, 1999. This represented 31.8% of our total
sales on a pro forma basis giving effect to the MBCI acquisition.
Before our combination with MBCI, both companies had individually
demonstrated strong growth in sales and EBITDA. Over the five fiscal years
before the MBCI acquisition, NCI achieved compound annual growth rates of 32.0%
in sales and 45.2% in EBITDA. Over the five fiscal years before its acquisition
by NCI, MBCI achieved compound annual growth rates of 15.8% in sales and 15.4%
in EBITDA.
COMPANY STRENGTHS
We believe that we benefit from the following key strengths:
- LEADING MARKET POSITIONS. We are the largest manufacturer of metal
components for the nonresidential building industry and one of the largest
suppliers of engineered building systems in the United States. We are also
one of the largest independent providers of metal coating and painting
services and products. We believe that these leading market positions are
a result of our emphasis on high quality manufacturing, timely delivery of
products and our broad line of branded building products that are well
known in the industry.
- FAVORABLE MIX BETWEEN NEW CONSTRUCTION AND REPAIR AND RETROFIT
END-MARKETS. We derive a majority of our sales and EBITDA from metal
components sales. Unlike engineered building systems, metal components are
used in a variety of repair and retrofit applications, as well as new
construction. We believe that the favorable mix between these end-markets
reduces our dependence on new construction activity and provides us with
diverse growth opportunities.
- LOW-COST SUPPLIER. We strive to keep our purchasing, production,
distribution and administrative costs low. Our size provides us with
purchasing efficiencies and enhances our productivity through the sharing
of best practices between our metal components and engineered building
systems operations. In addition, we operate a nationwide system of
manufacturing facilities, placing our manufacturing and distribution
operations closer to our customers. This system helps
4
<PAGE>
reduce the need for substantial labor, machinery and inventory investments
at each facility. It also helps control transportation costs and reduce
delivery times.
- BROAD PRODUCT LINES AND DIVERSE CUSTOMER BASE. We are one of the largest
integrated suppliers in the industry with a wider variety of products and
services than our competitors. In addition, we have a broad and
diversified customer base that provides significant cross-selling
opportunities. In fiscal 1998, our largest customer accounted for less
than 2% of total sales.
- NATIONWIDE COVERAGE. We have 39 facilities located in 17 states and
Mexico, giving us extensive geographic reach across a number of high
population growth areas. Our nationwide coverage reduces the impact of
regional economic cycles and seasonality on our results of operations.
- EXPERIENCED AND COMMITTED MANAGEMENT TEAM. Our executive officers and
other key managers have an average of over 20 years of industry
experience. This senior management team, along with our directors, also
owns approximately 20% of our common stock, including exercisable stock
options.
BUSINESS STRATEGY
We believe we can maximize our sales and EBITDA by continuing to focus on
the following business strategies:
- CONTROL OPERATING AND ADMINISTRATIVE COSTS. We plan to maintain our focus
on operating and administrative cost control. We intend to (1) continue to
aggressively manage the purchase of raw materials, (2) further automate
our manufacturing operations to reduce production costs, (3) capitalize on
our nationwide coverage to reduce distribution costs and (4) minimize
administrative expenses.
- MANAGE WORKING CAPITAL AND FIXED ASSETS. We plan to remain focused on
obtaining a high rate of return on operating assets through strong balance
sheet management. We seek to continue to minimize accounts receivable and
inventory balances to improve cash flow. We manage our investment in fixed
assets to achieve targeted rates of return. In addition, our bonus
compensation plan for management is significantly focused on control of
working capital and return on capital investment.
- DEVELOP NEW MARKETS. We intend to increase our presence in the metal
components market, primarily for sales of metal roofing and wall systems.
We plan to increase sales and EBITDA by using our multiple distribution
channels to market our expanded range of metal components products to
existing and new customers. We also plan to increase sales of our
engineered building systems both in existing markets and new regional
markets by using our nationwide metal components manufacturing facilities
as platforms for expansion.
- IDENTIFY STRATEGIC GROWTH OPPORTUNITIES. We consider external
opportunities an important part of our growth plan. We have a disciplined
acquisition and expansion process for evaluating future opportunities.
Since 1994, we have successfully acquired and integrated nine companies.
To expand our geographic coverage and increase manufacturing capacity, we
have also constructed nine new manufacturing facilities in the last six
years and have formed four joint ventures.
5
<PAGE>
SUMMARY OF KEY TERMS OF THE EXCHANGE OFFER
<TABLE>
<S> <C>
Securities to be Exchanged........ On May 5, 1999, we issued $125.0 million principal
amount of Series A notes to Warburg Dillon Read LLC,
Montgomery NationsBank Securities LLC, First Union
Capital Markets Corp. and Bear, Stearns & Co. Inc., the
initial purchasers, in a transaction exempt from the
registration requirements of the Securities Act. The
terms of the Series B notes and the Series A notes are
identical in all material respects, except that the
Series B notes will be freely transferable by the
holders of the Series B notes in accordance with the
transfer provision of the indenture.
The Exchange Offer................ You must properly tender your Series A notes and we must
accept them for exchange. We will exchange all Series A
notes that you tender and do not withdraw by the
expiration date of the exchange offer. If you exchange
your Series A notes we will issue Series B notes to you
on or promptly after the expiration date.
Expiration of Exchange Offer...... 5:00 p.m., New York City time, on , 1999.
Ability to Resell Series B
Notes........................... We believe you may offer for resale, resell and
otherwise freely transfer the Series B notes without
registration or delivering a prospectus to a buyer if:
- you acquire the Series B notes in the ordinary course
of your business;
- you are not participating, do not intend to
participate and have no arrangement or understanding
with any person to participate in the distribution of
Series B notes; and
- you are not related to us.
If this belief is inaccurate and you sell or transfer
any Series B note without delivering a prospectus to a
buyer or without an exemption from the registration
requirements of the Securities Act, you may be
responsible for money or other damages under the
Securities Act. We will not pay those damages on your
behalf.
Each broker-dealer that receives Series B notes for its
own account in exchange for Series A notes it acquired
as a result of market-making or other trading activities
must acknowledge that it will deliver a prospectus in
connection with any resale of the Series B notes. A
broker-dealer may use this prospectus for an offer to
resell, resale or other retransfer of the Series B notes
issued to it in the exchange offer.
Exchange offers are not being made to:
- holders of Series A notes in any jurisdiction in which
the exchange offer or its acceptance would not comply
with the securities or blue sky laws of that
jurisdiction; and
- holders of Series A notes who we control.
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
No Minimum Required............... There is no minimum amount of Series A notes that you
must tender in the exchange offer.
Procedures for Exchanging
Your Series A Notes............. If you wish to exchange your Series A notes, you must
transmit to Harris Trust Company of New York, our
exchange agent, on or before the expiration date either:
- a properly completed and executed letter of
transmittal, which we have provided to you with this
prospectus, or a facsimile of the letter of transmittal,
together with your Series A notes and any other
documentation requested by the letter of transmittal; or
- a computer generated agent's message transmitted by
means of the Depository Trust Company's Automated Tender
Offer Program system.
By agreeing to the letter of transmittal, you will make
those representations described on page 61 under the
heading "The Exchange Offer--Purpose and Effect."
Guaranteed Delivery Procedures.... If you wish to exchange your Series A notes and time
will not permit the documents required by the letter of
transmittal to reach the exchange agent before the
expiration date of the exchange offer, or you cannot
complete the procedure for book-entry transfer on a
timely basis, you must exchange your Series A notes
according to the guaranteed delivery procedures
described on page 65 under the heading "The Exchange
Offer-- Guaranteed Delivery Procedures."
Special Procedures for
Beneficial Owners............... If you are a beneficial owner whose Series A notes are
registered in the name of a broker, dealer, commercial
bank, trust company or other nominee and you wish to
exchange your Series A notes, you should contact the
registered holder promptly and instruct the registered
holder to exchange the Series A notes for you. If you
wish to exchange your Series A notes on your own behalf,
you must either make appropriate arrangements to
register ownership of the Series A notes in your name or
obtain a properly completed bond power from the
registered holder.
The transfer of registered ownership may take
considerable time and you may not be able to complete
the transfer before the expiration date of the exchange
offer.
Withdrawal Rights................. Unless we extend the date, you may withdraw your
tendered Series A notes at any time before 5:00 p.m.,
New York City time, on the expiration date of the
exchange offer.
Exchange Agent.................... The address, telephone number and facsimile number for
the exchange agent is:
</TABLE>
Harris Trust Company of New York
Wall Street Plaza
88 Pine Street, 19th Floor
New York, New York 10005
Telephone: (212) 701-7624
Telecopy: (212) 701-7636
7
<PAGE>
SUMMARY OF KEY TERMS OF THE SERIES B NOTES
You should be aware that the indenture that currently governs your Series A
notes is the same indenture that will govern the Series B notes, except that
there will be no restrictions on your sale of Series B notes.
<TABLE>
<S> <C>
Issuer............................ NCI Building Systems, Inc.
Notes Offered..................... $125,000,000 in aggregate principal amount of 9 1/4%
Senior Subordinated Notes due 2009.
Maturity Date..................... May 1, 2009.
Interest Payment Dates............ Payable semi-annually on May 1 and November 1, beginning
November 1, 1999.
Subsidiary Guarantors............. Our domestic subsidiaries on the issue date will
unconditionally guarantee the Series B notes. If we
create or acquire a new subsidiary, it will also
guarantee the Series B notes unless we designate the
subsidiary as an "unrestricted subsidiary" or the
subsidiary is a foreign subsidiary.
Ranking........................... The Series B notes will not be secured by any
collateral.
The Series B notes will rank below all of our and our
subsidiary guarantors' senior debt. Therefore, if we
default, your right to payment under the Series B notes
will be junior to the rights of holders of our and our
subsidiary guarantors' senior debt to collect money we
owe them at the time. The Series B notes will
effectively rank below all liabilities, including trade
payables, of our subsidiaries that are not guarantors.
We estimate that we and our subsidiary guarantors would
have had approximately $354.4 million of senior debt at
January 31, 1999 on an as adjusted basis giving effect
to the offering.
Optional Redemption............... After May 1, 2004 we may redeem some or all of the
Series B notes at the redemption prices listed in the
"Description of Registered Notes" section under the
heading "Optional Redemption of the Notes," plus accrued
interest.
Optional Redemption after
Equity Offerings................ At any time before the third anniversary of the issue
date of the Series B notes, we can choose to buy back up
to 35% of the original principal amount of the Series B
notes with money that we raise in specified equity
offerings as long as:
- we pay 109.250% of the face amount of the Series B
notes, plus interest;
- we buy the Series B notes back within 90 days of
completing the equity offering; and
- at least 65% of the principal amount of the Series B
notes remain outstanding afterwards.
Change of Control Offer........... If we experience a change in control, we must give
holders of the Series B notes the opportunity to sell us
their Series B notes at 101% of their face amount, plus
accrued interest.
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
We might not be able to pay you the required price for
Series B notes you present us at the time of a change of
control, because our senior credit facility may prohibit
payment or we might not have enough funds at that time.
Basic Covenants of Indenture...... The indenture governing the Series B notes contains
covenants for your benefit which, among other things,
restrict our ability and the ability of our subsidiaries
to:
- incur additional indebtedness;
- make restricted payments, including dividends or other
distributions;
- incur liens;
- make investments;
- sell assets or merge with or into other companies; and
- enter into transactions with affiliates.
The restrictions contain a number of significant
exceptions and qualifications.
Use of Proceeds................... We will not receive any cash proceeds from the issuance
of the Series B notes in this exchange offer.
</TABLE>
RISK FACTORS
You should carefully consider the factors discussed in detail under the
caption "Risk Factors" in connection with the exchange offer and before making
an investment in the Series B notes.
------------------------
We were incorporated in Texas in December 1984 and reincorporated in
Delaware in December 1991. Our principal executive offices are located at 7301
Fairview, Houston, Texas 77041, and our telephone number is (713) 466-7788.
9
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
We have shown in the following table our summary historical and pro forma
financial information for the periods and the dates indicated. The historical
financial information for the three fiscal years ended October 31, 1998 is
derived from our audited financial statements. All other financial information
in the table is unaudited. The unaudited pro forma as adjusted statement of
income data give effect as of November 1, 1997 to (1) the MBCI acquisition and
(2) this offering and the application of our net proceeds. The pro forma as
adjusted information is not necessarily indicative of either our future results
of operations or what our results of operations would have been if the MBCI
acquisition had been completed on that date. In the MBCI acquisition, we
acquired all of the capital stock of Amatek Holdings, Inc., the former indirect
parent company of MBCI. Because Amatek had a fiscal year ended December 31, the
pro forma as adjusted information presented for the 12-month period ended
January 31, 1999 includes Amatek's financial information for the three-month
period ended March 31, 1998. You should read this table along with the
historical and pro forma financial statements and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included in this
prospectus.
<TABLE>
<CAPTION>
PRO FORMA
THREE MONTHS TWELVE AS ADJUSTED
ENDED MONTHS TWELVE MONTHS
YEAR ENDED OCTOBER 31, JANUARY 31, ENDED ENDED
------------------------------- -------------------- JANUARY 31, JANUARY 31,
1996 1997 1998 1998 1999 1999 1999
--------- --------- --------- --------- --------- ----------- -------------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Sales.................................... $ 332.9 $ 407.8 $ 675.3 $ 97.3 $ 214.3 $ 792.4 $ 876.5
Cost of sales............................ 241.4 299.4 497.9 71.9 160.1 586.0 654.9
--------- --------- --------- --------- --------- ----------- ------
Gross profit............................. 91.5 108.3 177.5 25.4 54.3 206.3 221.6
Operating expenses....................... 53.1 66.1 94.0 16.6 32.1 109.5 120.7
Nonrecurring acquisition expenses (1).... -- -- 2.1 -- -- 2.1 2.1
--------- --------- --------- --------- --------- ----------- ------
Income from operations................... 38.4 42.3 81.4 8.8 22.2 94.8 98.9
Interest expense......................... 0.1 0.2 20.8 -- 9.8 30.5 43.6
Other income............................. 1.6 2.0 0.5 0.7 0.7 0.5 0.5
Joint venture income (loss).............. -- -- 0.7 -- -- 0.8 0.6
--------- --------- --------- --------- --------- ----------- ------
Income before income taxes............... 39.9 44.1 61.8 9.4 13.1 65.5 56.4
Provision for income taxes............... 15.1 16.2 24.5 3.4 5.7 26.9 24.4
--------- --------- --------- --------- --------- ----------- ------
Net income............................... $ 24.8 $ 27.9 $ 37.3 $ 6.1 $ 7.4 $ 38.7 $ 32.0
--------- --------- --------- --------- --------- ----------- ------
--------- --------- --------- --------- --------- ----------- ------
OTHER FINANCIAL DATA:
EBITDA (2)............................... $ 47.2 $ 54.1 $ 103.6 $ 12.3 $ 30.4 $ 121.7 $ 130.2
Depreciation and amortization (3)........ 5.8 7.9 17.8 2.2 7.0 22.6 27.8
Capital expenditures..................... 10.3 11.3 20.8 2.1 11.2 29.9 31.5
SELECTED RATIO DATA:
EBITDA/interest expense.................. 3.0x
EBITDA less capital expenditures/interest
expense................................ 2.3x
Total debt/EBITDA........................ 3.7x
Earnings/fixed charges (4)............... 2.3x
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
AS ADJUSTED
AS OF AS OF
JANUARY 31, 1999 JANUARY 31, 1999
----------------- -----------------
(IN MILLIONS)
<S> <C> <C>
BALANCE SHEET DATA:
Working capital................................................................ $ 71.9 $ 71.9
Property, plant and equipment, net............................................. 186.3 186.3
Total assets................................................................... 825.9 829.2
Total debt..................................................................... 476.7 480.9
Shareholders' equity........................................................... 235.7 235.2
</TABLE>
- --------------------------
(1) Nonrecurring acquisition expenses in the third quarter of fiscal 1998
represents severance and relocation expenses related to the consolidation of
our components sales and marketing functions, estimated costs associated
with announced plant closures and consolidations and costs associated with
the integration of our product lines.
(2) "EBITDA" consists of net income before interest expense, taxes, depreciation
and amortization, minority interest and nonrecurring gains and expenses.
EBITDA also excludes non-cash employer contributions to our 401(k) plan,
which are made in shares of our common stock, as shown for each of the
following periods (in millions):
<TABLE>
<S> <C>
Year ended October 31, 1996............................................................ $ 1.4
Year ended October 31, 1997............................................................ 2.0
Year ended October 31, 1998............................................................ 2.2
Three months ended January 31, 1998.................................................... 0.6
Three months ended January 31, 1999.................................................... 1.0
Twelve months ended January 31, 1999................................................... 2.6
Pro forma as adjusted twelve months ended January 31, 1999............................. 2.6
</TABLE>
The amount shown for contributions for pro forma as adjusted twelve months
ended January 31, 1999, does not include $1.3 million of cash employer
contributions with respect to MBCI employees. On January 1, 1999, we began
to make contributions for MBCI employees in shares of our common stock as
required under our 401(k) plan.
EBITDA is not a measure of financial performance under generally accepted
accounting principles, but is presented here to provide additional
information about operations. EBITDA should not be considered as an
alternative to, or more meaningful than, net income or cash flows as an
indicator of operating performance or as a better measure of liquidity.
EBITDA may not be comparable to similarly titled measures of other
companies. You should read the financial statements in this prospectus for
information regarding operating, investing and financing cash flow
activities.
(3) Depreciation and amortization includes deferred financing costs, which are
also included in interest expense, as shown for each of the following
periods (in millions):
<TABLE>
<S> <C>
Year ended October 31, 1996................................................... --
Year ended October 31, 1997................................................... --
Year ended October 31, 1998................................................... $ 1.1
Three months ended January 31, 1998........................................... --
Three months ended January 31, 1999........................................... 0.5
Twelve months ended January 31, 1999.......................................... 1.6
Pro forma as adjusted twelve months ended January 31, 1999.................... 2.4
</TABLE>
(4) The ratio of earnings to fixed charges has been computed by dividing
earnings available for fixed charges (earnings before income taxes plus
fixed charges less capitalized interest) by fixed charges (interest expense
plus capitalized interest plus the portion of operating lease rental expense
that represents the interest factor).
11
<PAGE>
RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS AND ALL OTHER
INFORMATION CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE EXCHANGE OFFER
AND BEFORE MAKING AN INVESTMENT IN THE SERIES B NOTES. INVESTING IN OUR NOTES
INVOLVES A HIGH DEGREE OF RISK. ANY OF THESE RISKS COULD MATERIALLY ADVERSELY
AFFECT OUR BUSINESS, OPERATING RESULTS AND FINANCIAL CONDITION AND COULD RESULT
IN A COMPLETE LOSS OF YOUR INVESTMENT.
WE ARE SIGNIFICANTLY LEVERAGED AND MAY NOT BE ABLE TO SERVICE OR REFINANCE OUR
DEBT
As a result of the MBCI acquisition, we are significantly leveraged. This
means we have a large amount of debt in relation to our shareholders' equity.
The following table presents relevant financial information after giving pro
forma effect to the MBCI acquisition and as adjusted to reflect completion of
this offering (in millions):
<TABLE>
<CAPTION>
PRO FORMA
AS ADJUSTED AT
JANUARY 31, 1999
-------------------
<S> <C>
Total debt.......................................................................... $ 480.9
Shareholders' equity................................................................ $ 235.2
<CAPTION>
PRO FORMA
AS ADJUSTED
TWELVE MONTHS
ENDED
JANUARY 31, 1999
-------------------
<S> <C>
Ratio of earnings to fixed charges.................................................. 2.3x
</TABLE>
We may also incur additional debt from time to time to finance acquisitions
or capital expenditures or for other purposes if we comply with the restrictions
in our senior credit facility and the indenture governing our notes.
Our significant degree of leverage may have important consequences to us,
including the following:
- Our ability to obtain additional financing, if necessary, for working
capital, capital expenditures, acquisitions or other purposes may be
impaired or additional financing may not be available on favorable terms.
- We will need a substantial portion of our cash flow to pay the principal
and interest on our debt, including debt that we may incur in the future.
- Payments on our debt will reduce the funds that would otherwise be
available for our operations and future business opportunities.
- A substantial decrease in our net operating cash flows could make it
difficult for us to meet our debt service requirements and force us to
modify our operations.
- We may be more leveraged than our competitors. This may place us at a
competitive disadvantage.
- We may be more vulnerable to a downturn in our business or the economy
generally.
- There would be a material adverse effect on our business and financial
condition if we are unable to service our debt or obtain additional
financing as needed.
Our ability to pay principal and interest on our notes and to satisfy our
other obligations will depend upon:
- Our future financial and operating performance will be affected by
prevailing economic conditions and financial, business and other factors,
some of which are beyond our control.
12
<PAGE>
- The future availability of revolving credit borrowings under our senior
credit facility or any successor facility. Future availability depends on,
among other things, our complying with covenants and meeting specified
borrowing base requirements.
Our cash flow from operations and available borrowings under our senior
credit facility may not be sufficient to service our debt, including our notes.
If we cannot service our debt, we will be forced to take actions such as
reducing or delaying acquisitions and/or capital expenditures, selling assets,
restructuring or refinancing our debt or seeking additional equity capital. We
can give you no assurance that we can do any of these things on satisfactory
terms or at all.
THE NOTES AND GUARANTEES ARE SUBORDINATE TO OUR OTHER DEBT; THE NOTES AND
GUARANTEES ARE UNSECURED OBLIGATIONS
Our notes and the guarantees are subordinated in right of payment to the
prior payment in full in cash of all our and our subsidiary guarantors' existing
and future senior debt. This includes all amounts owing under our senior credit
facility. As of January 31, 1999, we had approximately $475.2 million of senior
debt outstanding and we would have been able to borrow an additional $48.3
million under our five-year revolver. On an as adjusted basis after giving
effect to the offering of the Series A notes and the application of our net
proceeds, we would have had approximately $354.4 million of senior debt
outstanding and we would have been able to borrow an additional $48.3 million
under our five-year revolver and $20.8 million under our extendable facility.
Therefore, if either we or our subsidiary guarantors went into a bankruptcy,
liquidation, dissolution, reorganization or similar proceeding, our assets or
the assets of our subsidiary guarantors, as the case may be, will be available
to pay obligations on our notes only after the senior debt has been paid in full
in cash. We can give you no assurance that there will be sufficient assets
remaining to pay amounts due on our notes. In addition, all payments on our
notes and the guarantees will be blocked in the event of a payment default on
our senior debt and may be blocked for up to 179 of 365 consecutive days in the
event of specified non-payment defaults on our senior debt.
The indenture permits us and our restricted subsidiaries to incur additional
senior debt, including debt under our senior credit facility. Debt under our
senior credit facility, including guarantees of that debt by our domestic
subsidiaries and our operating limited partnerships, is secured by the pledge of
all capital stock, partnership interests and other equity interests of our
subsidiaries. Other senior debt may be secured by our assets and our subsidiary
guarantors' assets. Our notes and the guarantees will be unsecured and therefore
will not have the benefit of any collateral. Accordingly, if either we or a
subsidiary guarantor went into a bankruptcy, liquidation, dissolution,
reorganization or similar proceeding, the lenders of our secured debt would have
the right to foreclose upon their collateral to the exclusion of the holders of
our notes. This would occur even if an event of default existed with respect to
our notes. In this event, our ownership interests in our subsidiaries as well as
any other of our assets or the assets of our subsidiary guarantors that had been
pledged as collateral to secure our senior credit facility or other senior debt
would first be used to repay in full in cash all amounts outstanding under the
secured debt. This would result in all or a portion of our or our subsidiary
guarantors' assets being unavailable to satisfy claims of holders of our notes
and other unsecured debt.
WE MUST COMPLY WITH DEBT COVENANTS
We must comply with operating and financing restrictions in our senior
credit facility and the indenture. We may also have similar restrictions with
any future debt. These restrictions affect, and in many respects limit or
prohibit our ability to:
- incur additional indebtedness;
- make restricted payments, including dividends or other distributions;
13
<PAGE>
- incur liens;
- make investments, including joint venture investments;
- sell assets;
- merge or consolidate with or into other companies or sell substantially
all our assets; and
- enter into transactions with affiliates.
Our senior credit facility also requires us to achieve specified financial
and operating results and satisfy set financial tests governing our consolidated
net worth and our leverage, fixed charge coverage and senior debt ratios. These
restrictions could limit our ability to plan for or react to market conditions
or meet extraordinary capital needs or otherwise could restrict corporate
activities. These restrictions could also adversely affect our ability to
finance our future operations or capital needs or to engage in other business
activities that would be in our interest. Our inability to comply with these and
other provisions of the senior credit facility could result in a default under
the senior credit facility. The lenders under our senior credit facility could
then elect to declare all amounts borrowed under the senior credit facility
together with accrued interest to be due and payable, and we could be prohibited
from making payments with respect to our notes until the default is cured or all
debt under the senior credit facility is paid or satisfied in full. If we were
unable to repay these borrowings, the senior credit facility lenders could
proceed against their collateral. If the debt under the senior credit facility
were accelerated, we cannot assure you that our assets would be sufficient to
repay in full this debt and our other debt, including our notes. Any default
under our senior debt could have a material adverse effect on the market value
of our notes.
If we have a change of control under our senior credit facility, it may
accelerate the amounts due under our senior credit facility, which could have a
material adverse affect on the holders of our notes.
OUR BUSINESSES ARE CYCLICAL
The nonresidential construction industry is highly sensitive to national and
regional economic conditions. From time to time, it has been adversely affected
in various parts of the country by unfavorable economic conditions, low use of
manufacturing capacity, high vacancy rates, changes in tax laws affecting the
real estate industry, high interest rates and the unavailability of financing.
Sales of our products may be adversely affected by weakness in demand for our
products within particular customer groups, including builders of self-storage
facilities, or a recession in the engineered building industry, the general
construction industry or particular geographic regions. We cannot predict the
timing or severity of future economic or industry downturns. Any economic
downturn, particularly in states where many of our sales are made, could have a
material adverse effect on our results of operations and financial condition.
The markets for metal components, including overhead doors, self-storage
buildings and metal home framing systems, are also highly sensitive to overall
economic conditions, high interest rates and the availability of financing.
OUR BUSINESSES ARE SEASONAL
The metal components and engineered building systems businesses, as well as
the construction industry in general, are seasonal in nature. Sales normally are
lower in the first calendar quarter of each year compared to the other three
quarters because of unfavorable weather conditions for construction and typical
business planning cycles affecting construction. This seasonality adversely
affects our results of operations for the first two fiscal quarters. Prolonged
severe winter weather conditions can delay construction projects and otherwise
adversely affect our business.
14
<PAGE>
SUPPLY AND DEMAND FOR STEEL MAY AFFECT OUR BUSINESS
Our principal raw material is steel. We do not have any long-term contracts
for the purchase of steel. During fiscal 1998, we purchased almost 80% of our
steel requirements from National Steel Corporation and Bethlehem Steel
Corporation. We do not maintain an inventory of steel in excess of our current
production requirements. We can give you no assurance that steel will remain
available or that prices will remain stable. The steel industry is highly
cyclical in nature, and steel prices are influenced by numerous factors beyond
our control. These factors include general economic conditions, competition,
labor costs, import duties and other trade restrictions. Furthermore, a
prolonged labor strike against one or more of our principal domestic suppliers
could have a material adverse effect on our operations. If the available supply
of steel declines or if one or more of our current suppliers is unable for any
reason to meet our requirements, we could experience price increases, a
deterioration of service from our suppliers or interruptions or delays that may
cause us not to meet delivery schedules to our customers. Any of these problems
could adversely affect our results of operations and financial condition.
WE ARE DEPENDENT ON KEY PERSONNEL
We are dependent on the continued services of our senior management team.
Our senior management team has an average of over 20 years of industry
experience, with our three top executives averaging 35 years. The loss of these
key personnel could have a material adverse effect on our business, financial
condition and results of operations.
OUR BUSINESSES ARE HIGHLY COMPETITIVE
Competition in the metal components and metal buildings markets of the
building industry is intense. It is based primarily on:
- price
- speed of construction
- ability to provide added value in the design and engineering of buildings
- service
- quality
- delivery
We compete with a number of other manufacturers of metal components and
engineered building systems ranging from small local firms to large national
firms. In addition, we and other manufacturers of metal components and
engineered building systems compete with alternative methods of building
construction. These alternative building methods may be perceived as more
traditional, more aesthetically pleasing or having other advantages.
ACQUISITIONS MAY HAVE SHORT-TERM ADVERSE EFFECTS ON OUR OPERATIONS
One element of our growth strategy is to pursue strategic acquisitions that
either expand or complement our business. We may not be able to integrate
successfully an acquired business into our business or operate profitably any
business we may acquire. Acquisitions involve a number of special risks. They
divert management's attention to the integration of the operations and personnel
of the acquired companies. They may also have adverse short-term effects on our
operating results. We may have difficulty integrating our financial reporting
and other management systems in connection with acquisitions.
15
<PAGE>
WE HAVE POTENTIAL EXPOSURE TO ENVIRONMENTAL LIABILITIES
We must comply with federal, state and local laws and regulations governing
the protection of the environment. These laws and regulations cover air
emissions, discharges to water, the management of wastes and hazardous
substances, the cleanup of contamination and the control of noise and odors. We
may incur significant fines or penalties if we fail to comply with these
environmental requirements. In some circumstances, a current or previous owner
or operator of real property, and parties that generate or transport hazardous
substances that are disposed of at real property, may be held liable for the
cost to investigate or clean up hazardous substances on or under the property.
We may incur liability, including liability for cleanup costs, if contamination
is discovered at one of our facilities or at a landfill or other location where
we have disposed of wastes. Because environmental requirements are becoming
increasingly stringent, our expenditures for environmental compliance may
increase and we may incur material costs associated with environmental
compliance in the future. From time to time, claims have been made against us
under environmental laws or regulations.
WE MAY BE ADVERSELY AFFECTED IF OUR INFORMATION SYSTEMS ARE NOT ABLE TO
RECOGNIZE THE YEAR 2000
We use software and related technologies throughout our businesses that will
be affected by the year 2000 issue. The year 2000 issue relates to information
systems and computer software programs being unable to properly recognize and
process date-sensitive information as the year 2000 approaches. We have
implemented a year 2000 plan in an attempt to ensure that our computer systems
and applications will function properly for years beyond 1999. We are carrying
out our plan as part of an overall upgrade of our management information
systems. We cannot assure you that the plan will be completed successfully or on
a timely basis. We have no separate budget for year 2000 compliance. As our MIS
upgrade is carried out, we may identify assets that present a risk of year
2000-related disruption. We do not have a contingency plan with respect to the
year 2000 issue if the MIS upgrade is not completed or is delayed beyond the end
of 1999. We are discussing with our vendors and customers the possibility of any
year 2000 interface difficulties that may affect us, but the ability of third
parties with whom we transact business to address adequately their year 2000
issue is outside our control. Our failure, or the failure of our vendors or our
customers, to have year 2000 compliant systems in place could have a material
adverse effect on our financial condition and results of operations.
WE MAY NOT BE ABLE TO REPURCHASE OUR NOTES UPON A CHANGE OF CONTROL
Upon a change of control under the indenture, we must give holders of our
notes the opportunity to sell us their notes at 101% of their principal amount
plus accrued interest, if any, to the date of purchase. The source of funds for
any purchase will be our available cash or cash generated from operations or
other sources, including borrowings or sales of assets or equity. However, we
may not have sufficient funds at the time of any change of control to make any
required repurchases of notes tendered. In addition, restrictions in our senior
credit facility or in any future debt may not permit us to make the required
repurchases.
The change of control provision in the indenture may not necessarily afford
holders of notes protection if we have a highly leveraged transaction. This type
of transaction includes a reorganization, restructuring, merger or other similar
transaction involving us that may adversely affect the holders. A highly
leveraged transaction may not involve a change in voting power or beneficial
ownership, or, even if it does, may not involve a change of the magnitude
required under the definition of change of control in the indenture to trigger
those provisions. Except as described under "Description of Registered
Notes--Change of Control," the indenture does not contain provisions that permit
the holders of the Notes to require us to repurchase or redeem our notes if a
takeover, recapitalization or similar transaction occurs.
16
<PAGE>
WE CANNOT ASSURE YOU THAT AN ACTIVE TRADING MARKET WILL DEVELOP FOR THE SERIES B
NOTES
Before this exchange offer, there was no public market for the Series A
notes. We have been informed by Warburg Dillon Read LLC that it intends to
continue to make a market in the Series B notes after the exchange offer is
completed. Warburg Dillon Read LLC may, however, cease its market-making at any
time. In addition, the liquidity of the trading market in the Series B notes,
and the market price quoted for the Series B notes, may be adversely affected by
changes in the overall market for high yield securities and by changes in our
financial performance or prospects or in the prospects for companies in our
industry generally. As a result, we cannot assure you that an active trading
market will develop for the Series B notes. We do not intend to apply for
listing or quotation of the Series B notes on any securities exchange or stock
market. To the extent that Series A notes are tendered and accepted in the
exchange offer, the market for the remaining untendered Series A notes among
investors qualified to purchase and sell those notes could be adversely
affected.
THE SERIES A NOTES WILL CONTINUE TO BE SUBJECT TO TRANSFER RESTRICTIONS IF YOU
DO NOT EXCHANGE THEM IN THE EXCHANGE OFFER
If you do not exchange your Series A notes for Series B notes in the
exchange offer, the Series A notes will continue to be subject to the
restrictions on transfer described in the legend on the Series A notes. The
restrictions on transfer of the Series A notes exist because we issued the
Series A notes based upon exemptions to the registration requirements of the
Securities Act and applicable state securities laws. In general, you may only
offer or sell the currently outstanding Series A notes if they are registered
under the Securities Act and applicable state securities laws or are offered and
sold under an exemption from these registration requirements. We do not intend
to register the currently outstanding Series A notes under the Securities Act.
FRAUDULENT CONVEYANCE STATUTES MAY AFFECT OUR CREDITORS
We used the net proceeds from the initial offering of the Series A notes to
repay borrowings of $120.8 million under our senior credit facility. The
obligations we incurred under the indenture and our notes and the obligations
incurred by our subsidiary guarantors under the indenture and their guarantees
may be reviewed under relevant federal and state fraudulent conveyance and
similar statutes in a bankruptcy or reorganization case or lawsuit commenced by
or on behalf of our creditors and those of the subsidiary guarantors. Under
these statutes, if a court were to find that, at the time we or our subsidiary
guarantors incurred debt under our senior credit facility or at the time we
issued our notes and our subsidiary guarantors issued the guarantees, we or a
subsidiary guarantor:
- incurred the debt with the intent of hindering, delaying or defrauding
present or future creditors; or
- received less than the reasonably equivalent value in consideration for
incurring the debt; and:
-- were engaged or about to engage in a business or transaction for which
our or the subsidiary guarantor's assets constituted unreasonably small
capital, or
-- intended to incur, or did incur, or believed that we or the subsidiary
guarantor would incur, debts beyond our or its ability to pay as they
matured or became due;
then, the court might:
- subordinate our notes or the guarantee to our or the subsidiary
guarantor's presently existing or future debt;
- void the issuance of our notes or the guarantees and direct the repayment
of any amounts paid under our notes or the guarantees to our creditors; or
17
<PAGE>
- take other actions that would be detrimental to holders of our notes and
the guarantees.
The measure of insolvency under fraudulent conveyance statutes will vary
depending upon the law of the particular jurisdiction. However, we or a
subsidiary guarantor generally would be considered insolvent at the time we or a
subsidiary guarantor incurred debt under our senior credit facility, our notes
or the guarantees if:
- the fair market value or the fair salable value of our assets or the
assets of the subsidiary guarantor were less than the amount required to
pay our or the subsidiary guarantor's total existing debts and
liabilities, including the probable liability on contingent liabilities,
as they become absolute or mature; or
- we or the subsidiary guarantor were incurring debts beyond our or its
ability to pay as the debts mature.
We cannot predict:
- what standard a court would apply to determine whether we or a subsidiary
guarantor were "insolvent" as of the date we or the subsidiary guarantor
incurred debt under our senior credit facility or issued our notes or the
guarantee, or that regardless of the method of valuation a court would
determine that we or a subsidiary guarantor were insolvent on that date;
or
- whether a court would determine that the payments constituted fraudulent
transfers on another ground.
In determining our solvency at any point in time, we rely on various
management valuations and estimates of future cash flow that necessarily involve
a number of assumptions and choices of methodology. A court may not adopt the
same assumptions and methodologies we have chosen or concur with our conclusion
as to our solvency.
If a court were to find that any component of the MBCI acquisition,
including the incurrence of debt under our senior credit facility, constituted a
fraudulent transfer, to the extent proceeds from this offering were used to
refinance the senior debt, the court might find that we or a subsidiary
guarantor did not receive fair consideration of reasonably equivalent value in
consideration for incurring the debt represented by our notes and the
guarantees.
If a court voids our notes or any guarantee as a fraudulent conveyance or
holds our notes or any guarantee unenforceable for any other reason, holders of
our notes would cease to have any claim in respect of us or the related
subsidiary guarantor. The holders would be our creditors or creditors of the
subsidiary guarantors only to the extent obligations were not voided or held
unenforceable. In this event, the claims of the holders of our notes against the
issuers of an invalid guarantee, if any claims were allowed, would be
subordinate to the prior payment of all liabilities and preferred stock claims
of the subsidiary guarantor. If any claims were allowed, we can give you no
assurance that, after providing for all prior claims, there would be sufficient
assets to satisfy the claims of the holders of our notes.
18
<PAGE>
THE MBCI ACQUISITION
In May 1998, we acquired all of the outstanding capital stock of Amatek from
BTR Australia Limited, an indirect wholly owned subsidiary of BTR plc, for a
purchase price of $588.5 million, including cash of $550.0 million. At the time
of the MBCI acquisition, Amatek had no operations other than MBCI. In connection
with the MBCI acquisition, we also issued 1,400,000 unregistered shares of our
common stock at the closing to officers and employees of MBCI in exchange for
their future interests in MBCI's senior management incentive plan. The issued
common stock had an approximate fair market value of $32.2 million at the time
of the MBCI acquisition.
We financed the MBCI acquisition by obtaining a new senior credit facility
from a syndicate of lenders. Our senior credit facility originally consisted of
a $200.0 million five-year revolver, a $200.0 million five-year term loan
facility and a $200.0 million extendable facility. During fiscal 1998, we repaid
approximately $65.0 million of this debt and reduced our senior credit facility
to $540.0 million to better reflect our future needs. After the initial offering
of the Series A notes, we reduced our senior credit facility to a $440.0 million
facility to reflect the paydown of the extendable facility. Borrowings under our
senior credit facility may be used for working capital and other general
corporate purposes.
The following table sets forth the cash sources and uses of funds, including
transaction costs, for the MBCI acquisition and the cost of the common stock
issued to MBCI officers and employees:
<TABLE>
<CAPTION>
SOURCES OF FUNDS
- -----------------------------------------------
<S> <C>
(IN MILLIONS)
Cash................................ $ 16.3
Senior credit facility:
Five-year revolver................ 140.0
Term loan......................... 200.0
Extendable facility............... 200.0
Issuance of common stock(b)......... 32.2
---------
Total............................... $ 588.5
---------
---------
<CAPTION>
USES OF FUNDS
- -----------------------------------------------
<S> <C>
Cash purchase price................. $ 550.0
Estimated transaction costs(a)...... 6.3
Issuance of common stock(b)......... 32.2
---------
Total............................... $ 588.5
---------
---------
</TABLE>
- ------------------------
(a) Excludes $10.8 million in financing costs that were also paid in cash.
(b) Represents approximate fair market value at the time of the MBCI acquisition
of 1,400,000 unregistered shares of our common stock.
19
<PAGE>
USE OF PROCEEDS
We will not receive any cash proceeds from the issuance of the Series B
notes. In consideration for issuing the Series B notes as described in this
prospectus, we will receive in exchange Series A notes in the same principal
amount. The Series A notes will be canceled and we will have no increase in our
indebtedness as a result of the exchange.
The net proceeds from the initial offering of the Series A notes, after
deducting discounts and commissions to the initial purchasers and estimated
expenses of that offering, were approximately $120.8 million. We used the net
proceeds to repay borrowings under our extendable facility. After the
application of the net proceeds of the initial offering of the Series A notes,
we decreased the extendable facility to a $40.0 million facility.
We currently have outstanding $39.2 million under the extendable facility
and have the ability to borrow an additional $0.8 million under the extendable
facility. The extendable facility had an original maturity date of May 3, 1999,
which was extended to May 1, 2000 with respect to all of these borrowings. If
the extended portion of the extendable facility is not repaid by us on or before
May 1, 2000 or further extended by the lenders, we have the option to convert it
to a three-year term note on the same terms. The three-year term note would be
due and payable at the end of the term of the note, but in no event later than
July 1, 2003. The extendable facility currently bears interest at LIBOR plus
1.75%.
CAPITALIZATION
The following table sets forth our capitalization at January 31, 1999, and
as adjusted as of January 31, 1999 to reflect the original sale of the Series A
notes and the application of the net proceeds from that sale. You should read
this table with "Use of Proceeds" and our and Amatek's financial statements
included in this prospectus.
<TABLE>
<CAPTION>
JANUARY 31, 1999
----------------------
ACTUAL AS ADJUSTED
--------- -----------
(IN MILLIONS)
<S> <C> <C>
Total debt, including current portion:
Senior credit facility:
Five-year revolver (1)................................................................... $ 150.0 $ 150.0
Term loan................................................................................ 185.0 185.0
Extendable facility (2).................................................................. 140.0 19.2
Senior subordinated notes.................................................................. -- 125.0
Other debt................................................................................. 1.7 1.7
--------- -----------
Total debt, including current portion.................................................. 476.7 480.9
--------- -----------
Shareholders' equity:
Preferred stock, $1.00 par value; 1,000,000 shares authorized; no shares outstanding....... -- --
Common stock, $0.01 par value; 50,000,000 shares authorized; 18,363,310 issued and
outstanding.............................................................................. 0.2 0.2
Additional paid-in capital................................................................. 94.1 94.1
Retained earnings(3)....................................................................... 141.4 140.9
--------- -----------
Total shareholders' equity............................................................... 235.7 235.2
--------- -----------
Total capitalization..................................................................... $ 712.4 $ 716.1
--------- -----------
--------- -----------
</TABLE>
- ------------------------------
(1) The five-year revolver is a $200.0 million facility and was fully drawable
as of January 31, 1999. At January 31, 1999, we could have borrowed an
additional $48.3 million on an actual and as adjusted basis under the
five-year revolver.
(2) The extendable facility is a $140.0 million facility and was fully drawn on
January 31, 1999. At January 31, 1999, we had no additional availability on
an actual basis and could have borrowed an additional $20.8 million on an as
adjusted basis under the extendable facility.
(3) Retained earnings as adjusted reflects costs of $0.5 million in connection
with the early extinguishment of a portion of the extendable facility.
20
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following Unaudited Pro Forma Condensed Combined Financial Statements
are based on our and Amatek's historical consolidated financial statements
included in this prospectus. Amatek was acquired on May 4, 1998. After the
acquisition date, its results of operations are included in our historical
consolidated financial statements. Our fiscal year ends on October 31. Amatek
had a fiscal year ended December 31.
The Unaudited Pro Forma Condensed Combined Statements of Income for the year
ended October 31, 1998 and the 12-month period ended January 31, 1999, give
effect to the MBCI acquisition as if it had occurred on November 1, 1997. The
Unaudited Pro Forma Condensed Combined Statement of Income for the fiscal year
ended October 31, 1998 combines our results of operations for the fiscal year
ended October 31, 1998 with Amatek's results for the six months ended March 31,
1998. The Unaudited Pro Forma Condensed Combined Statement of Income for the
three months ended January 31, 1998 combines our results of operations for the
three months ended January 31, 1998 with Amatek's results for the three months
ended December 31, 1997. The Unaudited Pro Forma Condensed Combined Statement of
Income for the 12 months ended January 31, 1999 combines our results of
operations for the 12 months ended January 31, 1999 with Amatek's results for
the three months ended March 31, 1998.
The Unaudited Pro Forma Condensed Combined Statements of Income also give
effect to this offering and the application of the net proceeds from the initial
offering of the Series A notes as of November 1, 1997.
The unaudited pro forma adjustments are based upon available information and
upon assumptions and estimates that we believe are reasonable. We accounted for
the MBCI acquisition using the purchase method of accounting.
The pro forma financial statements do not purport to represent what our
financial position or results of operations actually would have been had the
MBCI acquisition actually occurred on November 1, 1997 or to project our
financial position or results of operation for any future date or period.
Furthermore, the pro forma financial statements do not reflect changes that may
occur as the result of post-acquisition activities and other matters.
21
<PAGE>
NCI BUILDING SYSTEMS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
TWELVE MONTHS ENDED OCTOBER 31, 1998
<TABLE>
<CAPTION>
HISTORICAL
---------------------------
<S> <C> <C> <C> <C> <C> <C>
TWELVE SIX
MONTHS ENDED MONTHS ENDED
OCTOBER 31, MARCH 31,
1998 1998 PRO FORMA PRO
------------ ------------ ACQUISITION FORMA OFFERING PRO FORMA
NCI AMATEK(A) ADJUSTMENTS COMBINED ADJUSTMENTS AS ADJUSTED
------------ ------------ ----------- -------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Sales................................... $675,331 $195,695 $ -- $871,026 $ -- $871,026
Cost of sales........................... 497,862 153,306 -- 651,168 -- 651,168
------------ ------------ ----------- -------- ----------- -----------
Gross profit............................ 177,469 42,389 -- 219,858 -- 219,858
Operating expenses...................... 94,040 19,458 4,868(B) 116,513 -- 116,513
(1,853)(B)
Nonrecurring acquisition expenses....... 2,060 -- -- 2,060 -- 2,060
------------ ------------ ----------- -------- ----------- -----------
Income from operations.................. 81,369 22,931 (3,015) 101,285 -- 101,285
Equity income in joint venture.......... 737 14 -- 751 -- 751
Nonrecurring gain....................... -- 3,284 -- 3,284 3,284
Interest expense........................ (20,756) -- (20,257)(C) (42,095) (2,261)(D) (44,558)
(1,082)(C) (202)(D)
Other income............................ 499 761 (408)(E) 852 -- 852
------------ ------------ ----------- -------- ----------- -----------
Income before taxes..................... 61,849 26,990 (24,762) 64,077 (2,463) 61,614
Provision for income taxes.............. 24,531 9,764 (7,361)(F) 26,934 (911)(F) 26,023
------------ ------------ ----------- -------- ----------- -----------
Net income(1)........................... $ 37,318 $ 17,226 $(17,401) $ 37,143 $(1,552) $ 35,591
------------ ------------ ----------- -------- ----------- -----------
------------ ------------ ----------- -------- ----------- -----------
Net income per share:
Basic................................. $ 2.17 -- -- $ 2.07 -- $ 1.99
------------ -------- -----------
------------ -------- -----------
Diluted............................... $ 2.05 -- -- $ 1.97 -- $ 1.89
------------ -------- -----------
------------ -------- -----------
Weighted average number of common
shares:
Basic................................. 17,212 -- 700(G) 17,912 -- 17,912
Diluted............................... 18,192 -- 700(G) 18,892 -- 18,892
EBITDA(2)............................... 103,600 27,518 1,445 132,563 -- 132,563
Depreciation and amortization(3)........ 17,818 3,812 5,950 27,580 202 27,782
Capital expenditures.................... 20,834 10,497 -- 31,331 -- 31,331
</TABLE>
- ------------------------------
(1) Excludes cost of $0.5 million in connection with the early extinguishment of
a portion of the extendable facility.
(2) "EBITDA" consists of net income before interest expense, taxes, depreciation
and amortization, minority interest and nonrecurring gains and expenses. For
the period shown, EBITDA also excludes non-cash employer contributions of
$2.2 million to our 401(k) plan, which we made in shares of our common
stock. EBITDA is not a measure of financial performance under generally
accepted accounting principles, but is presented here to provide additional
information about operations. EBITDA should not be considered as an
alternative to, or more meaningful than, net income or cash flows as an
indicator of operating performance or as a better measure of liquidity.
EBITDA may not be comparable to similarly titled measures of other
companies. You should read the financial statements in this prospectus for
information regarding operating, investing and financing cash flow
activities.
(3) Depreciation and amortization includes deferred financing costs, which are
also included in interest expense, of $1.1 million for the twelve months
ended October 31, 1998 and $2.4 million on a pro forma as adjusted basis.
See Accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements.
22
<PAGE>
NCI BUILDING SYSTEMS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
THREE MONTHS ENDED JANUARY 31, 1998
<TABLE>
<CAPTION>
HISTORICAL
---------------------------
<S> <C> <C> <C> <C> <C> <C>
THREE THREE
MONTHS ENDED MONTHS ENDED
JANUARY 31, DECEMBER 31,
1998 1997 PRO FORMA PRO
------------ ------------ ACQUISITION FORMA OFFERING PRO FORMA
NCI AMATEK(A) ADJUSTMENTS COMBINED ADJUSTMENTS AS ADJUSTED
------------ ------------ ----------- -------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Sales................................... $ 97,323 $111,523 $ -- $208,846 $ -- $208,846
Cost of sales........................... 71,886 84,442 -- 156,328 -- 156,328
------------ ------------ ----------- -------- ----------- -----------
Gross profit............................ 25,437 27,081 -- 52,518 -- 52,518
Operating expenses...................... 16,641 9,828 2,434(B) 27,909 -- 27,909
(994)(B)
------------ ------------ ----------- -------- ----------- -----------
Income from operations.................. 8,796 17,253 (1,440) 24,609 -- 24,609
Equity income in joint venture.......... -- 175 -- 175 -- 175
Nonrecurring gain....................... -- 3,284 -- 3,284 -- 3,284
Interest expense........................ (47) -- (10,128)(C) (10,716) (565)(D) (11,332)
(541)(C) (51)(D)
Other income............................ 699 494 (204)(E) 989 -- 989
------------ ------------ ----------- -------- ----------- -----------
Income before taxes..................... 9,448 21,206 (12,313) 18,341 (616) 17,725
Provision for income taxes.............. 3,396 7,569 (3,655)(F) 7,310 (228)(F) 7,082
------------ ------------ ----------- -------- ----------- -----------
Net income(1)........................... $ 6,052 $ 13,636 $ (8,658) $ 11,030 $ (388) $ 10,643
------------ ------------ ----------- -------- ----------- -----------
------------ ------------ ----------- -------- ----------- -----------
Net income per share:
Basic................................. $ .37 -- -- $ .62 -- $ .60
------------ -------- -----------
------------ -------- -----------
Diluted............................... $ .35 -- -- $ .59 -- $ .57
------------ -------- -----------
------------ -------- -----------
Weighted average number of common
shares:
Basic................................. 16,325 -- 1,400(G) 17,725 -- 17,725
Diluted............................... 17,286 -- 1,400(G) 18,686 -- 18,686
EBITDA(2)............................... 12,267 19,715 790 32,772 -- 32,772
Depreciation and amortization(3)........ 2,205 1,793 2,975 6,973 51 7,024
Capital expenditures.................... 2,135 8,851 -- 10,986 -- 10,986
</TABLE>
- ------------------------------
(1) Excludes cost of $0.5 million in connection with the early extinguishment of
a portion of the extendable facility.
(2) "EBITDA" consists of net income before interest expense, taxes, depreciation
and amortization, minority interest and nonrecurring gains and expenses. For
the period shown, EBITDA also excludes non-cash employer contributions of
$0.6 million to our 401(k) plan, which we made in shares of our common
stock. EBITDA is not a measure of financial performance under generally
accepted accounting principles, but is presented here to provide additional
information about operations. EBITDA should not be considered as an
alternative to, or more meaningful than, net income or cash flows as an
indicator of operating performance or as a better measure of liquidity.
EBITDA may not be comparable to similarly titled measures of other
companies. You should read the financial statements in this prospectus for
information regarding operating, investing and financing cash flow
activities.
(3) Depreciation and amortization includes deferred financing costs, which are
also included in interest expense, of $0.6 million on a pro forma as
adjusted basis.
See Accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements.
23
<PAGE>
NCI BUILDING SYSTEMS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
TWELVE MONTHS ENDED JANUARY 31, 1999
<TABLE>
<CAPTION>
HISTORICAL
---------------------------
<S> <C> <C> <C> <C> <C> <C>
TWELVE THREE
MONTHS ENDED MONTHS ENDED
JANUARY 31, MARCH 31,
1999 1998 PRO FORMA PRO
------------ ------------ ACQUISITION FORMA OFFERING PRO FORMA
NCI AMATEK(A) ADJUSTMENTS COMBINED ADJUSTMENTS AS ADJUSTED
------------ ------------ ----------- -------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Sales................................... $792,355 $ 84,172 $ -- $876,527 $ -- $876,527
Cost of sales........................... 586,046 68,864 -- 654,910 -- 654,910
------------ ------------ ----------- -------- ----------- -----------
Gross profit............................ 206,309 15,308 -- 221,617 -- 221,617
Operating expenses...................... 109,469 9,598 2,434(B) 120,673 -- 120,673
(828)(B)
Nonrecurring acquisition expenses....... 2,060 -- -- 2,060 -- 2,060
------------ ------------ ----------- -------- ----------- -----------
Income from operations.................. 94,780 5,710 (1,606) 98,884 -- 98,884
Equity income in joint venture.......... 757 (161) -- 596 -- 596
Interest expense........................ (30,460) -- (10,128)(C) (41,129) (2,261)(D) (43,592)
(541)(C) (202)(D)
Other income............................ 470 267 (204)(E) 533 -- 533
------------ ------------ ----------- -------- ----------- -----------
Income before taxes..................... 65,547 5,816 (12,479) 58,884 (2,463) 56,421
Provision for income taxes.............. 26,856 2,206 (3,716)(F) 25,346 (911)(F) 24,435
------------ ------------ ----------- -------- ----------- -----------
Net income(1)........................... $ 38,691 $ 3,610 $ (8,763) $ 33,538 $(1,552) $ 31,986
------------ ------------ ----------- -------- ----------- -----------
------------ ------------ ----------- -------- ----------- -----------
Net income per share:
Basic................................. $ 2.19 -- -- $ 1.86 -- $ 1.77
------------ -------- -----------
------------ -------- -----------
Diluted............................... $ 2.08 -- -- $ 1.77 -- $ 1.69
------------ -------- -----------
------------ -------- -----------
Weighted average number of common
shares:
Basic................................. 17,673 -- 350(G) 18,023 -- 18,023
Diluted............................... 18,645 -- 350(G) 18,995 -- 18,995
EBITDA(2)............................... 121,701 7,835 624 130,160 -- 130,160
Depreciation and amortization(3)........ 22,647 2,019 2,975 27,641 202 27,843
Capital expenditures.................... 29,864 1,646 -- 31,510 -- 31,510
</TABLE>
- ------------------------------
(1) Excludes cost of $0.5 million in connection with the early extinguishment of
a portion of the extendable facility.
(2) "EBITDA" consists of net income before interest expense, taxes, depreciation
and amortization, minority interest and nonrecurring gains and expenses. For
the period shown, EBITDA also excludes non-cash employer contributions of
$2.6 million to our 401(k) plan, which we made in shares of our common
stock. EBITDA is not a measure of financial performance under generally
accepted accounting principles, but is presented here to provide additional
information about operations. EBITDA should not be considered as an
alternative to, or more meaningful than, net income or cash flows as an
indicator of operating performance or as a better measure of liquidity.
EBITDA may not be comparable to similarly titled measures of other
companies. You should read the financial statements in this prospectus for
information regarding operating, investing and financing cash flow
activities.
(3) Our depreciation and amortization for the period shown includes deferred
financing costs, which are also included in interest expense, of $1.6
million for the twelve months ended January 31, 1999 and $2.4 million on a
pro forma as adjusted basis.
See Accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements.
24
<PAGE>
NCI BUILDING SYSTEMS, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS
BASIS OF PRESENTATION--The Unaudited Pro Forma Condensed Combined Financial
Statements are presented to give pro forma effect to our acquisition of Amatek.
We have used the purchase method of accounting in preparing the Unaudited Pro
Forma Condensed Combined Financial Statements with respect to our acquisition of
Amatek. The Unaudited Pro Forma Condensed Combined Statement of Income for the
fiscal year ended October 31, 1998 combines our results of operations for the
fiscal year ended October 31, 1998 with Amatek's results for the six months
ended March 31, 1998. The Unaudited Pro Forma Condensed Combined Statement of
Income for the three months ended January 31, 1998 combines our results of
operations for the three months ended January 31, 1998 with Amatek's results for
the three months ended December 31, 1997. The Unaudited Pro Forma Condensed
Combined Statement of Income for the 12 months ended January 31, 1999 combines
our results of operations for the 12 months ended January 31, 1999 with Amatek's
results for the three months ended March 31, 1998. Amatek's results of
operations for the three months ended March 31, 1998 have been restated to
reflect adjustments to revenues and cost of sales of $2.7 million (related to
customer credit memos) and $1.0 million (related to an inventory write-off of
scrap metal), respectively, which were expensed by Amatek in April 1998. The
Unaudited Pro Forma Condensed Combined Statements of Income give effect to the
Amatek acquisition as if it had occurred on November 1, 1997.
(A) Due to the different fiscal year ends of us and Amatek as discussed above,
Amatek's results of operations for the three months ended December 31, 1997
are included in both the Unaudited Pro Forma Condensed Combined Statements
of Income for the three months ended January 31, 1998 and fiscal year ended
October 31, 1998, and Amatek's results of operations for the month ended
April 30, 1998 are excluded from the Unaudited Pro Forma Condensed Combined
Statements of Income for the 12 months ended October 31, 1998 and the 12
months ended January 31, 1999. Amatek's revenues and net income for the
three months ended December 31, 1997 were $111.5 million and $13.6 million,
respectively, which includes a nonrecurring pre-tax gain of $3.3 million
from insurance recoveries related to a plant fire. Amatek's revenues and net
loss for the month ended April 30, 1998 were $37.2 million and $4.0 million,
respectively, which net loss includes a nonrecurring pre-tax charge of $8.6
million related to the acquisition for payments to Amatek management
required due to the change in control of Amatek.
(B) To record additional amortization expense associated with the goodwill
generated from the Amatek acquisition (assigned useful life of 40 years),
offset by elimination of a management incentive charge incurred by Amatek on
a historical basis.
(C) To record additional interest expense and amortization of debt issuance
costs related to debt incurred in connection with the acquisition of Amatek.
(D) To give effect to the issuance of the Series A notes and the application of
the net proceeds of the initial offering of the Series A notes to repay a
portion of the outstanding principal of the extendable facility. Assumes net
proceeds from this offering of $120.8 million and $0.2 million of net
additional deferred financing cost amortization.
(E) To eliminate daily cash investment interest income for the portion of our
excess cash utilized for the acquisition.
(F) To record the tax effect on the pro forma adjustments.
25
<PAGE>
(G) To reflect the purchase of Amatek for consideration of $550.0 million in
cash plus 1,400,000 shares of our common stock valued at $32.2 million
issued to Amatek employees to replace the management incentive plan in place
at Amatek. In addition, there were $6.3 million in transaction costs, which
does not include $10.8 million in financing costs that were also paid in
cash. Goodwill has been calculated as follows:
<TABLE>
<S> <C>
Purchase price:
Cash............................................................ $ 550,000
Equity issued................................................... 32,200
Transaction costs................................................. 6,300
Less: Net assets acquired......................................... 199,000
---------
Goodwill.......................................................... $ 389,500
</TABLE>
26
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
NCI
The selected historical consolidated financial information presented below
for, and as of the end of, each of the years in the five-year period ended
October 31, 1998, is derived from our audited consolidated financial statements.
The selected historical consolidated financial information for, and as of the
end of, the three months ended January 31, 1998 and 1999, is derived from our
unaudited consolidated financial statements. In our opinion, the unaudited
results of operations for, and as of the end of, the interim periods, include
all adjustments, consisting only of normal recurring adjustments, necessary for
a fair presentation of this information. The unaudited consolidated results of
operations for the interim periods are not necessarily indicative of the results
that may be expected for the full fiscal year. The selected historical financial
information is not necessarily indicative of the future results of operations.
This financial information should be read along with "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and our financial
statements included in this prospectus.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED OCTOBER 31, JANUARY 31,
-------------------------------------- --------------
1994 1995 1996 1997 1998 1998 1999
------ ------ ------ ------ ------ ------ ------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Sales........................................ $167.8 $234.2 $332.9 $407.8 $675.3 $ 97.3 $214.3
Cost of sales................................ 124.1 169.8 241.4 299.4 497.9 71.9 160.1
------ ------ ------ ------ ------ ------ ------
Gross profit................................. 43.6 64.4 91.5 108.3 177.5 25.4 54.3
Operating expenses........................... 28.2 38.1 53.1 66.1 94.0 16.6 32.1
Nonrecurring acquisition expenses(1)......... -- -- -- -- 2.1 -- --
------ ------ ------ ------ ------ ------ ------
Income from operations....................... 15.4 26.3 38.4 42.3 81.4 8.8 22.2
Interest expense............................. 0.1 0.1 0.1 0.2 20.8 -- 9.8
Other income................................. 0.6 0.8 1.6 2.0 0.5 0.7 0.7
Joint venture income......................... -- -- -- -- 0.7 -- --
------ ------ ------ ------ ------ ------ ------
Income before income taxes................... 16.0 27.1 39.9 44.1 61.8 9.4 13.1
Provision for income taxes................... 5.7 10.0 15.1 16.2 24.5 3.4 5.7
------ ------ ------ ------ ------ ------ ------
Net income................................... $ 10.3 $ 17.0 $ 24.8 $ 27.9 $ 37.3 $ 6.1 $ 7.4
------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------
Net income per share:
Basic...................................... $ 0.82 $ 1.36 $ 1.60 $ 1.73 $ 2.17 $ .37 $ .41
------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------
Diluted.................................... $ 0.77 $ 1.26 $ 1.51 $ 1.64 $ 2.05 $ .35 $ .39
------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------
Weighted average number of common shares:
Basic...................................... 12.4 12.5 15.5 16.1 17.2 16.3 18.2
Diluted.................................... 13.4 13.5 16.5 17.1 18.2 17.3 19.1
OTHER FINANCIAL DATA:
EBITDA(2).................................... $ 19.0 $ 31.3 $ 47.2 $ 54.1 $103.6 $ 12.3 $ 30.4
Depreciation and amortization(3)............. 2.2 3.2 5.8 7.9 17.8 2.2 7.0
Capital expenditures......................... 5.9 5.8 10.3 11.3 20.8 2.1 11.2
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital.............................. $ 16.9 $ 31.7 $ 52.0 $ 76.8 $ 58.4 $ 84.3 $ 71.9
Property, plant and equipment, net........... 22.2 25.6 42.8 51.2 179.5 51.7 186.3
Total assets................................. 63.4 83.1 158.3 196.3 823.5 193.4 825.9
Total debt................................... 0.4 0.4 1.8 1.7 475.8 4.3 476.7
Shareholders' equity......................... 39.7 57.7 116.2 147.8 223.6 156.0 235.7
</TABLE>
- --------------------------
(1) Nonrecurring acquisition expenses in the third quarter of fiscal 1998
represents severance and relocation expenses related to the consolidation of
components sales and marketing functions, estimated costs associated with
announced plant closures and consolidations and costs associated with the
integration of product lines.
27
<PAGE>
(2) "EBITDA" consists of net income before interest expense, taxes, depreciation
and amortization, minority interest and nonrecurring gains and expenses.
EBITDA also excludes non-cash employer contributions to our 401(k) plan,
which are made in shares of our common stock, as shown for each of the
following periods (in millions):
<TABLE>
<S> <C>
Year ended October 31, 1994............................................................. $ 0.7
Year ended October 31, 1995............................................................. 1.0
Year ended October 31, 1996............................................................. 1.4
Year ended October 31, 1997............................................................. 2.0
Year ended October 31, 1998............................................................. 2.2
Three months ended January 31, 1998..................................................... 0.6
Three months ended January 31, 1999..................................................... 1.0
</TABLE>
EBITDA is not a measure of financial performance under generally accepted
accounting principles, but is presented here to provide additional
information about operations. EBITDA should not be considered as an
alternative to, or more meaningful than, net income or cash flows as an
indicator of operating performance or as a better measure of liquidity.
EBITDA may not be comparable to similarly titled measures of other
companies. You should read the financial statements in this prospectus for
information regarding operating, investing and financing cash flow
activities.
(3) Depreciation and amortization includes deferred financing costs, which are
also included in interest expense, as shown for each of the following
periods (in millions):
<TABLE>
<S> <C>
Year ended October 31, 1994............................................................. --
Year ended October 31, 1995............................................................. --
Year ended October 31, 1996............................................................. --
Year ended October 31, 1997............................................................. --
Year ended October 31, 1998............................................................. $ 1.1
Three months ended January 31, 1998..................................................... --
Three months ended January 31, 1999..................................................... 0.5
</TABLE>
28
<PAGE>
MBCI
The selected historical consolidated financial information presented below
for, and as of the end of, each of the three years in the three-year period
ended December 31, 1997, is derived from the audited consolidated financial
statements of Amatek. The selected historical consolidated financial information
for, and as of the end of, the two years ended December 31, 1994, and the three
months ended March 31, 1997 and 1998, is derived from the unaudited consolidated
financial statements of Amatek. In our opinion, the unaudited results of
operations for, and as of the end of, the interim periods include all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of this information. The unaudited consolidated results of
operations for the interim periods are not necessarily indicative of the results
that may be expected for the full fiscal year. The selected historical financial
information is not necessarily indicative of the future results of operations.
This financial information should be read along with "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Results of
Operations of MBCI" and Amatek's financial statements included in this
prospectus.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
-------------------------------------- --------------
1993 1994 1995 1996 1997 1997 1998
------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
(IN MILLIONS)
STATEMENT OF INCOME DATA:
Sales........................................ $226.5 $279.8 $315.7 $362.9 $408.0 $ 82.5 $ 84.2
Cost of sales................................ 170.8 209.4 234.0 271.3 312.3 63.9 68.9
------ ------ ------ ------ ------ ------ ------
Gross profit................................. 55.7 70.4 81.7 91.6 95.6 18.6 15.3
Operating expenses........................... 20.7 24.8 24.9 29.7 36.6 8.5 9.6
------ ------ ------ ------ ------ ------ ------
Income from operations....................... 35.0 45.6 56.8 61.9 59.0 10.1 5.7
Interest income, net......................... 0.1 0.7 1.4 1.9 2.0 0.3 0.3
Equity in income (loss) of DOUBLECOTE........ -- -- (1.3) (0.3) 0.1 (0.2) (0.2)
Unusual/nonrecurring gain(1)................. -- -- -- -- 3.3 -- --
------ ------ ------ ------ ------ ------ ------
Income before income taxes................... 35.1 46.3 56.9 63.5 64.3 10.2 5.8
Provision (benefit) for income taxes......... 14.5 20.5 23.0 24.9 24.6 4.1 2.2
------ ------ ------ ------ ------ ------ ------
Net income................................... $ 20.6 $ 25.8 $ 33.9 $ 38.6 $ 39.7 $ 6.1 $ 3.6
------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------
OTHER FINANCIAL DATA:
EBITDA(2).................................... $ 38.3 $ 49.9 $ 61.0 $ 69.0 $ 67.9 $ 11.8 $ 7.8
Deprecation and amortization................. 3.2 3.4 4.1 5.5 6.8 1.6 2.0
Capital expenditures......................... 5.2 13.1 12.5 21.1 27.2 5.8 1.6
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital.............................. $ 20.4 $ 27.0 $ 28.0 $ 35.0 $ 72.3 $ 52.0 $ 76.1
Property, plant and equipment, net........... 44.9 54.7 63.2 84.7 104.1 89.0 104.0
Total assets................................. 96.6 137.8 166.9 220.5 249.8 210.7 243.2
Total debt................................... 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Shareholders' equity......................... 66.4 93.7 126.5 165.0 204.8 171.1 208.4
</TABLE>
- --------------------------
(1) Unusual/nonrecurring gain reflects insurance recoveries for fire damage to
Lubbock, Texas plant in 1997.
(2) "EBITDA" consists of net income before interest expense, taxes, depreciation
and amortization, minority interest and nonrecurring gains and expenses.
EBITDA is not a measure of financial performance under generally accepted
accounting principles, but is presented here to provide additional
information about operations. EBITDA should not be considered as an
alternative to, or more meaningful than, net income or cash flows as an
indicator of operating performance or as a better measure of liquidity.
EBITDA may not be comparable to similarly titled measures of other
companies. You should read the financial statements in this prospectus for
information regarding operating, investing and financing cash flow
activities.
29
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ ALONG WITH OUR AND
AMATEK'S FINANCIAL STATEMENTS INCLUDED IN THIS PROSPECTUS.
We are one of North America's largest integrated manufacturers of metal
products for the building industry, with 39 manufacturing and distribution
facilities located in 17 states and Mexico. We sell metal components and
engineered building systems, offering one of the most extensive metal product
lines in the building industry with well-recognized brand names. Our
consolidated results of operations for the year ended October 31, 1998 reflect
combined NCI and MBCI operations since May 4, 1998. Following completion of the
MBCI acquisition, we immediately began integrating our and MBCI's operations by
eliminating overlapping costs and consolidating our and MBCI's components
operations, including sales and marketing functions. This consolidation has
resulted in the closure of one plant and the reduction in operations at two
other plants currently targeted for closure by the end of 1999. As a result of
the MBCI acquisition, our product mix has shifted from engineered building
systems to metal components. Components sales constituted approximately
two-thirds of sales in fiscal 1998 as compared to approximately one-third of
sales in fiscal 1997.
RESULTS OF OPERATIONS OF NCI
The following table presents, as a percentage of sales, selected
consolidated financial data for the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED OCTOBER 31, JANUARY 31,
------------------------------- --------------------
<S> <C> <C> <C> <C> <C>
1996 1997 1998 1998 1999
--------- --------- --------- --------- ---------
Sales........................................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales................................................... 72.5 73.4 73.7 73.9 74.7
--------- --------- --------- --------- ---------
Gross profit.................................................... 27.5 26.6 26.3 26.1 25.3
Operating expenses.............................................. 16.0 16.3 13.9 17.1 14.9
Nonrecurring acquisition expenses............................... 0.0 0.0 0.3 0.0 0.0
--------- --------- --------- --------- ---------
Income from operations.......................................... 11.5 10.3 12.1 9.0 10.4
Interest expense................................................ 0.0 0.0 3.1 0.0 4.6
Other income.................................................... 0.5 0.5 0.2 0.7 0.3
--------- --------- --------- --------- ---------
Income before income taxes...................................... 12.0 10.8 9.2 9.7 6.1
Provision for income taxes...................................... 4.5 4.0 3.6 3.5 2.6
--------- --------- --------- --------- ---------
Net income...................................................... 7.5% 6.8% 5.6% 6.2% 3.5%
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
THREE MONTHS ENDED JANUARY 31, 1999 COMPARED TO THREE MONTHS ENDED JANUARY 31,
1998
Sales in the first quarter of fiscal 1999 increased by $117.0 million, or
120%, compared to the first quarter of fiscal 1998. Substantially all of this
increase resulted from the inclusion of MBCI, which we acquired in May 1998, in
the first quarter of fiscal 1999. Because we combined our component business
with MBCI, consolidated our component sales and marketing personnel and
transferred the operations of three of our manufacturing facilities to MBCI's
manufacturing facilities shortly after the completion of the transaction, it is
difficult to determine the exact impact on sales of the acquisition. We believe
that our business grew approximately 10% in the first quarter of fiscal 1999.
This internal growth resulted from expansion of our sales efforts and our
authorized builder organization.
30
<PAGE>
Gross profit for the first quarter increased $28.8 million, or 113%,
compared to the prior years' first quarter. Gross margin percentage declined
from 26.1% last year to 25.3% in the first quarter of fiscal 1999. The increased
mix of component sales versus building system sales accounted for this decline,
since component gross margin percentage is lower than building systems gross
margin percentage. This change resulted primarily from the acquisition of MBCI.
Due to the integration of MBCI's component operations with our component
operations after the acquisition, intercompany sales between units and the
transfer of operational control of several manufacturing facilities, it is not
possible to calculate the separate impact of MBCI on our gross margin
percentage.
Operating expenses, which consist of engineering, selling and administrative
costs, increased $15.4 million, or 93%, in the first quarter of fiscal 1999
compared to the same period last year. As a percentage of sales, operating
expenses were 14.9% compared to 17.1% a year ago. The dollar increase was
primarily due to the inclusion of MBCI in the first quarter of fiscal 1999. As a
percentage of sales, operating expenses declined due to the spread of the fixed
cost element over the higher sales base and a lower level of operating expenses
in component operations as compared to building systems operations.
Interest expense increased by $9.7 million in the first quarter of fiscal
1999 which resulted from the funds borrowed to finance the MBCI acquisition in
May 1998.
Income before income taxes increased by $3.7 million, or 39%, as a result of
the increased sales volume, and improved operating expense percentages offset by
the increased interest expense for the period. As a percentage of sales, income
before taxes was 6.1% in the first quarter of fiscal 1999 compared to 9.7% in
the same quarter a year ago. The decline was primarily a result of the interest
expense incurred in the first quarter of fiscal 1999.
Provision for income taxes increased by 68.5% in the first quarter of fiscal
1999, reflecting an effective tax rate of 43.5% in the first quarter compared to
35.9% for the same period last year. The increase in effective tax rate resulted
primarily from nondeductible amortization of goodwill associated with the MBCI
acquisition and increases in state income taxes.
FISCAL 1998 COMPARED TO FISCAL 1997
Sales in fiscal 1998 increased by $267.8 million, or 66%, compared to fiscal
1997. The MBCI acquisition on May 4, 1998 accounted for a substantial portion of
this increase. It is difficult to determine the exact impact on sales of the
MBCI acquisition. We believe that our business grew approximately 9% in fiscal
1998. This internal growth resulted from geographical expansion of our sales
efforts and our authorized builder organization.
Gross profit for fiscal 1998 increased by $69.1 million, or 64%, compared to
fiscal 1997. Gross profit dollars increased at a slightly slower rate than sales
because components typically have a lower gross profit percentage than building
systems. This accounted for the slight decline in gross profit percent to 26.3%
in fiscal 1998 from 26.6% in fiscal 1997. We believe that the internal growth of
gross profit was similar to the sales increase mentioned above.
Operating expenses include engineering, selling and general and
administrative costs. Engineering expense is associated only with the sale of
engineered building systems. This expense increased by $1.2 million, or 9%, in
fiscal 1998 compared to fiscal 1997. This increase is in line with the growth of
engineered building systems sales. Selling, general and administrative expenses
increased $28.8 million, or 55%, in fiscal 1998 compared to fiscal 1997. These
expenses grew at a slower rate than sales because the component business has a
lower level of selling expense associated with it. As a result, the percentage
of selling, general and administrative expenses to sales declined to 12.1% in
fiscal 1998 from 13% in fiscal 1997.
31
<PAGE>
The nonrecurring acquisition expense of $2.1 million represented the
one-time cost of severance and relocation expenses related to the consolidation
of component sales and marketing functions, estimated costs associated with
announced plant closures and consolidations and costs associated with the
integration of product lines.
Interest expense increased in fiscal 1998 to $20.8 million compared to $0.2
million in fiscal 1997 reflecting the cost of borrowed funds to finance the MBCI
acquisition and the amortization of debt issuance costs related to those
borrowings. On May 4, 1998, we borrowed $540.0 million to finance the MBCI
acquisition and had outstanding total debt of $475.7 million at the end of
October 1998. We entered into an interest rate swap agreement to fix the
interest on $200.0 million ($192.5 million outstanding as of October 31, 1998)
of this amount at 5.9% plus the applicable margin on borrowings which is
currently 1.75%. The remainder of the debt bears interest at a floating rate.
Joint venture income of $737,000 in fiscal 1998 primarily represents the 50%
ownership in a coil coating plant which we acquired as part of the MBCI
acquisition.
Income before income taxes increased by $17.7 million, or 40%, in fiscal
1998. The increase was less than the sales increase as a result of the increase
in interest expense, amortization of goodwill expense and the nonrecurring
acquisition expenses.
Provision for income taxes increased by 51% in fiscal 1998, reflecting an
effective tax rate of 39.7% in fiscal 1998 compared to 36.8% in fiscal 1997. The
increase in effective tax rate resulted primarily from nondeductible
amortization of goodwill associated with the MBCI acquisition.
FISCAL 1997 COMPARED TO FISCAL 1996
Sales in fiscal 1997 increased by $74.9 million, or 22%, compared to fiscal
1996. The acquisition of the facilities of Carlisle Engineered Metals in
February 1997 and the inclusion of Mesco Metal Buildings Division for the whole
fiscal year 1997 accounted for approximately $23.0 million of this increase. The
remaining increase of approximately $50.0 million, or 15%, resulted from growth
of sales in our door division due to geographic expansion, building systems
sales growth due to increased builder recruitment and a full year's operation of
our Atwater plant and growth in our components division.
Gross profit increased by $16.8 million, or 18%, compared to fiscal 1996.
Gross profit dollars increased at a slower rate than sales due to price
competition earlier in the year, bad weather in the first half of 1997, which
impacted plant efficiencies, and slightly higher raw material costs. In
addition, growth in the component and door sales, which have lower gross margins
than building systems, impacted gross profit. As a result, the gross profit
percentage in 1997 declined from 27.5% to 26.6%.
Operating expenses increased by $13.0 million, or 24%, compared to fiscal
1996. These expenses increased at a slightly higher rate than sales due to the
additional expenses resulting from the acquisition of Carlisle Engineered
Metals, additional sales expense to support the marketing of steel frame housing
and continued geographic expansion of our sales and marketing effort.
Interest expense increased $55,000 in fiscal 1997 as a result of the $1.5
million debenture issued in April 1996 being outstanding all of 1997. Other
income, which consists primarily of interest income, increased by $413,000 in
fiscal 1997. This increase was the result of a higher level of cash invested
during the year.
Income before income taxes increased by $4.2 million or 10.6%, in fiscal
1997. Income before income taxes was impacted by higher cost of sales and higher
operating expenses as a percentage of sales.
32
<PAGE>
Provision for income taxes increased by 7.7% in fiscal 1997 and decreased as
a percent of sales from 4.5% in fiscal 1996 to 4% in fiscal 1997. During the
year, we changed the corporate structure of some of our operating units which
reduced the amount of state income tax paid by these units.
RESULTS OF OPERATIONS OF MBCI
The following table presents, as a percentage of sales, selected
consolidated financial data of MBCI for the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER ENDED
31, MARCH 31,
-------------------- --------------------
<S> <C> <C> <C> <C>
1996 1997 1997 1998
--------- --------- --------- ---------
Sales..................................................................... 100.0% 100.0% 100.0% 100.0%
Cost of sales............................................................. 74.8 76.6 77.4 81.8
--------- --------- --------- ---------
Gross profit.............................................................. 25.2 23.4 22.6 18.2
Operating expenses........................................................ 8.2 9.0 10.4 11.4
--------- --------- --------- ---------
Income from operations.................................................... 17.0 14.4 12.2 6.8
Interest income, net...................................................... 0.6 0.5 0.3 0.3
Unusual/nonrecurring gain................................................. 0.0 0.8 0.0 0.0
Other income (expense).................................................... (0.1) 0.0 (0.2) (0.2)
--------- --------- --------- ---------
Income before income taxes................................................ 17.5 15.7 12.3 6.9
Provision for income taxes................................................ 6.9 6.0 4.9 2.6
--------- --------- --------- ---------
Net income................................................................ 10.6% 9.7% 7.4% 4.3%
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THREE MONTHS ENDED MARCH 31, 1997
Sales for the three months ended March 31, 1998 increased by $1.7 million,
or 2%, from the same period in 1997. The additional revenues were attributable
to increased metal components and hot roll coil sales. Light gauge steel
painting revenues declined 14% as major customers attempted to reduce
inventories. The increase in revenues was offset by an aggregate of $2.7 million
in credit memos written to customers in April 1998 to resolve invoices with
questioned or disputed items. Sales for the three months ended March 31, 1998
have been restated to reflect this adjustment.
Gross profit decreased by $3.3 million, or 18%, in the first quarter of
1998, and decreased as a percentage of sales from 22.6% for the same period in
1997 to 18.2%. This decrease in gross profit resulted primarily from the
adjustment of $1.0 million resulting from an inventory write-off of partial
metal coils in April 1998. Cost of sales for the three months ended March 31,
1998 have been restated to reflect this inventory adjustment. The decrease in
gross profit was also due to a change in product mix as higher margin steel
painting decreased as a percentage of total sales.
Operating expenses increased $1.1 million, or 12%, for the first three
months of 1998 due to costs of opening new plants in the western United States
in 1997. These expenses were not offset by related sales, since the new plants
did not make a significant revenue contribution due to both the seasonality of
the business and limited operations in the period.
Other income decreased slightly in the first three months of 1998 due to
losses in MBCI's DOUBLECOTE joint venture offset by interest income on advances
to DOUBLECOTE.
1997 COMPARED TO 1996
Sales in 1997 increased by $45.1 million, or 12%, as MBCI furthered its
expansion into the western United States metal components market during the
year, opening plants in Boise, Idaho, Salt Lake
33
<PAGE>
City, Utah and Phoenix, Arizona. MBCI also expanded its architectural panel
capacity in the Memphis, Tennessee plant. Total metal components sales rose by
$33.5 million, or 11%. The largest increases came in commercial/industrial and
agricultural products. Metal coating and painting sales increased by $11.6
million, or 20%, as MBCI increased its efforts to expand prepainted packaged
coil sales. MBCI did not realize significant revenues from the new metal
components plants during the year as markets were being developed.
Gross profit increased by $4.1 million, or 4%, in 1997 compared to 1996. The
gross margin percentage declined from 25.2% in 1996 to 23.4% in 1997, primarily
because of competitive pressures in the metal components sector. The strength of
the construction market encouraged competition to add capacity and attempt to
expand market share with pricing. Metal coating and painting gross margins also
declined due to a change in product mix. Prepainted coil package sales, which
have lower gross margins than toll coil coating, increased as a percentage of
total metal coating and painting sales.
Operating expenses increased by $7.0 million, or 24%, in 1997 compared to
1996 due primarily to plant additions in Utah, Idaho and Arizona. This expansion
into the western U.S. market required additional sales and management personnel
and related administrative costs.
In February 1997, the Lubbock, Texas metal components plant sustained major
fire damage. The facility was rebuilt and resumed operations in July 1997.
Insurance recoveries over cost basis resulted in a nonrecurring gain of $3.3
million. Other income increased by $387,000 in 1997 based on positive results in
MBCI's DOUBLECOTE joint venture.
QUARTERLY RESULTS
The metal components and engineered building systems businesses, as well as
the construction industry in general, are seasonal in nature. Sales normally are
lower in the first calendar quarter of each year compared to the other three
quarters because of unfavorable weather conditions for construction and typical
business planning cycles affecting construction. This seasonality adversely
affects our results of operations for the first two fiscal quarters.
The following table sets forth our selected unaudited quarterly financial
information for the 1996, 1997 and 1998 fiscal years and the first quarter of
1999.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------------------------------------------------------------------------------------
FISCAL
FISCAL 1996 FISCAL 1997 FISCAL 1998 1999
---------------------------------- ---------------------------------- ---------------------------------- ---------
JAN. 31 APR. 30 JUL. 31 OCT. 31 JAN. 31 APR. 30 JUL. 31 OCT. 31 JAN. 31 APR. 30 JUL. 31 OCT. 31 JAN. 31
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sales......... $67.4 $72.2 $92.0 $101.4 $82.9 $91.7 $112.5 $120.8 $97.3 $95.3 $229.5 $253.1 $214.3
Gross
profit...... 17.4 19.5 25.5 29.1 22.4 23.7 29.8 32.5 25.4 26.6 60.7 64.7 54.3
Income from
operations.. 6.1 7.7 11.2 13.4 7.9 7.9 12.2 14.3 8.8 9.2 28.6 34.8 22.2
Net income.... 4.0 5.1 7.2 8.6 5.2 5.2 8.0 9.6 6.1 6.4 11.1 13.8 7.4
</TABLE>
The following table sets forth selected unaudited quarterly financial
information for MBCI for 1996, 1997 and the first quarter of 1998.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------------------------------------------------------------------------
1996 1997 1998
------------------------------------- -------------------------------------- -------
MAR. 31 JUN. 30 SEP. 30 DEC. 31 MAR. 31 JUN. 30 SEPT. 30 DEC. 31 MAR. 31
------- ------- ------- ------- ------- ------- -------- ------- -------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sales......................... $69.1 $92.3 $102.3 $99.2 $82.5 $103.6 $110.4 $111.5 $84.2
Gross profit.................. 17.6 23.5 25.7 24.7 18.6 24.8 25.2 27.1 15.3
Income from operations........ 11.9 17.0 17.1 15.9 10.1 16.1 16.2 16.6 5.7
Net income.................... 7.2 11.2 10.4 9.8 6.1 10.0 10.1 13.6 3.6
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
At January 31, 1999, we had working capital of $71.9 million compared to
$58.4 million at October 31, 1998. The increase in working capital resulted
primarily from a reduction of current liabilities related to the payment in the
first quarter of accrued expenses for year-end incentive payments, a reduction
in trade accounts payable and income tax payments made.
34
<PAGE>
At October 31, 1998, we had working capital of $58.4 million compared to
$76.8 million on October 31, 1997. The decrease of $18.4 million was primarily
the result of the payment of the cash portion of the purchase price for the MBCI
acquisition.
CASH FLOW
We have historically funded our operations with cash flow from operations,
bank borrowings and the sale of common stock. We believe internal cash
generation has been aided by a compensation program under which bonuses are
earned based on achieving specified return on assets goals. This program
encourages management of the balance sheet as well as the income statement.
During the first quarter of fiscal 1999, we generated $15.2 million in cash
flow from operations before changes in working capital components. During fiscal
1998, we generated $65.7 million in cash flow from operations before changes in
working capital components.
Based on our current capitalization, we expect future cash flow from
operations and availability of alternative sources of financing will be
sufficient to provide adequate liquidity for the foreseeable future. Liquidity
in future periods will be dependent on internally generated cash flows, the
ability to obtain adequate financing for capital expenditures and expansion when
needed and the amount of increased working capital necessary to support expected
growth. We can give you no assurance that liquidity would not be impacted by a
decline in general economic conditions and higher interest rates, which would
affect our ability to obtain external financing.
LONG-TERM DEBT
On May 4, 1998, we completed the MBCI acquisition and incurred debt of
$540.0 million under our senior credit facility.
In March 1998, we entered into a $600.0 million senior credit facility. Our
senior credit facility originally consisted of (1) the five-year revolver of up
to $200.0 million, of which up to $20.0 million was available for commercial and
standby letters of credit, (2) the term loan, a five-year term loan facility in
the principal amount of up to $200.0 million and (3) the extendable facility of
up to $200.0 million. The initial funding of $140.0 million under the five-year
revolver, $200.0 million under the term loan and $200.0 million under the
extendable facility occurred on May 4, 1998, the date on which we acquired MBCI.
In addition to funding the MBCI acquisition, borrowings under our senior credit
facility may be used for working capital and other general corporate purposes.
During fiscal 1998, we reduced our senior credit facility to $540.0 million to
better reflect future needs. At January 31, 1999, we had outstanding borrowings
of $150.0 million under the five-year revolver, $185.0 million under the term
loan and $140.0 million under the extendable facility.
The net proceeds from the initial offering of the Series A notes were $120.8
million. We used the net proceeds to repay borrowings under our extendable
facility.
Loans and letters of credit under the five-year revolver will be available,
and amounts repaid under the five-year revolver may be reborrowed, at any time
until July 1, 2003, if we fulfill specified conditions precedent, including the
absence of a default under our senior credit facility. The term loan was fully
drawn down as of the MBCI acquisition date, and amounts repaid under the term
loan may not be reborrowed. Our obligations under our senior credit facility are
secured by the pledge of all capital stock, partnership interests and other
equity interests of our domestic subsidiaries. All obligations under our senior
credit facility are also guaranteed by each of those subsidiaries and our
operating limited partnerships. Our senior credit facility contains customary
financial and restrictive covenants with amounts and ratios negotiated between
us and our lenders.
Our senior credit facility provides for loans bearing interest, at our
option, as follows: (1) base rate loans, base rate plus a margin that ranges
from 0% to 0.5%; and (2) LIBOR loans, adjusted LIBOR plus a margin that ranges
from 0.75% to 2%. The base rate is the higher of NationsBank, N.A.'s prime
35
<PAGE>
rate or the overnight federal funds rate plus 0.5%, and adjusted LIBOR is the
applicable London interbank offered rate adjusted for reserves, if any. In each
case, the margin is adjusted based on our most recently determined ratio of
funded debt to EBITDA, as it is defined in our senior credit facility. Our
senior credit facility currently bears interest at LIBOR plus 1.75%. We
currently have an interest rate swap agreement in place, which limits our
variable interest rate exposure on the term loan. The agreement applies to the
full principal amount of the term loan and caps interest on LIBOR loans at 5.9%
plus the applicable LIBOR margin. In the first quarter of fiscal 1999, our
effective interest rate on variable rate loans was 7.6%.
Loans under the five-year revolver mature on July 1, 2003. Loans under the
term loan are payable in successive quarterly installments beginning on October
31, 1998, in quarterly payments beginning with $7.5 million and gradually
increasing to $12.5 million on the maturity date. The extendable facility had an
original maturity date of May 3, 1999, which was extended to May 1, 2000 with
respect to all of these borrowings. If the extended portion of the extendable
facility is not repaid by us on or before May 1, 2000 or further extended by the
lenders, we have the option to convert it to a three-year term note on the same
terms. Borrowings under our senior credit facility may be prepaid and voluntary
reductions of the unused portion of the five-year revolver may be made at any
time, in agreed upon minimum amounts, without premium or penalty but we may
incur LIBOR breakage costs. We are required to make mandatory prepayments on our
senior credit facility upon the occurrence of specified events, including the
sale of assets and the issuance and sale of equity securities.
As of January 31, 1999, we had $475.0 million outstanding under our senior
credit facility and could have borrowed an additional $48.3 million under the
five-year revolver. Total debt at January 31, 1999 also included $1.7 million,
representing a convertible debenture issued in connection with the Mesco
acquisition and an industrial revenue bond. We used the net proceeds of the
initial offering to repay $120.8 million of the outstanding principal balance of
the extendable facility.
CAPITAL EXPENDITURES
During the first quarter of fiscal 1999, we spent $11.1 million in capital
additions for plant expansion, maintenance, capital replacements and
improvements and the development of new management information systems. We plan
to spend approximately $27.0 million in capital additions in fiscal 1999. Delays
or cancellation of planned projects could increase or decrease capital spending
from the amounts currently anticipated. During fiscal 1998, we spent $20.8
million in capital additions primarily for plant expansion and the development
of new management information systems. We also spent $15.5 million for the
acquisition of California Finished Metals, Inc., a coil painting facility
located in California.
Acquisitions of additional assets and businesses are expected to continue to
be an important part of our strategy for growth. We may need to obtain
additional debt and/or equity financing to fund future acquisitions.
INFLATION
Inflation has not significantly affected our financial position or
operations. Metal components and engineered building systems sales are affected
more by the availability of funds for financing construction than interest
rates. We can give you no assurance that inflation or interest rates will not
fluctuate significantly, either or both of which could have an adverse effect on
our operations.
ACCOUNTING STANDARDS
In June 1997, the FASB issued Statement No. 131, DISCLOSURE ABOUT SEGMENTS
OF AN ENTERPRISE AND RELATED INFORMATION, which is effective for our fiscal year
ending October 31, 1999. We are evaluating the segments that will be reported
under Statement No. 131.
36
<PAGE>
In June 1998, the FASB issued Statement No. 133, ACCOUNTING FOR DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES, which requires companies to recognize all
derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. Statement No. 133 is
effective for fiscal years beginning after June 15, 1999. We do not expect the
adoption of Statement No. 133 to have a material impact on our financial
position or results of operations.
IMPACT OF THE YEAR 2000 ISSUE
The year 2000 issue is the result of computer programs having been written
using two digits rather than four to define the applicable year. Any computer
programs that have date-sensitive software may recognize a date using "00" as
the year 1900 rather than the year 2000. This could result in a system failure
or miscalculations causing disruptions of operations, including a temporary
inability to process transactions, send invoices or engage in similar normal
business activities.
We have conducted a review of our computer systems to identify the systems
that could be affected by the year 2000 issue and are implementing our plan to
attempt to ensure that our MIS and computer software are year 2000 compliant.
This review is part of our overall upgrade of our MIS, which is currently in
progress and includes the installation of new systems. As a result, we have no
separate budget for year 2000 compliance. Expenses relating to reviewing and
assessing systems are included in historical operating expenses as part of
management information expenses and have not been separately identified. We
believe that with installation of the new systems, conversion to new software
and modifications to existing software, the year 2000 issue will pose no
significant operational problems for us. We expect to complete the MIS upgrade,
all new installations, conversions and necessary systems modifications and
conversions by early fall 1999. We cannot assure you, however, that we will be
able to install and maintain year 2000 compliant MIS and software. We do not
have a contingency plan with respect to the year 2000 issue if the MIS upgrade
is not completed or is delayed beyond the end of 1999. Our failure to address
adequately, and in a timely manner, the year 2000 issue, including ensuring that
our MIS and software are year 2000 compliant, could have a material adverse
effect on our business, results of operations and financial condition.
To date, we have not identified any information technology assets under our
control that present a material risk of not being year 2000 ready or for which a
suitable alternative cannot be implemented or is not being implemented. As our
MIS upgrade is implemented, we may identify assets that present a risk of a year
2000-related disruption. It is also possible that a disruption could have a
material adverse effect on our business, financial condition and results of
operations.
We are currently discussing with our vendors and customers the possibility
of any year 2000 interface difficulties that may affect us. The ability of third
parties with whom we transact business to address adequately their year 2000
issue is, however, outside of our control. If any third parties who provide
goods or services that are critical to our business activities fail to
appropriately address their year 2000 issues, there could be a material adverse
effect on our business, results of operations and financial condition.
MARKET RISK DISCLOSURE
We face market risk exposure related to changes in interest rates on our
senior credit facility. These instruments carry interest at an agreed upon
percentage point spread from either the prime interest rate or LIBOR. Under our
senior credit facility, we may, at our option, fix the interest rate for some of
our borrowings based on a spread over LIBOR for 30 days to six months. Of the
amount outstanding under our senior credit facility at January 31, 1999, $185.0
million is covered by an interest rate swap agreement that effectively fixes the
interest rate at 5.9% plus the applicable margin on borrowings. This fixed rate
was 7.6% at January 31, 1999. Based on this balance, an immediate change of 1%
in the interest rate would cause a change in interest expense of approximately
$2.9 million on an annual basis. Our objective in maintaining these variable
rate borrowings is the flexibility obtained regarding early repayment without
penalties and lower overall cost as compared with fixed-rate borrowings.
37
<PAGE>
INDUSTRY OVERVIEW
The building industry encompasses a broad range of metal products,
principally composed of steel, sold through a variety of distribution channels
for use in diverse applications. These metal products include metal components
and engineered building systems.
METAL COMPONENTS
Manufacturers of metal components for the building industry supply
pre-formed components, including roof and wall panels, doors, partitions,
related trim, accessories and other metal components used in engineered building
systems and other repair, retrofit and new construction applications for
commercial, industrial, agricultural, governmental, community and residential
uses. Metal components are used in a wide variety of construction applications,
including purlins and girts, roofing, walls, doors, trim and other parts of
traditional buildings, as well as in architectural applications and engineered
building systems. We estimate the metal components market including roofing
applications to be a multi-billion dollar market, although market data is
limited. We believe that the metal components business is less affected by
economic cycles than the engineered building systems business due to the use of
metal components in repair and retrofit applications. We believe that metal
products have gained and continue to gain a greater share of new construction
and repair and retrofit markets due to increasing acceptance and recognition of
the benefits of metal products in building applications.
Metal roofing accounts for a significant portion of the overall metal
components market, but only approximately 6% of total annual roofing market
expenditures, estimated at over $21.0 billion based on available industry
information. As a result, we believe that significant opportunities exist for
metal roofing, with its advantages over conventional roofing materials, to
increase its overall share of this market. Metal roofing systems have several
advantages over conventional roofing systems, including the following:
- LOWER LIFECYCLE COST. The total cost over the life of metal roofing
systems is lower than that of conventional roofing systems for both new
construction and retrofit roofing. For new construction, the cost of
installing metal roofing is greater than the cost of conventional roofing.
Yet, the longer life and lower maintenance costs of metal roofing make the
cost more attractive. For retrofit roofing, although installation costs
are 60-70% higher for metal roofing due to the need for a sloping support
system, the lower ongoing costs more than offset the initial cost.
- INCREASED LONGEVITY. Metal roofing systems generally last for 20 years
without requiring major maintenance or replacement. This compares to five
to ten years for conventional roofs. The cost of leaks and roof failures
associated with conventional roofing can be very high, including damage to
building interiors and disruption of the functional usefulness of the
building. Metal roofing prolongs the intervals between costly and
time-consuming repair work.
- ATTRACTIVE AESTHETICS AND DESIGN FLEXIBILITY. Metal roofing systems allow
architects and builders to integrate colors and geometric design into the
roofing of new and existing buildings, providing an increasingly
fashionable means of enhancing a building's aesthetics. Conventional
roofing material is generally tar paper or a gravel surface, and building
designers tend to conceal roofs made with these materials.
ENGINEERED BUILDING SYSTEMS
Engineered building systems consist of engineered structural beams and
panels that are welded and roll formed in a factory and shipped to a
construction site complete and ready for assembly. Engineered building systems
manufacturers design an integrated system that meets applicable building code
requirements. These systems consist of primary structural framing, secondary
structural members like purlins and girts and covering for roofs and walls. Over
the last 15 years, engineered building
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systems have significantly increased penetration of the market for
nonresidential low rise structures and are being used in a broad variety of
other applications. According to the Metal Building Manufacturers Association,
reported sales of engineered building systems have increased from approximately
$1.5 billion in 1993 to $2.7 billion in 1998. We believe this increase has
resulted primarily from (1) the significant cost advantages offered by these
systems, (2) increased architectural acceptance of engineered building systems
for construction of commercial and industrial building projects, (3) advances in
design versatility and production processes and (4) a favorable economic
environment. We believe the cost of an engineered building system generally
represents approximately 15-20% of the total cost of constructing a building,
which includes land cost, labor, plumbing, electrical, heating and air
conditioning systems installation and interior finish. Technological advances in
products and materials, as well as significant improvements in engineering and
design techniques, have led to the development of structural systems that are
compatible with more traditional construction materials. Architects and
designers now often combine an engineered building system with masonry, glass
and wood exterior facades to meet the aesthetic requirements of customers while
preserving the inherent characteristics of engineered building systems. As a
result, the uses for engineered building systems now include office buildings,
showrooms, retail stores, banks, schools, warehouses, factories and distribution
centers, and government and community centers for which aesthetics and
architectural features are important considerations of the end users.
In our marketing efforts, we and other major manufacturers generally
emphasize the following characteristics of engineered building systems to
distinguish them from other methods of construction:
- SHORTER CONSTRUCTION TIME. In many instances, it takes less time to
construct an engineered building than other building types. In addition,
because most of the work is done in the factory, the likelihood of weather
interruptions is reduced.
- MORE EFFICIENT MATERIAL UTILIZATION. The larger engineered building
systems manufacturers use computer-aided analysis and design to fabricate
structural members with high strength-to-weight ratios, minimizing raw
materials costs.
- LOWER CONSTRUCTION COSTS. The in-plant manufacture of engineered building
systems, coupled with automation, allows the substitution of less
expensive factory labor for much of the skilled on-site construction labor
otherwise required for traditional building methods.
- GREATER EASE OF EXPANSION. Engineered building systems can be modified
quickly and economically before, during or after the building is completed
to accommodate all types of expansion. Typically, an engineered building
system can be expanded by removing the end or side walls, erecting new
framework and adding matching wall and roof panels.
- LOWER MAINTENANCE COSTS. Unlike wood, metal will not deteriorate because
of cracking, rot or insect damage. Furthermore, factory-applied roof and
siding panel coatings resist cracking, peeling, chipping, chalking and
fading.
CONSOLIDATION
Over the last several years, there has been consolidation in the metal
components and engineered building systems industry, which includes a large
number of small local and regional firms. We believe that this industry will
continue to consolidate, driven by the needs of manufacturers to increase
manufacturing capacity, achieve greater process integration and add geographic
diversity to meet customers' product and delivery needs, improve production
efficiency and manage costs.
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BUSINESS
OVERVIEW
We are one of North America's largest integrated manufacturers of metal
products for the nonresidential building industry. We operate 39 manufacturing
and distribution facilities located in 17 states and Mexico. We sell metal
components and engineered building systems, offering one of the most extensive
metal product lines in the building industry with well-recognized brand names.
We believe that our leading market positions and strong track record of growth
in sales and EBITDA have resulted from our focus on:
- Controlling operating and administrative costs
- Managing working capital and fixed assets
- Developing new markets
- Successfully identifying strategic growth opportunities
In May 1998, we acquired Metal Building Components, Inc. ("MBCI"), for a
purchase price of $588.5 million. The MBCI acquisition, which doubled our
revenue base, made us the largest domestic manufacturer of nonresidential metal
components and significantly improved our product mix.
METAL COMPONENTS. We are the largest domestic supplier of metal components
to the nonresidential building industry and have a market share at least twice
that of our largest competitor. We are also one of the largest suppliers in the
U.S. of roll-up doors for self-storage facilities. We design, manufacture, sell
and distribute one of the widest selections of components for a variety of new
construction applications as well as repair and retrofit uses.
The following are the types of components we sell:
<TABLE>
<S> <C>
- - Metal roof and wall systems - Fascia
- - Overhead doors - Mansard accessories
- - Interior and exterior doors - Trim accessories
</TABLE>
Our components are used in the following markets:
<TABLE>
<S> <C>
- - Industrial - Commercial
- - Governmental - Agricultural
- - Community - Residential
</TABLE>
In addition to metal components manufacturing, we are also one of the
largest independent providers of hot roll and light gauge metal coil coating and
painting services and products. We coat and paint hot roll metal coils for our
own use in metal components manufacturing, supplying substantially all of our
internal metal coating and painting requirements. Our own use accounts for about
50% of our production. We also coat and paint hot roll metal coils and light
gauge metal for third parties for a variety of applications, including heating
and air conditioning systems, water heaters, lighting fixtures and office
furniture.
We market our metal components products and metal coating and painting
services nationwide primarily through a direct sales force under several brand
names. These brand names include "Metal Building Components," "American Building
Components," "DBCI," "MBCI," "IPS," "Metal Coaters," "Metal-Prep," "DOUBLECOTE"
and "Midwest Metal Coatings." On a pro forma basis giving effect to the MBCI
acquisition, our sales of metal components and coating and painting services
were $597.8 million for the 12-month period ended January 31, 1999. This
represented 68.2% of our total sales.
ENGINEERED BUILDING SYSTEMS. We are one of the largest domestic suppliers
of engineered building systems. We design, manufacture and market engineered
building systems, self-storage building systems and metal home framing systems
for commercial, industrial, agricultural, governmental, community and
40
<PAGE>
residential uses. We market these systems nationwide through authorized builder
networks totaling over 1,200 builders and a direct sales force under several
brand names. These brand names include "Metallic Buildings," "Mid-West Steel
Buildings," "A & S Buildings," "All American Systems," "Steel Systems" and
"Mesco." Our sales of engineered building systems were $278.7 million for the
12-month period ended January 31, 1999. This represented 31.8% of our total
sales on a pro forma basis giving effect to the MBCI acquisition.
Before our combination with MBCI, both companies had individually
demonstrated strong growth in sales and EBITDA. Over the five fiscal years
before the MBCI acquisition, NCI achieved compound annual growth rates of 32.0%
in sales and 45.2% in EBITDA. Over the five fiscal years before its acquisition
by NCI, MBCI achieved compound annual growth rates of 15.8% in sales and 15.4%
in EBITDA.
COMPANY STRENGTHS
We believe that we will benefit from the following key strengths:
- LEADING MARKET POSITIONS. We are the largest manufacturer of metal
components for the nonresidential building industry and one of the largest
suppliers of engineered building systems in the United States. We are also
one of the largest independent providers of metal coating and painting
services and products. We believe that these leading market positions are
a result of our emphasis on high quality manufacturing, timely delivery of
products and our broad line of branded building products that are well
known in the industry.
- FAVORABLE MIX BETWEEN NEW CONSTRUCTION AND REPAIR AND RETROFIT
END-MARKETS. We derive a majority of our sales and EBITDA from metal
components sales. Unlike engineered building systems, metal components are
used in a variety of repair and retrofit applications, as well as new
construction. We believe that the favorable mix between these end-markets
reduces our dependence on new construction activity and provides us with
diverse growth opportunities.
- LOW-COST SUPPLIER. We strive to keep our purchasing, production,
distribution and administrative costs low. Our size provides us with
purchasing efficiencies and enhances our productivity through the sharing
of best practices between our metal components and engineered building
systems operations. In addition, we operate a nationwide system of
manufacturing facilities, placing the manufacturing and distribution
operations closer to our customers. This system helps reduce the need for
substantial labor, machinery and inventory investments at each facility.
It also helps control transportation costs and reduce delivery times. In
addition, we have shifted our coil coating and painting needs from
third-party providers to our own in-house coil painting and coating
operations. Coil painting and coating is a significant cost element in
metal components manufacturing. By using our own facilities, we are
increasing coating usage and recapturing margin previously paid to third
parties.
- BROAD PRODUCT LINES AND DIVERSE CUSTOMER BASE. We are one of the largest
integrated suppliers in the industry with a wider variety of products and
services than our competitors. In addition, we have a broad and
diversified customer base that provides significant cross-selling
opportunities. In fiscal 1998, our largest customer accounted for less
than 2% of total sales.
- NATIONWIDE COVERAGE. We now have 39 facilities located in 17 states and
Mexico, giving us extensive geographic reach across a number of high
population growth areas. Our nationwide coverage reduces the impact of
regional economic cycles and seasonality on our results of operations.
- EXPERIENCED AND COMMITTED MANAGEMENT TEAM. Our executive officers and key
managers have an average of over 20 years of industry experience. This
senior management team, along with our
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directors, also owns approximately 20% of our common stock, including
exercisable stock options.
BUSINESS STRATEGY
We believe we can maximize our sales and EBITDA by continuing to focus on
the following business strategies:
- CONTROL OPERATING AND ADMINISTRATIVE COSTS. We plan to maintain our focus
on operating and administrative cost control. We intend to (1) continue to
aggressively manage the purchase of raw materials, (2) further automate
our manufacturing operations to reduce production costs, (3) capitalize on
our nationwide coverage to reduce distribution costs and (4) minimize
administrative expenses.
- MANAGE WORKING CAPITAL AND FIXED ASSETS. We plan to remain focused on
obtaining a high rate of return on operating assets through strong balance
sheet management. We seek to continue to minimize accounts receivable and
inventory balances to improve cash flow. We manage our investment in fixed
assets to achieve targeted rates of return. In addition, our bonus
compensation plan for management is significantly focused on control of
working capital and return on capital investment.
- DEVELOP NEW MARKETS. We intend to increase our presence in the metal
components market, primarily for sales of metal roofing and wall systems.
We plan to increase sales and EBITDA by using our multiple distribution
channels to market our expanded range of metal components products to
existing and new customers. Currently, we sell our products under
well-recognized brand names through various distribution channels to a
broad range of end users. These channels include (1) authorized builders,
(2) building materials manufacturers, distributors and retailers, (3)
roofing systems installers, (4) contractors and end users and (5) builders
of self-storage facilities. We also plan to increase sales of our
engineered building systems both in existing markets and new regional
markets by using our nationwide metal components manufacturing facilities
as platforms for expansion.
- IDENTIFY STRATEGIC GROWTH OPPORTUNITIES. We consider external
opportunities an important part of our growth plan. We have a disciplined
acquisition and expansion process for evaluating future opportunities.
Since 1994, we have successfully acquired and integrated nine companies.
To expand our geographic coverage and increase manufacturing capacity, we
have also constructed nine new manufacturing facilities in the last six
years and have formed four joint ventures.
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<PAGE>
ACQUISITIONS AND JOINT VENTURES
ACQUISITIONS. The following table describes our acquisition activity since
1994:
<TABLE>
<CAPTION>
PURCHASE
DATE PRICE
SELLER ACQUIRED (IN MILLIONS) BUSINESS ACQUIRED LOCATIONS
- ---------------------------- ----------- ------------- ---------------------------- --------------------------------
<S> <C> <C> <C> <C>
Ellis Building Components, Oct. 1994 $ 4.9 Engineered building systems Tallapoosa, GA.
Inc. and metal components
Royal Metal Buildings, Inc. Mar. 1995 0.9 Engineered building systems Hobbs, NM
and metal components
Doors & Building Components, Nov. 1995 14.7 Doors and interior metal Douglasville, GA; Chandler, AZ
Inc. components
Carlisle Engineered Metals, Mar. 1996 2.8 Metal components (West coast Lodi, CA
Inc. division)
Anderson Industries, Inc. Apr. 1996 22.3 Engineered building systems, Southlake, TX
metal components, metal Chester, SC
roofs and components (Mesco
division)
Alta Industries Apr. 1996 21.2 Metal components (Steelco Salt Lake City, UT; Boise, ID
division)
Carlisle Engineered Metals, Feb. 1997 6.2 Insulated panels and metal Stratford, TX;
Inc. components (division) Jemison, AL
BTR plc May 1998 588.5 Metal components and metal Houston, TX
coating and painting (MBCI) headquarters and 21 other
facilities in U.S.
Chicago Metallic Corporation May 1998 15.5 Metal coating and painting Rancho Cucamonga, CA
(California Finished Metals)
</TABLE>
JOINT VENTURES. We have also formed the following joint ventures:
<TABLE>
<CAPTION>
OPERATIONS PERCENTAGE
JOINT VENTURE BEGUN OWNERSHIP BUSINESS LOCATION
- ---------------------------- ----------- ------------- ---------------------------- --------------------------------
<S> <C> <C> <C> <C>
DOUBLECOTE, L.L.C. Apr. 1995 50% Metal coating and painting Jackson, MS
Metallic de Mexico, S.A. de Nov. 1995 50% Drafting and marketing Monterrey, Mexico
C.V.
Building Systems de Mexico, July 1997 51% Primary structures for Monterrey, Mexico
S.A. de C.V. engineered building systems
Midwest Metal Coatings, LLC (1) 50% Metal coating and painting Granite City, IL
</TABLE>
- ------------------------
(1) Expected to commence operations in the summer of 1999.
43
<PAGE>
PRODUCTS AND MARKETS
Our product lines consist of metal components for the building industry and
engineered building systems. Our approximate sales attributable to these product
lines were as follows for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31, PRO FORMA TWELVE-
---------------------------------------------------------------- MONTHS ENDED JANUARY
1996 1997 1998 31, 1999
-------------------- -------------------- -------------------- --------------------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Engineered building systems............. $ 213.0 64.0% $ 246.6 60.5% $ 264.1 39.1% $ 278.7 31.8%
Metal components........................ 119.9 36.0% 161.2 39.5% 411.2 60.9% 597.8 68.2%
--------- --------- --------- --------- --------- --------- --------- ---------
Total sales............................. $ 332.9 100.0% $ 407.8 100.0% $ 675.3 100.0% $ 876.5 100.0%
--------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- ---------
</TABLE>
METAL COMPONENTS. Our metal components consist of individual components,
including secondary structural framing, covering systems and associated metal
trims, that are sold directly to contractors or end users for use in the
building industry, including the construction of metal buildings. We also stock
and market metal component parts for use in the maintenance and repair of
existing buildings. Specific component products consist of end and side wall
panels, roof panels, purlins, girts, partitions, header panels and related trim
and screws. We believe we offer the widest selection of metal components in the
building industry.
Purlins and girts are medium gauge, roll formed steel components. They are
supplied to builders for secondary structural framing. We custom produce purlins
and girts for our customers and offer the widest selection of sizes and profiles
in the United States. Covering systems, consisting of wall and roof panels,
protect the rest of the structure and the contents of the building from the
weather. They also contribute to the structural integrity of the building.
Our metal roofing products are attractive and durable. We use standing seam
roof technology to replace traditional built-up and single-ply roofs as well as
to provide a distinctive look to new construction. We manufacture and design
metal roofing systems for sales to regional metal building manufacturers,
general contractors and subcontractors. We believe we have the broadest line of
standing seam roofing products in the building industry. We also have developed
and patented a retrofit metal panel, Retro-R-Registered Trademark-, that is used
to replace wall and roof panels of metal buildings.
Retro-R-Registered Trademark- can be installed over the top of existing metal
panels to remodel or preserve a standing structure. Although metal roofing is
somewhat more expensive than traditional roofing in upfront costs, its
durability and low maintenance costs make metal roofing a lower cost roofing
product after the first 10 years.
We manufacture overhead doors and interior and exterior doors for use in
metal and other buildings. We are one of the largest suppliers in the U.S. of
roll-up doors to builders of self-storage facilities.
We provide our own metal coating and painting products and services for use
in component manufacturing. We also provide pre-painted hot roll coils to
manufacturers of engineered building systems and metal components. Either a
customer provides coils through its own supply channels, which are processed by
us, or we purchase hot roll coils and process them for sale as a packaged
product. We also pre-paint light gauge steel coils for steel mills, which supply
the painted coils to various industrial users, including manufacturers of
engineered building systems, metal components and lighting fixtures.
Our metal coating and painting operations apply a variety of paint systems
to metal coils. The process generally includes cleaning and painting the coil
and slitting it to customer specifications. We believe that pre-painted metal
coils are a better quality product, environmentally cleaner and more
44
<PAGE>
cost-effective than painted metal products prepared in other manufacturers'
in-house painting operations. Painted metal coils also offer manufacturers the
opportunity to produce a broader and more aesthetically pleasing range of
products.
ENGINEERED BUILDING SYSTEMS. Engineered building systems consist of
pre-engineered structural beams and panels that are welded and roll formed in a
factory and shipped to a construction site complete and ready for assembly. We
design an integrated engineered building system that meets customer
specifications and allows easy on-site assembly by the builder or independent
contractor. Engineered building systems typically consist of three systems:
- PRIMARY STRUCTURAL FRAMING. Primary structural framing, fabricated from
heavy-gauge steel, supports the secondary structural framing, roof, walls
and all externally applied loads. Through the primary framing, the force
of all applied loads is structurally transferred to the foundation.
- SECONDARY STRUCTURAL FRAMING. Secondary structural framing consists of
medium-gauge, roll-formed steel components called purlins and girts.
Purlins are attached to the primary frame to support the roof. Girts are
attached to the primary frame to support the walls. The secondary
structural framing is designed to strengthen the primary structural
framing and efficiently transfer applied loads from the roof and walls to
the primary structural framing.
- COVERING SYSTEMS. Covering systems consist of roof and wall panels. These
panels not only lock out the weather but also contribute to the structural
integrity of the overall building system. Roof and siding panels are
fabricated from light-gauge, roll-formed steel.
Accessory components complete the engineered building system. These components
include doors, windows, gutters and interior partitions.
[SIMPLIFIED DIAGRAM OF BUILDING]
SALES, MARKETING AND CUSTOMERS
METAL COMPONENTS. We sell metal components directly to regional
manufacturers, contractors, subcontractors, distributors, lumberyards,
cooperative buying groups and other customers under the brand names "Metal
Building Components," "American Building Components," "MBCI" and "IPS." Roll-up
doors, interior and exterior doors, interior partitions and walls, header panels
and trim are sold directly to contractors and other customers under the brand
names "Doors & Building Components"
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<PAGE>
or "DBCI." These components also are produced for integration into self storage
and engineered building systems sold by us.
We market our components products within four product lines:
- commercial/industrial
- architectural
- wood frame builders
- residential
Customers include regional engineered building systems manufacturers,
general contractors, subcontractors, roofing installers, architects and
end-users. Commercial and industrial businesses are heavy users of metal
components and metal buildings systems. Standing seam roof and architectural
customers are growing in importance. As metal buildings become a more acceptable
building alternative and aesthetics become an increasingly important
consideration for end users of metal buildings, we believe that architects are
participating in metal building design and purchase decisions to a greater
extent. Wood frame builders also purchase our metal components through
distributors, lumberyards, cooperative buying groups and chain stores for
various uses, including agricultural buildings. Residential customers are
generally contractors building upscale homes that require an architect-specified
product.
Our metal components sales operations are organized into four geographic
regions. Each region is headed by a general sales manager supported by
individual plant sales managers. Each local sales office is located adjacent to
a manufacturing plant and is staffed by a direct sales force responsible for
contacting customers and architects and a sales coordinator who supervises the
sales process from the time the order is received until it is shipped and
invoiced. The regional and local focus of our customers requires extensive
knowledge of local business conditions. During fiscal 1998, our largest customer
for metal components accounted for less than 2% of our total sales.
We provide our customers with product catalogs tailored to our product
lines, which include product specifications and suggested list prices. Some of
our catalogs are available on-line through the Internet, which enables
architects and other customers to download drawings for use in developing
project specifications. Customers place orders via telephone or facsimile to a
sales coordinator at the regional office who enters it onto a standard order
form. The form is then sent via computer to the plant and downloaded
automatically to the production machines.
We have a small number of national accounts for our coating and painting
products and services and rely on a single sales manager. Our metal coating
joint ventures have independent sales forces.
ENGINEERED BUILDING SYSTEMS. We sell engineered building systems to
builders nationwide under the brand names "Metallic Buildings," "A&S Buildings"
and "Mesco." We market engineered building systems through an in-house sales
force to authorized builder networks of over 1,200 builders. We market
engineered building systems under the brand name "Mid-West Steel Buildings"
directly to contractors in Texas and surrounding states using an in-house sales
force. We also sell engineered building systems under the name "All American
Systems" and various private labels.
Our authorized builder networks consist of independent general contractors
that market our Metallic Buildings, A&S Buildings and Mesco products to end
users. Most of our sales of engineered building systems outside of Texas and
surrounding states are through our authorized builder networks. We rely upon
maintaining a satisfactory business relationship for continuing job orders from
our authorized builders and do not consider the builder agreements to be
material to our business. During fiscal 1998, our largest customer for
engineered building systems accounted for less than 2% of our total sales.
We enter into an agreement with an authorized builder, which generally
grants the builder the non-exclusive right to market our products in a specified
territory. The agreement is cancelable by
46
<PAGE>
either party on 60 days notice. The agreement does not prohibit the builder from
marketing engineered building systems of other manufacturers. We establish an
annual sales goal for each builder and provide the builder with sales and
pricing information, design and engineering manuals, drawings and assistance,
application programs for estimating and quoting jobs and advertising and
promotional literature. We also defray a portion of the builder's advertising
costs and provide volume purchasing and other pricing incentives to encourage it
to deal exclusively or principally with us. The builder is required to maintain
a place of business in its designated territory, provide a sales organization,
conduct periodic advertising programs and perform construction, warranty and
other services for customers and potential customers. An authorized builder
usually is hired by an end user to erect an engineered building system on the
customer's site and provide general contracting and other services related to
the completion of the project. We sell our products to the builder, which
generally includes the price of the building as a part of its overall
construction contract with its customer.
MANUFACTURE AND DESIGN
METAL COMPONENTS. We operate 37 facilities used for manufacturing of metal
components for the building industry, including our metal coating and painting
operations. We believe this broad geographic penetration gives us an advantage
over our components competitors because major elements of a customer's decision
are the speed and cost of delivery from the manufacturing facility to the
product's ultimate destination. With the exception of our architectural and
standing seam products, we are not involved in the design process for the
components we manufacture. We also own a fleet of trucks to deliver our products
to our customers in a more timely manner than most of our competitors.
Our doors, interior partitions and other related panels and trim products
are manufactured at dedicated plants in Georgia, Texas and Arizona. Orders are
processed at the Georgia plant and sent to the appropriate plant, which is
generally determined based upon the lowest shipping cost.
Metal component products are roll-formed or fabricated at each plant using
roll-formers and other metal working equipment. In roll forming, pre-finished
coils of steel are unwound and passed through a series of progressive forming
rolls which form the steel into various profiles of medium-gauge structural
shapes and light-gauge sheets and panels.
METAL COATING AND PAINTING. We operate two metal coating and painting
facilities for hot rolled, medium gauge steel coils and two metal coating and
painting facilities for painting light gauge steel coils. These facilities
primarily service our needs, but we also process steel coils at these facilities
for other manufacturers. Metal coating and painting processes involve applying
various types of chemical treatments and paint systems to flat rolled continuous
coils of metal, including steel and aluminum. These processes give the coils a
baked-on finish that both protects the metal and makes it more attractive.
Initially, various metals in coil form are flattened, cleaned and pretreated.
The metal is then coated, oven cured, cooled, recoiled and packaged for
shipment. Slitting and embossing services can also be performed on the coated
metal before shipping according to customer specifications. Hot roll steel coils
typically are used in the production of secondary structural framing of metal
buildings and other structural applications. Painted light gauge steel coils are
used in the manufacture of products for building exteriors, metal doors,
lighting fixtures and appliances. Our metal coating operation is one of only two
metal coaters in the United States to receive the Supplier Excellence Award from
Bethlehem Steel Corporation.
We are a joint venture partner in two metal coating operations. We own 50%
of an existing metal coating joint venture with a processing plant in Jackson,
Mississippi for painting light gauge steel coils. We also own 50% of a new joint
venture, which has acquired land in Granite City, Illinois and is building a hot
rolled coil coating facility. It is expected to commence operations in the
summer of 1999. The new facility will be used to slit and coat hot rolled coils
of medium gauge steel for use in manufacturing purlins and girts. We have agreed
to purchase a substantial portion of our production requirements for that
product from the new joint venture.
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<PAGE>
ENGINEERED BUILDING SYSTEMS. After we receive an order, our engineers
design the engineered building system to meet the customer's requirements and to
satisfy applicable building codes and zoning requirements. To expedite this
process, we use computer-aided design and engineering systems to generate
engineering and erection drawings and a bill of materials for the manufacture of
the engineered building system. We employ approximately 185 engineers and
draftsmen in this area.
Once the specifications and designs of the customer's project have been
finalized, the manufacturing of frames and other building systems begins at one
of our six manufacturing facilities in Texas, Georgia, South Carolina or
Tennessee or our joint venture facility in Mexico. The fabrication of the
primary structural framing consists of a process in which rigid steel plates are
punched and sheared and then routed through an automatic welding machine and
sent through further fitting and welding processes. The secondary structural
framing and the covering subsystem are roll-formed steel products that are
manufactured at our full manufacturing facilities as well as our components
plants.
Once manufactured, structural framing members and covering systems are
shipped to the job site for assembly. We generally are not responsible for any
on-site construction. The time elapsed between our receipt of an order and
shipment of a completed building system has typically ranged from four to eight
weeks, although delivery can extend somewhat longer if engineering and drafting
requirements are extensive.
We own 51% of a joint venture, which began operation of a framing facility
in Monterrey, Mexico in July 1997. We purchase substantially all of the framing
systems produced by the Mexico joint venture.
RAW MATERIALS
The principal raw material used in the manufacture of our metal components
products and engineered building systems is steel. Components are fabricated
from common steel products produced by mills including bars, plates, sheets and
galvanized sheets. During the 1998 fiscal year, we purchased approximately 80%
of our steel requirements from National Steel Corporation and Bethlehem Steel
Corporation. No other steel supplier accounted for more than 10% of steel
purchases for the same period. We believe concentration of our steel purchases
among a small group of suppliers that have mills and warehouse facilities close
to our facilities enables us, as a large customer of those suppliers, to obtain
better service and delivery. These suppliers generally maintain an inventory of
the types of materials we require. This enables us to utilize a form of
"just-in-time" inventory management with regard to raw materials.
We do not have any long-term contracts for the purchase of raw materials. A
prolonged labor strike against one of our principal domestic suppliers could
have a material adverse effect on our operations. Alternative sources, however,
including foreign steel, are currently believed to be sufficient to maintain
required deliveries.
BACKLOG
At January 31, 1999, the total backlog for orders for our products believed
by us to be firm was $126.0 million. This compares with a total backlog for our
products of $98.7 million at January 31, 1998 and for MBCI's products of $16.1
million at December 31, 1997. The increases in backlog reflect the results of
our marketing activities and market demand. Backlog primarily consists of
engineered building systems. Job orders generally are cancelable by customers at
any time for any reason. Occasionally, orders in the backlog are not completed
and shipped for reasons that include changes in the requirements of the
customers and the inability of customers to obtain necessary financing or zoning
variances. None of the backlog at January 31, 1999 currently is scheduled to
extend beyond January 31, 2000.
48
<PAGE>
COMPETITION
Competition in the metal components and metal buildings markets of the
building industry is intense. It is based primarily on:
- price
- speed of construction
- ability to provide added value in the design and engineering of buildings
- service
- quality
- delivery
We compete with a number of other manufacturers of metal components and
engineered building systems for the building industry, ranging from small local
firms to large national firms. Most of these competitors operate on a regional
basis, although we believe that at least four other manufacturers of engineered
building systems and several manufacturers of metal components have nationwide
coverage. In addition, we and other manufacturers of metal components and
engineered building systems compete with alternative methods of building
construction, which may be perceived as more traditional, more aesthetically
pleasing or having other advantages.
REGULATORY MATTERS
We must comply with a wide variety of federal, state and local laws and
regulations governing the protection of the environment. These laws and
regulations cover air emissions, discharges to water, the generation, handling,
storage, transportation, treatment and disposal of hazardous substances, the
cleanup of contamination, the control of noise and odors and other materials and
health and safety matters. Laws protecting the environment generally have become
more stringent than in the past and are expected to continue to do so.
Environmental laws and regulations generally impose strict liability. This means
that in some situations we could be exposed to liability for cleanup costs, and
toxic tort or other damages as a result of conduct that was lawful at the time
it occurred or because of the conduct of or conditions caused by prior operators
or other third parties. This strict liability is regardless of fault on our
part. We believe we are in substantial compliance with all environmental
standards applicable to our operations. We cannot assure you, however, that
cleanup costs, natural resource damages, criminal sanctions, toxic tort or other
damages arising as a result of environmental laws and costs associated with
complying with changes in environmental laws and regulations will not be
substantial and will not have a material adverse effect on our financial
condition. From time to time, claims have been made against us under
environmental laws. We have insurance coverage applicable to some environmental
claims and to specified locations after payment of the applicable deductible. We
do not anticipate material capital expenditures to meet current environmental
quality control standards. We cannot assure you that more stringent regulatory
standards will not be established that might require material capital
expenditures.
We also must comply with federal, state and local laws and regulations
governing occupational safety and health, including review by the federal
Occupational Health and Safety Administration and similar state agencies. We
believe we are in substantial compliance with applicable laws and regulations.
Compliance does not have a material adverse affect on our business.
The engineered building systems we manufacture must meet zoning and building
code requirements adopted by local governmental agencies.
PATENTS, LICENSES AND PROPRIETARY RIGHTS
We have a number of United States patents and pending patent applications,
including patents relating to metal roofing systems and metal overhead doors. We
do not, however, consider patent
49
<PAGE>
protection to be a material competitive factor in our industry. We also have
several registered trademarks and pending registrations in the United States.
EMPLOYEES
As of January 31, 1999, we had approximately 3,700 employees, of whom over
2,700 were manufacturing and engineering personnel. We regard our employee
relations as satisfactory.
Our employees are not represented by a labor union or collective bargaining
agreement. The United Steel Workers of America petitioned the National Labor
Relations Board to be recognized as the collective bargaining representative of
the production and maintenance employees of our Tallapoosa, Georgia facility. A
union election was held at the Tallapoosa facility in January 1996, and the
union lost the election. Similar elections were held at our Mattoon, Illinois
facility in November 1997 and our Rancho Cucamongo, California facility in
August 1998. The United Steel Workers of America lost each of those elections.
LEGAL PROCEEDINGS
We are involved in various legal proceedings that we consider to be in the
normal course of business. We believe that these proceedings will not have a
material adverse effect on our results of operations or financial condition.
PROPERTIES
We conduct manufacturing operations at the following facilities:
<TABLE>
<CAPTION>
SQUARE OWNED
FACILITY PRODUCTS FEET OR LEASED
- ------------------------------------------------ ------------------------------------------ --------- -----------
<S> <C> <C> <C>
Chandler, Arizona............................... Doors and related metal components 35,000 Leased
Tomlinson, Arizona.............................. Metal components(1) 65,980 Owned
Atwater, California............................. Metal components(2) 85,700 Owned
Rancho Cucamonga, California.................... Metal coating and painting 98,000 Owned
Tampa, Florida.................................. Metal components(3) 28,775 Owned
Adel, Georgia................................... Metal components(1) 59,550 Owned
Douglasville, Georgia........................... Metal components(4) 110,536 Owned
Douglasville, Georgia........................... Doors and related metal components 60,000 Owned
Marietta, Georgia............................... Metal coating and painting 125,700 Owned
Tallapoosa, Georgia............................. Engineered building systems(5) 246,000 Leased
Metal components
Nampa, Idaho.................................... Metal components(3) 42,900 Owned
Granite City, Illinois.......................... Metal coating and painting(9) 94,000 Owned
Mattoon, Illinois............................... Metal components(2) 90,600 Owned
Shelbyville, Indiana............................ Metal components(3) 66,450 Owned
Nicholasville, Kentucky......................... Metal components(6) 41,280 Owned
Monterrey, Mexico(7)............................ Engineered building systems(8) 64,125 Owned
Jackson, Mississippi............................ Metal components(2) 96,000 Owned
Jackson, Mississippi(9)......................... Metal coating and painting 363,200 Owned
Omaha, Nebraska................................. Metal components(6) 51,750 Owned
Rome, New York.................................. Metal components(3) 57,700 Owned
Oklahoma City, Oklahoma......................... Metal components(1) 59,695 Owned
Chester, South Carolina......................... Engineered building systems(5) 124,000 Owned
Metal components
Caryville, Tennessee............................ Engineered building systems(5) 193,800 Owned
Metal components
Memphis, Tennessee.............................. Metal coating and painting 61,500 Owned
Nesbitt, Tennessee.............................. Metal components(1) 71,720 Owned
Ennis, Texas.................................... Metal components and studs 33,000 Owned
</TABLE>
50
<PAGE>
<TABLE>
<CAPTION>
SQUARE OWNED
FACILITY PRODUCTS FEET OR LEASED
- ------------------------------------------------ ------------------------------------------ --------- -----------
<S> <C> <C> <C>
Grand Prairie, Texas............................ Metal components(1) 48,027 Owned
Houston, Texas.................................. Metal components 97,000 Owned
Houston, Texas(10).............................. Metal components(4) 209,355 Owned
Houston, Texas.................................. Metal coating and painting 39,550 Owned
Houston, Texas(11).............................. Engineered building systems(5) 358,375 Owned
Metal components
Houston, Texas.................................. Doors 23,625 Owned
Houston, Texas.................................. Engineered building systems(9) 70,200 Leased
Lubbock, Texas.................................. Metal components(1)(6) 64,320 Owned
San Antonio, Texas.............................. Metal components(3) 52,360 Owned
Southlake, Texas................................ Engineered building systems(5) 123,000 Owned
Metal components
Stafford, Texas................................. Metal components 56,840 Leased
Salt Lake City, Utah............................ Metal components(1) 93,150 Owned
Colonial Heights, Virginia...................... Metal components(1) 37,000 Owned
</TABLE>
- --------------------------
(1) Secondary structures and covering systems.
(2) Includes secondary structures and covering systems.
(3) Covering systems or products.
(4) Full components product range.
(5) Primary structures, secondary structures and covering systems.
(6) Specialized products.
(7) We own a 51% interest in a joint venture that owns this facility.
(8) Primary structures.
(9) We own a 50% interest in a joint venture that owns this facility.
(10) Includes 18,000 square feet used for the principal offices of the metal
components and metal coaters divisions.
(11) Includes 33,600 square feet used for our principal executive offices and
the principal offices of the engineered buildings systems division.
We also maintain several drafting office facilities and retail locations in
various states. We have short-term leases for these additional facilities.
We believe that our present facilities are adequate for our current and
projected operations.
We have purchased approximately five acres of land in Houston, Texas where
we plan to construct a new 60,000 square foot facility. The new facility will be
used as our principal executive and administrative offices.
51
<PAGE>
MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND OTHER KEY MANAGERS
Our directors, executive officers and other key managers, and their ages as
of May 31, 1999, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------------------- --- ------------------------------------------------------------
<S> <C> <C>
DIRECTORS AND EXECUTIVE OFFICERS:
C.A. Rundell, Jr............................. 67 Chairman of the Board and Class II Director of NCI
Johnie Schulte............................... 63 Chief Executive Officer, Chairman of the Executive Committee
and Class III Director of NCI; President and Chief Executive
Officer of Engineered Buildings Division
A.R. Ginn.................................... 59 President, Chief Operating Officer and Class I Director of
NCI; President and Chief Executive Officer of Metal
Components Division; Chief Executive Officer of Metal
Coaters Division
Robert J. Medlock............................ 59 Executive Vice President, Chief Financial Officer, Treasurer
and Class III Director of NCI; Vice President, Chief
Financial Officer and Treasurer of Engineered Buildings
Division
Kenneth W. Maddox............................ 52 Executive Vice President, Administration and Class I
Director of NCI; Vice President and Chief Financial Officer
of Metal Components Division and Metal Coaters Division
Donnie R. Humphries.......................... 49 Secretary of NCI; Vice President, Human Relations of
Engineered Buildings Division
T.C. Arnett.................................. 66 Class I Director of NCI
William D. Breedlove......................... 59 Class III Director of NCI
Gary L. Forbes............................... 55 Class II Director of NCI
Robert N. McDonald........................... 71 Class II Director of NCI
Daniel D. Zabcik............................. 70 Class I Director of NCI
OTHER KEY MANAGERS:
Jerry D. Boen................................ 52 Vice President, Marketing of Metal Components Division
David B. Curtis.............................. 39 President of Doors & Building Components Division
Charles W. Dickinson......................... 47 Vice President, Sales of Metal Components Division
John T. Eubanks.............................. 58 President of Mesco Metal Buildings Division
Leonard F. George............................ 46 Executive Vice President of Engineered Buildings Division
Kelly R. Ginn................................ 38 Vice President, Manufacturing of Metal Components Division
</TABLE>
52
<PAGE>
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------------------- --- ------------------------------------------------------------
<S> <C> <C>
Richard F. Klein............................. 60 President and Chief Operating Officer of Metal Coaters
Division
Fredrick D. Koetting......................... 39 Vice President, Operations of Engineered Buildings Division
Alvan E. Richey, Jr.......................... 63 Vice President, Sales and Marketing of Engineered Buildings
Division
</TABLE>
DIRECTORS AND EXECUTIVE OFFICERS:
C.A. Rundell, Jr. has served as a director and Chairman of the Board of NCI
since April 1989. Since May 1988, Mr. Rundell has owned and operated Rundell
Enterprises, a sole proprietorship engaged in providing acquisition and
financial consulting services to various business enterprises. Mr. Rundell is a
director and a member of the Executive Committee of Tyler Corporation, a
provider of information management systems and services for county governments
and other enterprises. Mr. Rundell was the President and Chief Executive Officer
of Tyler from October 1997 to December 1998, Chairman of the Board of Tyler from
October 1996 until October 1997, and its temporary Chief Executive Officer from
October 1996 to March 1997. Mr. Rundell is also a director of Dain Rauscher
Corporation, a holding company for a full-service regional brokerage and
investment banking company, and Tandy Brands Accessories, Inc., a manufacturer
of accessories for men, women and boys. In March 1999, he became Chairman of the
Board of Integrated Security Systems, Inc., a developer and manufacturer of
systems and software for traffic control, perimeter and other security
applications.
Johnie Schulte, a founder of NCI, has been a director and Chief Executive
Officer of NCI since 1984 and has served as the President and Chief Executive
Officer of the Engineered Buildings Division since May 1998. From 1984 until
December 1998, he served as President of NCI. Mr. Schulte founded and was
President of Mid-West Steel Buildings Co., Inc. from 1970 until its sale to
American Buildings Company ("ABC"), a metal building manufacturer, in 1980. Mr.
Schulte remained as President of the Mid-West Metallic Division of ABC until
1984, when he left to form NCI. Mr. Schulte has over 44 years of experience in
the metal building industry.
A.R. Ginn has served as President of NCI since December 1998, as a director
and Chief Operating Officer of NCI since May 1998 and as President and Chief
Executive Officer of the Metal Components Division and Chief Executive Officer
of the Metal Coaters Division since May 1998. From May 1998 until December 1998,
he served as Executive Vice President of NCI. Previously, he served as a
director and the President of MBCI, from 1976 until our acquisition of MBCI in
May 1998 and was Chief Executive Officer of the Metal Coaters Division of MBCI
from 1987 to May 1998. Mr. Ginn has over 40 years of experience in the metal
building and components industry. Mr. Ginn worked for four years with A&S Steel
Buildings and spent 14 years with Metallic Building Company, where he was Vice
President of Operations for seven years. Mr. Ginn is the father of Kelly R.
Ginn, one of the other key managers of NCI.
Robert J. Medlock has served as a director of NCI since March 1999, as
Executive Vice President of NCI since December 1998, as Chief Financial Officer
and Treasurer of NCI since February 1992 and as Vice President, Chief Financial
Officer and Treasurer of the Engineered Buildings Division since May 1998. From
February 1992 until December 1998, he served as a Vice President of NCI. He was
a Vice President and the Chief Financial Officer of ABC from 1973 to 1978. Mr.
Medlock is a certified public accountant.
Kenneth W. Maddox has served as Executive Vice President, Administration of
NCI since December 1998 and as a director of NCI and as Vice President and Chief
Financial Officer of the
53
<PAGE>
Metal Components Division and the Metal Coaters Division since May 1998. From
May 1998 until December 1998, he served as a Vice President of NCI. Previously,
he served as the Chief Financial Officer and Treasurer of MBCI from 1980 until
May 1998.
Donnie R. Humphries has been Secretary of NCI since 1985 and Vice President,
Human Relations of the Engineered Buildings Division since May 1998. Mr.
Humphries previously served as Vice President, Human Relations of NCI from 1997
until May 1998. Mr. Humphries was employed by Mid-West from 1976 to 1980 and by
ABC from 1980 to 1985. Mr. Humphries has over 21 years of experience in the
metal building industry.
Thomas C. Arnett has served as a director of NCI since April 1989. Mr.
Arnett is currently retired and manages his own investments. Most recently
before his retirement, Mr. Arnett served from 1977 to 1985 as Executive Vice
President of Cronus Industries, Inc. (subsequently known as BRC Holdings, Inc.
and recently acquired by Affiliated Computer Systems, Inc.), which at that time
was the parent corporation of ABC and, through other subsidiaries, a
manufacturer of feedwater heaters and condensers for the power industry and a
provider of information management systems and services to county and other
governments.
William D. Breedlove has served as a director of NCI since March 1992. Mr.
Breedlove has been Vice Chairman of Hoak Breedlove Wesneski & Co., an investment
banking firm, since August 1996. Previously, he served as Chairman and Managing
Director of Breedlove Wesneski & Co., a private merchant banking firm, for over
five years.
Gary L. Forbes has served as a director of NCI since December 1991. Mr.
Forbes has been a Vice President of Equus II Incorporated, an investment
company, since November 1991. Mr. Forbes is also a director of Consolidated
Graphics, Inc., a commercial printing company, Advanced Technical Products,
Inc., a manufacturer of aerospace parts, and Drypers Corporation, a manufacturer
of disposable diapers. Mr. Forbes is a certified public accountant.
Robert N. McDonald has served as a director of NCI since March 1992. Mr.
McDonald is currently retired. Most recently before his retirement, Mr. McDonald
served as a marketing consultant for ABC from 1985 until February 1992 and as a
director of that company from 1989 to 1990. From 1956 to 1970, Mr. McDonald was
employed by Butler Manufacturing Company, a metal building manufacturer, and
served as Vice President of Marketing for ABC from 1970 to 1978.
Daniel D. Zabcik has been a director of NCI since April 1989 and served as
an Executive Vice President of NCI from April 1989 until October 1993, when he
resigned as an officer and assumed part-time employee status until his
retirement in early 1997. Since 1986, Mr. Zabcik has also served as a director
of Southwest Bolt, Inc., a distributor of structural bolts. From 1980 until
April 1989, Mr. Zabcik was employed as President, Executive Vice President and
Vice Chairman of the Mid-West Metallic division of ABC. Mr. Zabcik has over 40
years of experience in the metal building industry. Mr. Zabcik is a licensed
engineer and served on the Executive Committee of the Metal Building
Manufacturers Association in 1993.
The board of directors is comprised of four Class I Directors, three Class
II Directors and three Class III Directors. The terms of the Class I directors
will expire at the annual meeting of shareholders held in 2000, the terms of the
Class II directors will expire at the annual meeting of shareholders held in
2001 and the terms of the Class III directors will expire at the annual meeting
of shareholders held in 2002. At each of those annual meetings and thereafter,
directors will be elected for a three-year term to succeed the directors of the
same class whose terms are then to expire. Officers of NCI serve at the
discretion of the board of directors.
54
<PAGE>
OTHER KEY MANAGERS:
Jerry D. Boen has served as Vice President, Marketing of the Metal
Components Division since May 1998. Previously, he served as Vice President of
Marketing of MBCI since 1980. Before joining MBCI, Mr. Boen was a sales manager
for another building components company.
David B. Curtis has served as President of the Doors & Building Components
Division since it was acquired from Doors & Building Components, Inc. in
November 1995. Mr. Curtis was the founder of Doors & Building Components, Inc.
and served as its President and Chief Executive Officer for more than five
years.
Charles W. Dickinson has served as Vice President, Sales of the Metal
Components Division since May 1998. Previously, he served as Vice President of
Sales of MBCI since 1991 and was employed by MBCI for more than 16 years. Mr.
Dickinson has over 23 years of experience in the metal building and components
industry.
John T. Eubanks has served as President of the Mesco Metal Buildings
Division since its acquisition by NCI in April 1996 from Anderson Industries,
Inc. Mr. Eubanks also served as President of the Mesco Metal Buildings division
of Anderson from 1989 until April 1996, and as President of Anderson for more
than five years.
Leonard F. George has served as Executive Vice President of the Engineered
Buildings Division since May 1998. Previously, Mr. George served as a director
of NCI from March 1993 until March 1999, as Executive Vice President of NCI from
September 1992 until May 1998 and as the President of the A&S Buildings Division
of NCI from October 1992 until December 1992. From 1987 to September 1992, Mr.
George was employed as President, Vice President of Engineering, Assistant Vice
President of Engineering and Regional Sales Manager of ABC. Mr. George has over
20 years of experience in the metal building industry.
Kelly R. Ginn has served as Vice President, Manufacturing of the Metal
Components Division since May 1998. Previously, he served as Vice President of
Manufacturing of MBCI since 1990. Before joining MBCI in 1985, Mr. Ginn worked
as a Plant Superintendent for a large metal building manufacturer. Mr. Ginn has
19 years of experience in the metal building and components industry. Mr. Ginn
is the son of A.R. Ginn, President and Chief Operating Officer of NCI.
Richard F. Klein has served as President and Chief Operating Officer of the
Metal Coaters Division since May 1998. Previously, he served as President of
Metal Coaters, Inc., a subsidiary of MBCI, since 1987. Before joining MBCI in
1987, Mr. Klein spent nine years as Vice President of a large coil coating
concern.
Fredrick D. Koetting has been Vice President, Operations of the Engineered
Building Division since May 1998. He previously served as a Vice President of
NCI from May 1994 until May 1998. Before joining NCI in May 1994, Mr. Koetting
served as an Account Manager for National Steel Corporation, a steel supplier of
NCI, from 1991 until May 1994. Mr. Koetting served as a Manager of Customer
Service for Granite City Steel, a division of National Steel Corporation, from
1989 until 1991.
Alvan E. Richey, Jr. has been Vice President, Sales and Marketing of the
Engineered Buildings Division since May 1998. He previously served as Vice
President, Sales and Marketing of NCI from July 1995 until May 1998. Mr. Richey
has also been President of the A&S Buildings Division since December 1992.
Before joining NCI in September 1992, Mr. Richey was employed by ABC for over 22
years. Mr. Richey has over 29 years of experience in the metal building
industry.
55
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of May 31, 1999 (the "Ownership Date"),
the number of shares of common stock beneficially owned by (1) each person or
group known by us to own beneficially more than 5% of the outstanding shares of
common stock, (2) each director, (3) the Named Executive Officers and (4) all
directors and executive officers as a group. Except as otherwise indicated, each
of the persons or groups named below has sole voting power and investment power
with respect to the common stock.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP(1)
-------------------------
<S> <C> <C>
NAME OF BENEFICIAL NUMBER OF
OWNER OR GROUP SHARES PERCENT
- ------------------------------------------------------------------------------- ------------ -----------
Johnie Schulte(2).............................................................. 756,198 4.1%
A.R. Ginn...................................................................... 478,116 2.6%
Daniel D. Zabcik(3)............................................................ 313,010 1.7%
Kenneth W. Maddox.............................................................. 243,266 1.3%
Gary L. Forbes(4).............................................................. 205,500 1.1%
C.A. Rundell, Jr.(5)........................................................... 194,200 1.1%
Leonard F. George(6)........................................................... 177,317 *
Alvan E. Richey, Jr.(7)........................................................ 91,117 *
Robert J. Medlock(8)........................................................... 84,436 *
Thomas C. Arnett(9)............................................................ 41,574 *
William D. Breedlove(10)....................................................... 16,078 *
Robert N. McDonald(10)......................................................... 19,078 *
All directors and executive officers as a group (11 persons)(11)............... 2,562,810 13.8%
</TABLE>
- ------------------------
* Less than one percent
(1) Includes shares beneficially owned by the listed persons, including shares
owned under our 401(k) Profit Sharing Plan. If a person has the right to
acquire beneficial ownership of any shares by exercise of options within 60
days after the Ownership Date, those shares are deemed beneficially owned by
that person as of the Ownership Date and are deemed to be outstanding solely
for the purpose of determining the percentage of the common stock that he
owns. Those shares are not included in the computations for any other
person.
(2) Includes 2,210 shares held by a trust for the benefit of Mr. Schulte's
grandson, of which Mr. Schulte is a trustee and may be deemed to share
voting and investment power. Mr. Schulte disclaims beneficial ownership of
those shares. Also includes options to purchase 35,000 shares held by Mr.
Schulte which were exercisable as of the Ownership Date. Mr. Schulte also
holds options to purchase an additional 55,000 shares that were not
exercisable.
(3) Includes 90,000 shares held in a testamentary trust, of which Mr. Zabcik is
sole trustee, for the benefit of his children, 38,294 shares held by a
family general partnership of which Mr. Zabcik has management authority and
options to purchase 41,500 shares held by Mr. Zabcik that were exercisable
as of the Ownership Date. Mr. Zabcik also holds options to purchase an
additional 4,500 shares that were not exercisable.
(4) Includes 200,000 shares held by Equus II Incorporated, of which Mr. Forbes
is a Vice President and may be deemed to share voting and investment power.
Mr. Forbes disclaims beneficial ownership of those shares. Also includes
options to purchase 1,500 shares held by Mr. Forbes that were exercisable as
of the Ownership Date. Mr. Forbes also holds options to purchase an
additional 4,500 shares that were not exercisable.
56
<PAGE>
(5) Includes 12,000 shares held by The Rundell Foundation, of which Mr. Rundell
is a trustee and may be deemed to share voting and investment power. Mr.
Rundell disclaims beneficial ownership of those shares. Also includes
options to purchase 35,000 shares held by Mr. Rundell that were exercisable
as of the Ownership Date. Mr. Rundell also holds options to purchase an
additional 55,000 shares that were not exercisable.
(6) Includes options to purchase 172,028 shares held by Mr. George that were
exercisable as of the Ownership Date. Mr. George also holds options to
purchase an additional 39,500 shares that were not exercisable.
(7) Includes options to purchase 88,054 shares held by Mr. Richey that were
exercisable as of the Ownership Date. Mr. Richey also holds options to
purchase an additional 35,500 shares that were not exercisable.
(8) Includes options to purchase 79,948 shares held by Mr. Medlock that were
exercisable as of the Ownership Date. Mr. Medlock also holds options to
purchase an additional 35,500 shares that were not exercisable.
(9) Includes 40,074 shares held by La Plaza Partnership, of which Mr. Arnett is
a general partner and may be deemed to share voting and investment power.
Also includes options to purchase 1,500 shares held by Mr. Arnett that were
exercisable as of the Ownership Date. Mr. Arnett also holds options to
purchase an additional 4,500 shares that were not exercisable.
(10) Includes options to purchase 13,078 shares held by Mr. Breedlove and 19,078
shares held by Mr. McDonald that were exercisable as of the Ownership Date.
Each of Messrs. Breedlove and McDonald also holds options to purchase an
additional 4,500 shares that were not exercisable.
(11) In addition to the shares identified in notes (2) through (5) and (8)
through (10), includes options to purchase 7,500 shares held by Donnie
Humphries that were exercisable as of the Ownership Date. Mr. Humphries also
holds options to purchase an additional 2,500 shares that were not
exercisable.
57
<PAGE>
DESCRIPTION OF SENIOR CREDIT FACILITY
On March 25, 1998, we entered into our senior credit facility with
NationsBank, N.A. as administrative agent, NationsBanc Montgomery Securities
LLC, as arranger and syndication agent, and UBS AG, as documentation agent and
the lenders named in the senior credit facility. It provided for the
establishment of a $600.0 million credit facility. Our senior credit facility
originally consisted of the (1) $200.0 million five-year revolver, of which up
to $20.0 million may be used in the form of commercial and standby letters of
credit, (2) $200.0 million term loan and (3) $200.0 million extendable facility.
The initial funding of $140.0 million under the five-year revolver, $200.0
million under the term loan and $200.0 million under the extendable facility
occurred on May 4, 1998, the date on which the MBCI acquisition was completed.
During fiscal 1998, we reduced our senior credit facility to $540.0 million to
better reflect future needs. At January 31, 1999, we had outstanding $150.0
million under the five-year revolver, $185.0 million under the term loan and
$140.0 million under the extendable facility. We used the net proceeds from the
initial offering of the Series A notes to repay borrowings under the extendable
facility as described under "Use of Proceeds." The following is a summary
description of the principal terms of our senior credit facility and the
five-year revolver, term loan and extendable facility. This description does not
purport to be complete and is qualified by reference to the credit agreement
with respect to our senior credit facility and the other agreements that contain
the principal terms and conditions of our senior credit facility, which are
available upon request from us.
AVAILABILITY. Loans and letters of credit under the five-year revolver will
be available, and amounts repaid under the five-year revolver may be reborrowed,
at any time until July 1, 2003 if we fulfill specified conditions, including the
absence of a default under our senior credit facility. At January 31, 1999, we
could have borrowed an additional $48.3 million under the five-year revolver.
The term loan was fully drawn down as of the date of the MBCI acquisition.
Amounts repaid under the term loan may not be reborrowed. After the application
of the net proceeds of the initial offering of the Series A notes, we decreased
the extendable facility to a $40.0 million facility. At January 31, 1999, on an
as adjusted basis to reflect the application of the net proceeds from the
initial offering, we could have borrowed an additional $20.8 million under the
extendable facility.
GUARANTEES AND SECURITY. Our obligations under our senior credit facility
are secured by the pledge of all capital stock, partnership interests and other
equity interests of our domestic subsidiaries. Our obligations under the senior
credit facility also are guaranteed by each of those subsidiaries and our
operating limited partnerships.
INTEREST. Our senior credit facility provides for loans bearing interest
rates, at our option as follows: (1) base rate loans, base rate plus a margin
that ranges from 0% to 0.5%; and (2) LIBOR loans, adjusted LIBOR plus a margin
that ranges from 0.75% to 2%. The default interest rate is the applicable rate
plus 2% per year. The base rate is the higher of NationsBank, N.A.'s prime rate
and the overnight Federal funds rate plus 0.5%, and adjusted LIBOR is the
applicable London interbank offered rate adjusted for reserves, if any. In each
case the margin is based on our most recently determined ratio of funded debt to
EBITDA as calculated under our senior credit facility. Our senior credit
facility currently bears interest at LIBOR plus 1.75%. We currently have an
interest rate swap agreement in place, which limits our variable interest rate
exposure on the term loan. The agreement applies to the full principal amount of
the term loan and caps interest on LIBOR loans at 5.9% plus the applicable LIBOR
margin. In the first quarter of fiscal 1999, our effective interest rate on
variable rate loans was 7.6%.
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<PAGE>
MATURITY, AMORTIZATION AND PREPAYMENTS OF PRINCIPAL. Loans under the
five-year revolver mature and are due and payable in full on July 1, 2003. Loans
under the term loan are payable in successive quarterly installments beginning
on October 31, 1998 in quarterly payment amounts shown in the following table:
<TABLE>
<CAPTION>
QUARTERLY PAYMENT DATES QUARTERLY PAYMENT
- -------------------------------------------------- -----------------
<S> <C>
(IN MILLIONS)
10/31/98 - 7/31/99................................ $ 7.50
10/31/99 - 7/31/00................................ 8.75
10/31/00 - 7/31/01................................ 10.00
10/31/01 - 7/31/02................................ 11.25
10/31/02 - 7/1/03................................. 12.50
</TABLE>
The extendable facility had an original maturity date of May 3, 1999, which
was extended to May 1, 2000 with respect to all of these borrowings. If the
extended portion of the extendable facility is not repaid by us on or before May
1, 2000 or further extended by the lenders, we have the option to convert it to
a three-year term note. The three-year term note would be due and payable in
full at the end of the term of the note, but in no event later than July 1,
2003.
Borrowings may be prepaid, and voluntary reductions of the unutilized
portion of the five-year revolver made, at any time, in agreed upon minimum
amounts, without premium or penalty but we may incur LIBOR breakage costs.
Voluntary prepayments of the term loan will be applied to the remaining
installments of principal due in the inverse order of maturity. We are required
to make mandatory prepayments on our senior credit facility (together with
accrued interest and LIBOR breakage costs) equal to (a) 100% of the net proceeds
received by us or any subsidiary from the sale of assets, (b) 100% of the net
proceeds from the issuance of funded debt obligations and (c) 100% or 50%
(depending on the ratio of our funded debt to EBITDA) of the net cash proceeds
from the issuance and sale of equity securities. Mandatory prepayment will be
applied first to the remaining installments of principal due under the term loan
in inverse order of maturity and then to permanently reduce the five-year
revolver.
The table below shows, as of January 31, 1999 before application of the
proceeds of the initial offering, the required principal reductions that we must
make on our total debt:
<TABLE>
<CAPTION>
REQUIRED ANNUAL
YEAR ENDED OCTOBER 31 PAYMENTS (1)
- -------------------------------------------------- -------------------------
<S> <C>
(IN MILLIONS)
1999.............................................. $ 23.8
2000.............................................. 36.3
2001.............................................. 42.8
2002.............................................. 46.3
2003.............................................. 327.5
------
$ 476.7
------
------
</TABLE>
- ------------------------
(1) Assumes that the extendable facility is further extended and/or converted to
be due and payable in 2003.
COVENANTS. Our senior credit facility contains covenants restricting the
ability of us and our subsidiaries to, among other things, (1) incur additional
indebtedness for borrowed money, (2) incur liens, (3) engage in material
transactions with affiliates outside of the ordinary course of business, (4)
make loans, advances and investments, (5) declare dividends or redeem or
repurchase capital stock, (6) sell or otherwise dispose of assets, (7) engage in
mergers, acquisitions and dissolutions and (8) alter
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<PAGE>
the lines of business we presently conduct, in each case with permitted
exceptions as described in our senior credit facility. As shown below, our
senior credit facility also contains covenants requiring us to satisfy set
financial tests governing our consolidated net worth and our leverage, fixed
charge coverage and senior debt ratios. The required ratios for the periods
indicated are as follows:
<TABLE>
<CAPTION>
1999 2000 2001 2002 2003
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Maximum leverage ratio.................................... 4.25 4.00 3.50 3.50 3.50
Minimum fixed charge coverage ratio....................... 1.30 1.35 1.35 1.35 1.35
Maximum senior debt ratio................................. 3.25 3.00 2.75 2.50 2.50
</TABLE>
EVENTS OF DEFAULT. Events of default under our senior credit facility
include, with respect to us and, in some instances, our subsidiaries, failures
to make required payments, violations of covenants, material misrepresentations,
voluntary and involuntary bankruptcy and insolvency events, material final
judgments, attachments and divestiture orders, failure to maintain required
ownership in a subsidiary guarantor, the acceleration of maturity of specified
material debt, defaults with respect to letters of credit, invalidity or
unenforceability of any of our senior credit facility documents and a change in
control of NCI.
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<PAGE>
THE EXCHANGE OFFER
PURPOSE AND EFFECT
On May 5, 1999, we sold the Series A notes to the initial purchasers. In
connection with the sale of the Series A notes, we entered into a registration
rights agreement with the initial purchasers. The registration rights agreement
requires that we use our best efforts to register the Series B notes with the
SEC and offer to exchange the new Series B notes for the Series A notes. A copy
of the registration rights agreement has been filed with the SEC as an exhibit
to our registration statement and we strongly encourage you to read the entire
text of the registration rights agreement. We expressly qualify all of our
discussions of the registration rights agreement by the terms of the agreement
itself. Except as discussed below, upon the completion of the exchange offer we
will have no further obligations to register your notes.
We need certain representations from you before you can participate in the
exchange offer. In order to participate in the exchange offer, we require that
you represent to us that:
- you are acquiring the Series B notes in the ordinary course of your
business;
- neither you nor any other person is engaging in, or intends to engage in,
a distribution of the Series B notes;
- neither you nor any other person has an arrangement or understanding with
any person to participate in the distribution of the Series B notes;
- neither you nor any other person is our "affiliate," which is defined
under Rule 405 of the Securities Act as a person that directly, or
indirectly through one or more intermediaries, controls or is controlled
by, or is under common control with, us; and
- if you or any other person is a broker-dealer, you will receive Series B
notes for your own account, your Series B notes will be acquired as a
result of market making activities or other trading activities and you
will be required to acknowledge that you will deliver a prospectus in
connection with any resale of your Series B notes.
You may be entitled to "shelf" registration rights. In accordance with the
registration rights agreement, we are required to file a shelf registration
statement covering your Series A notes for a continuous offering in accordance
with Rule 415 of the Securities Act. This means that we must file a second
registration statement to register your Series A notes if:
- we are not permitted to complete the exchange offer because of any change
in law or applicable interpretations of the staff of the SEC; or
- we are notified by any holder of Series A notes that it is prohibited from
participating in the exchange offer because of SEC policy, it may not
resell the Series B notes because it cannot comply with the prospectus
delivery requirements or it is a broker-dealer who holds Series A notes
purchased directly from us or one of our affiliates.
If we are obligated to file a shelf registration statement, we will be
required to keep the shelf registration statement effective until May 5, 2001.
Other than as described above, you will not have the right to participate in the
shelf registration or require that we register your notes in accordance with the
Securities Act.
If you participate in the exchange offer and make the representations
provided above, we believe you will be able to freely sell or transfer your
Series B notes. We base our belief upon existing interpretations by the SEC's
staff contained in several "no-action" letters to third-parties unrelated to us.
If you tender your Series A notes in the exchange offer for the purpose of
participating in a distribution of Series B notes, you cannot rely on this
interpretation by the SEC's staff and you must
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<PAGE>
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with a secondary resale transaction. Each
broker-dealer who receives Series B notes for its own account in exchange for
its Series A notes, whether the Series B notes were acquired by that
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that the broker-dealer will deliver a prospectus in
connection with any resale of the Series B notes.
You may suffer adverse consequences if you fail to exchange your Series A
notes. See "Risk Factors."
Following the completion of the exchange offer, except as provided above and
in the registration rights agreement, you will not have any further registration
rights and your Series A notes will continue to be subject to restrictions on
transfer. Accordingly, if you do not participate in the exchange offer, your
ability to sell your Series A notes could be adversely affected.
TERMS OF THE EXCHANGE OFFER
We will accept any validly tendered notes that are not withdrawn, prior to
5:00 p.m., New York City time, on the expiration date of the exchange offer. We
will issue $1,000 principal amount of Series B notes in exchange for each $1,000
principal amount of your Series A notes. You may tender some or all of your
notes in the exchange offer.
The form and terms of the Series B notes will be the same as the form and
terms of your notes except that:
- interest on the Series B notes will accrue from the last interest payment
date on which interest was paid on your Series A notes, or, if no interest
was paid, from the date of the original issuance of your Series A notes;
and
- the Series B notes have been registered under the Securities Act and will
not bear a legend restricting their transfer.
This prospectus, together with the letter of transmittal you received with
this prospectus, is being sent to you and to others believed to have beneficial
interests in the Series A notes. You do not have any appraisal or dissenters'
rights under the General Corporation Law of the State of Delaware or under the
indenture governing your notes. We intend to conduct the exchange offer in
accordance with the requirements of the Securities Exchange Act of 1934 and the
rules and regulations of the SEC.
We will have accepted your validly tendered Series A notes when we have
given oral or written notice to the exchange agent. The exchange agent will act
as agent for the tendering holders for the purpose of receiving the Series B
notes from us. If the exchange agent does not accept any tendered Series A notes
for exchange because of an invalid tender or for any other valid reason, the
exchange agent will return the certificates, without expense, to the tendering
holder as promptly as practicable after the expiration date of the exchange
offer.
You will not be required to pay brokerage commissions, fees or transfer
taxes in the exchange of your Series A notes. We will pay all charges and
expenses other than any taxes you may incur in connection with the exchange
offer.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The exchange offer will expire at 5:00 p.m., New York City time, on
, 1999, unless we extend it and thereby delay acceptance for
exchange of any Series A notes. In order to extend the exchange offer, we will
issue a notice by press release or by other public announcement before 9:00 a.m,
New York City time, on the next business day after the previously scheduled
expiration date.
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<PAGE>
We reserve the right, in our sole discretion:
- to delay accepting your notes;
- to extend the exchange offer;
- to terminate the exchange offer if any of the conditions were not
satisfied by giving oral or written notice of delay, extension or
termination to the exchange agent; or
- to amend the terms of the exchange offer in any manner.
PROCEDURES FOR TENDERING YOUR NOTES
Only you may tender your notes in the exchange offer. Except as stated on
page 65 under the heading "--Book-Entry Transfer," to tender in the exchange
offer, you must:
- complete, sign and date the enclosed letter of transmittal, or a copy of
it;
- have the signature on the letter of transmittal guaranteed if required by
the letter of transmittal; and
- mail, fax or otherwise deliver the letter of transmittal or copy to the
exchange agent before the expiration date.
In addition, either:
- the exchange agent must receive certificates for your Series A notes and
the letter of transmittal before the expiration date; or
- the exchange agent must receive a timely confirmation of a book-entry
transfer of your Series A notes, if that procedure is available, into the
account of the exchange agent at the Depository Trust Company under the
procedure for book-entry transfer described below before the expiration
date of the exchange offer; or
- you must comply with the guaranteed delivery procedures described below.
For your Series A notes to be tendered effectively, the exchange agent must
receive a letter of transmittal and other required documents before the
expiration date of the exchange offer.
If you do not withdraw your tender before the expiration date, it will
constitute an agreement between you and us in accordance with the terms and
conditions in this prospectus and in the letter of transmittal.
The method of delivery to the exchange agent of your Series A notes, your
letter of transmittal, and all other required documents is at your election and
risk. Instead of delivery by mail, we recommend that you use an overnight or
hand delivery service. In all cases, you should allow sufficient time to assure
delivery to the exchange agent before the expiration date of the exchange offer.
Do not send either a letter of transmittal or your Series A notes directly to
us. You may request your broker, dealer, commercial bank, trust company or
nominee to make the exchange on your behalf.
PROCEDURE IF THE SERIES A NOTES ARE NOT REGISTERED IN YOUR NAME
Any beneficial owner whose Series A notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender the Series A notes in the exchange offer should contact the registered
holder promptly and instruct the registered holder to tender the Series A notes
on the beneficial owner's behalf. If the beneficial owner wishes to tender on
the owner's own behalf, the owner must, before completing and executing a letter
of transmittal and delivering the owner's Series A notes, either make
appropriate arrangements to register ownership of the Series A notes in the
beneficial owner's name or obtain a properly completed bond power or other
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<PAGE>
proper endorsement from the registered holder. We strongly urge you to act
immediately since the transfer of registered ownership may take considerable
time.
SIGNATURE REQUIREMENTS AND SIGNATURE GUARANTEES
Unless you are a registered holder who requests that the Series B notes be
mailed to you and issued in your name, or unless you are a member of, or
participate in, the Securities Transfer Agents Medallion Program, the New York
Stock Exchange Medallion Signature Program, the Stock Exchange Medallion Program
or an "Eligible Guarantor Institution" within the meaning of Rule 17Ad-15 under
the Securities Exchange Act, each an "Eligible Institution," you must guarantee
your signature on a letter of transmittal or a notice of withdrawal by an
eligible guarantor institution.
If a trustee, executor, administrator, guardian, attorney-in-fact, officer
of a corporation or other person acting in a fiduciary or representative
capacity signs the letter of transmittal or any notes or bond powers on your
behalf, that person must indicate their capacity when signing and submit
satisfactory evidence to us with the letter of transmittal demonstrating their
authority to act on your behalf.
CONDITIONS TO THE EXCHANGE OFFER
We will decide all questions as to the validity, form, eligibility,
acceptance and withdrawal of tendered Series A notes and our determination will
be final and binding on you. We reserve the absolute right to reject any and all
Series A notes properly tendered or accept any Series A notes that would be
unlawful in the opinion of our counsel. We also reserve the right to waive any
defects, irregularities or conditions of tender as to particular Series A notes.
Our interpretation of the terms and conditions of the exchange offer, including
the instructions in a letter of transmittal, will be final and binding on all
parties. You must cure any defects or irregularities in connection with tenders
of Series A notes as we shall determine. Although we intend to notify holders of
defects or irregularities with respect to tenders of Series A notes, we, the
exchange agent or any other person will not incur any liability for failure to
give this notification. Tenders of Series A notes will not be deemed to have
been made until any defects or irregularities have been cured or waived. Any
Series A notes received by the exchange agent that are not properly tendered and
as to which 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 of the exchange offer.
We reserve the right to purchase or to make offers for any Series A notes
that remain outstanding after the expiration date of the exchange offer or to
terminate the exchange offer and, to the extent permitted by law, purchase
Series A notes in the open market, in privately negotiated transactions or
otherwise. The terms of any of these purchases or offers could differ from the
terms of the exchange offer.
These conditions are for our sole benefit and we may assert or waive them at
any time or for any reason. Our failure to exercise any of our rights will not
be a waiver of our rights.
We will not accept for exchange any Series A notes tendered, and no Series B
notes will be issued in exchange for any Series A notes, if at the time any stop
order is threatened or in effect with respect to the registration statement or
the qualification of the indenture relating to the Series B notes under the
Trust Indenture Act of 1939. We are required to use every reasonable effort to
obtain the withdrawal of any stop order at the earliest possible time.
In all cases, issuance of Series B notes will be made only after timely
receipt by the exchange agent of certificates for Series A notes or a timely
book-entry confirmation of the Series A notes into the exchange agent's account
at DTC's book-entry transfer facility, a properly completed and duly
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<PAGE>
executed letter of transmittal or, with respect to DTC and its participants,
electronic instructions of the holder agreeing to be bound by the letter of
transmittal, and all other required documents. If we do not accept any tendered
Series A notes for a valid reason or if you submit Series A notes for a greater
principal amount than you desire to exchange, we will return the unaccepted or
non-exchanged Series A notes to you at our expense. In the case of Series A
notes tendered by book-entry transfer into the exchange agent's account at DTC's
book-entry transfer facility under the book-entry transfer procedures described
below, the non-exchanged Series A notes will be credited to an account
maintained with the book-entry transfer facility. This will occur as promptly as
practicable after the expiration or termination of the exchange offer for the
Series A notes.
Notwithstanding any other provision of the exchange offer, we will not be
required to accept for exchange, or to issue Series B notes in exchange for, any
Series A notes and may terminate or amend the exchange offer if at any time
before the acceptance of the Series A notes for exchange or the exchange of the
Series B notes for the Series A notes we determine that the exchange offer
violates applicable law, any applicable interpretation of the staff of the SEC
or any order of any governmental agency or court of competent jurisdiction.
BOOK-ENTRY TRANSFER
The exchange agent will make requests to establish accounts at DTC's
book-entry transfer facility for purposes of the exchange offer within two
business days after the date of this prospectus. Any financial institution that
is a participant in the book-entry transfer facility's systems may make
book-entry delivery of Series A notes being tendered by causing the book-entry
transfer facility to transfer the Series A notes into the exchange agent's
account at the book-entry transfer facility in accordance with the appropriate
procedures for transfer. However, although delivery of Series A notes may be
effected through book-entry transfer at the book-entry transfer facility, a
letter of transmittal or copy thereof, with any required signature guarantees
and any other required documents, must, except as provided in the following
paragraph, be transmitted to and received by the exchange agent on or before the
expiration date of the exchange offer or you must comply with the guaranteed
delivery procedures below.
DTC's Automated Tender Offer Program ("ATOP") is the only method of
processing the exchange offer through DTC. To accept the exchange offer through
ATOP, participants in DTC must send electronic instructions to DTC through DTC's
communication system instead of sending a signed, hard copy of the letter of
transmittal. DTC is obligated to communicate those electronic instructions to
the exchange agent. To tender notes through ATOP, the electronic instructions
sent to DTC and transmitted by DTC to the exchange agent must contain the
participant's acknowledgment of its receipt of and agreement to be bound by the
letter of transmittal for those notes.
GUARANTEED DELIVERY PROCEDURES
If a registered holder of Series A notes desires to tender any Series A
notes and the Series A notes are not immediately available, or time will not
permit the holder's Series A notes or other required documents to reach the
exchange agent before the expiration date of the exchange offer, or the
procedure for book-entry transfer cannot be completed on a timely basis, a
tender may be effected if:
- the tender is made through an Eligible Institution;
- before the expiration date of the exchange offer, the exchange agent
received from the Eligible Institution a properly completed and duly
executed letter of transmittal and Notice of Guaranteed Delivery, in the
form provided by us. The Notice of Guaranteed Delivery must state the name
and address of the holder of the Series A notes and the amount of Series A
notes tendered, that the tender is being made and guaranteeing that within
three New York Stock Exchange trading days after the date of execution of
the Notice of Guaranteed Delivery, the certificates for all physically
tendered Series A notes, in proper form for transfer, or a
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<PAGE>
book-entry confirmation and any other documents required by the applicable
letter of transmittal will be deposited by the Eligible Institution with
the exchange agent; and
- the certificates for all physically tendered Series A notes, in proper
form for transfer, or a book-entry confirmation and all other documents
required by the applicable letter of transmittal are received by the
exchange agent within three New York Stock Exchange trading days after the
date of execution of the Notice of Guaranteed Delivery.
WITHDRAWAL RIGHTS
You may withdraw your tender of Series A notes at any time before 5:00 p.m.,
New York City time, on the expiration date of the exchange offer.
For a withdrawal to be effective, a written or, for a DTC participant,
electronic ATOP transmission notice of withdrawal must be received by the
exchange agent at its address provided in this prospectus before 5:00 p.m., New
York City time, on the expiration date of the exchange offer.
The notice of withdrawal must:
- specify the name of the person who deposited the Series A notes to be
withdrawn;
- identify the Series A notes to be withdrawn, including the certificate
number or numbers and principal amount of the Series A notes;
- be signed by the holder in the same manner as the original signature on
the letter of transmittal by which the Series A notes were tendered or be
accompanied by documents of transfer sufficient to have the trustee of the
Series A notes register the transfer of the Series A notes into the name
of the person withdrawing the tender; and
- specify the name in which any Series A notes are to be registered, if
different from that of the holder who tendered the Series A notes.
We will determine all questions as to the validity, form and eligibility of
any and our determination will be final and binding on all parties. Any Series A
notes withdrawn will not be considered to have been validly tendered. We will
return any Series A notes that have been tendered but not exchanged without cost
to the holder as soon as practicable after withdrawal, rejection of tender or
termination of the exchange offer. Properly withdrawn Series A notes may be
retendered by following one of the above procedures before the expiration date.
EXCHANGE AGENT
You should direct all executed letters of transmittal to the exchange agent.
Harris Trust Company of New York is the exchange agent for the exchange offer.
Questions, requests for assistance and requests for additional copies of the
prospectus or a letter of transmittal should be directed to the exchange agent
addressed as follows:
<TABLE>
<S> <C> <C>
BY MAIL: BY FACSIMILE TRANSMISSION: BY HAND OR
Wall Street Station (FOR ELIGIBLE INSTITUTIONS OVERNIGHT COURIER:
P.O. Box 1023 ONLY) Receive Window
New York, NY 10268-1023 (212) 701-7636 or 7637 Wall Street Plaza
88 Pine Street, 19th Floor
New York, NY 10005
FOR INFORMATION BY TELEPHONE
(CALL COLLECT):
(212) 701-7624
</TABLE>
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<PAGE>
FEES AND EXPENSES
We currently do not intend to make any payments to brokers, dealers or
others to solicit acceptances of the exchange offer. The principal solicitation
is being made by mail. However, additional solicitations may be made in person
or by telephone by our officers and employees.
Our estimated cash expenses incurred in connection with the exchange offer
will be paid by us and are estimated to be approximately $150,000 in the
aggregate. This amount includes fees and expenses of the trustee for the Series
B and Series A notes, accounting, legal, printing, and related fees and
expenses.
TRANSFER TAXES
If you tender Series A notes for exchange, you will not be obligated to pay
any transfer taxes. However, if you instruct us to register Series B notes in
the name of, or request that your Series A notes not tendered or not accepted in
the exchange offer be returned to, a person other than you, you will be
responsible for the payment of any transfer tax owed.
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<PAGE>
DESCRIPTION OF REGISTERED NOTES
As used below in this "Description of Registered Notes" section, the
"Company" means NCI Building Systems, Inc. and its successors, but not any of
its subsidiaries. The Company will issue the Series B notes under our existing
Indenture, dated as of May 5, 1999, among the Company, the Subsidiary Guarantors
and Harris Trust Company of New York, as Trustee. The outstanding Series A notes
and the registered Series B notes are collectively referred to as the "Notes."
The following is a summary of the material terms and provisions of the Notes.
The terms of the Notes include those set forth in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act. The Notes are
subject to all such terms, and prospective purchasers of the Notes are referred
to the Indenture and the Trust Indenture Act for a statement of the terms. A
copy of the Indenture referred to below will be made available to prospective
purchasers of the Notes upon request. The following summary does not purport to
be a complete description of the Notes and is subject to the detailed provisions
of, and qualified in its entirety by reference to, the Indenture. Capitalized
terms that are used but not otherwise defined in this section have the meanings
assigned to them in the Indenture and those definitions are incorporated in this
section by reference.
The Notes are senior subordinated unsecured obligations of the Company,
subordinated in right of payment to all existing and future Senior Indebtedness
of the Company (including the Company's obligations under the Credit Agreement)
as described below under "--Subordination." The Notes will be fully and
unconditionally guaranteed (each a "Subsidiary Guarantee"), jointly and
severally, by each Subsidiary Guarantor on a senior subordinated basis, with
each such Guarantee subordinated to the Subsidiary Guarantor's guarantee of the
obligations of the Company under the Credit Agreement and to all other Senior
Indebtedness of such Subsidiary Guarantor (including guarantees of other Senior
Indebtedness of the Company that constitute Senior Indebtedness). The Notes will
be issued in registered form, without coupons, and in denominations of $1,000
and integral multiples thereof.
An aggregate principal amount of Series A notes equal to $125.0 million were
issued on the Issue Date. The Company may issue additional Notes having
identical terms and conditions to the Notes offered hereby (the "Additional
Notes"), subject to compliance with the "Limitations on Additional Indebtedness"
covenant described below. Any Additional Notes will be part of the same issue as
the Notes offered hereby and will vote on all matters as one class with the
Notes offered hereby. For purposes of this "Description of Registered Notes,"
except the covenant described under "Limitations on Additional Indebtedness,"
references to the Notes include Additional Notes.
PRINCIPAL, MATURITY AND INTEREST
The Notes will mature on May 1, 2009 and bear interest at the rate shown on
the cover page of this prospectus, payable on May 1 and November 1 of each year,
commencing on November 1, 1999, to holders of record at the close of business on
April 15 or October 15, as the case may be, immediately preceding the relevant
interest payment date. Interest on the Notes will be computed on the basis of a
360-day year of twelve 30-day months. The Notes will be payable as to principal,
premium, if any, and interest at the office or agency of the Company maintained
for such purpose within New York City or, at the option of the Company, by wire
transfer of immediately available funds or, in the case of certificated
securities only, by mailing a check to the registered address of the holder. See
"--Delivery and Form of Securities--Book Entry, Delivery and Form." Until
otherwise designated by the Company, the Company's office or agency in New York
City will be the office of the Trustee maintained for such purpose.
SUBORDINATION
The payment by the Company of principal of, and premium, if any, and
interest (including Special Interest) on the Notes (the "Note Indebtedness"),
and by each Subsidiary Guarantor of such amounts under its Subsidiary Guarantee
(the "Subsidiary Guarantee Indebtedness"), will be subordinated to the
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prior payment in full in cash of the principal of, and premium, if any, and
accrued and unpaid interest on, and all other amounts owing in respect of, all
existing and future Senior Indebtedness of the Company and the Subsidiary
Guarantor Senior Indebtedness of each of the Subsidiary Guarantors, as the case
may be. The Company will agree in the Indenture that it will not incur, directly
or indirectly, any Indebtedness that is subordinate or junior in ranking in
right of payment to its Senior Indebtedness unless such Indebtedness is PARI
PASSU with or is expressly subordinated in right of payment to the Notes. In
addition, each Subsidiary Guarantor will agree that it will not incur, directly
or indirectly, any Indebtedness that is subordinate or junior in ranking in
right of payment to its Subsidiary Guarantor Senior Indebtedness unless such
Indebtedness is PARI PASSU with or is expressly subordinated in right of payment
to the Subsidiary Guarantees. At January 31, 1999, on an as adjusted basis
assuming that the offering and the application of the net proceeds occurred on
such date, the Company and the Subsidiary Guarantors would have had
approximately $355.9 million of Indebtedness outstanding other than the Notes,
of which $354.4 million would have constituted Senior Indebtedness or Subsidiary
Guarantor Senior Indebtedness, and the Subsidiary Guarantors would have had no
Indebtedness outstanding other than the guarantees of the Company's Senior
Indebtedness and the Notes. Subject to certain limitations in the Credit
Agreement and the Indenture, the Company and its Subsidiaries (including the
Subsidiary Guarantors) may incur additional Indebtedness (including Senior
Indebtedness or Subsidiary Guarantor Senior Indebtedness, as the case may be) in
the future. See "Description of Credit Agreement" and "--Certain
Covenants--Limitations on Additional Indebtedness."
The Indenture provides that, upon any distribution to creditors of the
Company or any Subsidiary Guarantor of assets of any kind or character of the
Company or such Subsidiary Guarantor in a total or partial liquidation or
dissolution of the Company or such Subsidiary Guarantor or in a bankruptcy,
reorganization, insolvency, receivership or similar proceeding relating to the
Company or such Subsidiary Guarantor, whether voluntary or involuntary
(including any assignment for the benefit of creditors and proceedings for
marshaling of assets and liabilities of the Company or such Subsidiary
Guarantor), the holders of all Senior Indebtedness of the Company or the
Subsidiary Guarantor Senior Indebtedness of such Subsidiary Guarantor then
outstanding will be entitled to payment in full in cash (including interest
accruing subsequent to the filing of a petition for bankruptcy or insolvency at
the rate specified in the document relating to the applicable Senior
Indebtedness or Subsidiary Guarantor Senior Indebtedness, as the case may be,
whether or not such interest is an allowed claim enforceable against the Company
or such Subsidiary Guarantor under applicable law) before the holders of Notes
are entitled to receive any payment (other than payments made from a trust
previously established pursuant to provisions described under "--Legal
Defeasance or Covenant Defeasance of Indenture") on or with respect to the Note
Indebtedness or the Subsidiary Guarantee Indebtedness, as the case may be, and
until the holders of all Senior Indebtedness or Subsidiary Guarantor Senior
Indebtedness, as the case may be, of the Company or such Subsidiary Guarantor
receive payment in full, any distribution to which the holders of Notes would be
entitled will be made to holders of Senior Indebtedness or Subsidiary Guarantor
Senior Indebtedness, as the case may be.
Upon the occurrence of any default beyond the applicable grace period in the
payment of any principal of or interest on or other amounts due on any
Designated Senior Indebtedness (as defined below) of the Company or any
Subsidiary Guarantor (a "Payment Default"), no payment of any kind or character
shall be made by the Company or any Subsidiary Guarantor (or by any other Person
on its or their behalf) with respect to the Note Indebtedness unless and until
(i) such Payment Default shall have been cured or waived in accordance with the
instruments governing such Indebtedness or shall have ceased to exist, (ii) such
Designated Senior Indebtedness has been discharged or paid in full in cash in
accordance with the instruments governing such Indebtedness or (iii) the
benefits of this sentence have been waived by the holders of such Designated
Senior Indebtedness or their representative, including, if applicable, the
Agents, immediately after which the Company must resume
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making any and all required payments, including missed payments, in respect of
its obligations under the Notes.
Upon (1) the occurrence and continuance of an event of default (other than a
Payment Default) relating to Designated Senior Indebtedness, as such event of
default is defined therein or in the instrument or agreement under which it is
outstanding, which event of default, pursuant to the instruments governing such
Designated Senior Indebtedness, entitles the holders (or a specified portion of
the holders) of such Designated Senior Indebtedness or their representatives,
including, if applicable, the Agents, to immediately accelerate without further
notice (except such notice as may be required to effect such acceleration) the
maturity of such Designated Senior Indebtedness (a "Non-payment Default") and
(2) the receipt by the Trustee and the Company from the trustee or other
representative of holders of such Designated Senior Indebtedness of written
notice (a "Payment Blockage Notice") of such occurrence, no payment is permitted
to be made by the Company or any Subsidiary Guarantor (or by any other Person on
its or their behalf) in respect of the Note Indebtedness for a period (a
"Payment Blockage Period") commencing on the date of receipt by the Trustee of
such notice and ending on the earliest to occur of the following events (subject
to any blockage of payments that may then be in effect due to a Payment Default
on Designated Senior Indebtedness): (w) such Non-payment Default has been cured
or waived or has ceased to exist; (x) a period of 179 consecutive days,
commencing on the date such Payment Blockage Notice is received by the Trustee,
has elapsed; (y) such Payment Blockage Period has been terminated by written
notice to the Trustee from the trustee or other representative of holders of
such Designated Senior Indebtedness, whether or not such Non-payment Default has
been cured or waived or has ceased to exist; and (z) such Designated Senior
Indebtedness has been discharged or paid in full in cash, immediately after
which, in the case of clause (w), (x), (y) or (z), the Company must resume
making any and all required payments, including missed payments, in respect of
its obligations under the Notes. Notwithstanding the foregoing, (i) not more
than one Payment Blockage Period may be commenced in any period of 365
consecutive days and (ii) no default or event of default with respect to the
Designated Senior Indebtedness of the Company that was the subject of a Payment
Blockage Notice which existed or was continuing on the date of the giving of any
Payment Blockage Notice shall be or serve as the basis for the giving of a
subsequent Payment Blockage Notice whether or not within a period of 365
consecutive days unless such default or event of default shall have been cured
or waived for a period of at least 90 consecutive days after such date.
Notwithstanding the foregoing, Noteholders may receive and retain Permitted
Junior Securities and payment from the money or the proceeds held in any
defeasance trust described under "--Satisfaction and Discharge of Indenture;
Defeasance" below, and no such receipt or retention will be contractually
subordinated in right of payment to any Senior Indebtedness or subject to the
restrictions described in this "Subordination" section.
In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company or any Subsidiary Guarantor, whether in
cash, property or securities, shall be received by the Trustee or the holders of
Notes at a time when such payment or distribution is prohibited by the foregoing
provisions, such payment or distribution shall be segregated from other funds or
assets and held in trust for the benefit of the holders of Senior Indebtedness
of the Company or such Subsidiary Guarantor, as the case may be, and shall be
paid or delivered by the Trustee or such holders, as the case may be, to the
holders of the Senior Indebtedness of the Company or such Subsidiary Guarantor,
as the case may be, remaining unpaid or unprovided for or their representative
or representatives, or to the trustee or trustees under any indenture pursuant
to which any instruments evidencing any of such Senior Indebtedness of the
Company or such Subsidiary Guarantor, as the case may be, may have been issued,
ratably according to the aggregate amounts remaining unpaid on account of the
Senior Indebtedness of the Company or such Subsidiary Guarantor, as the case may
be, held or represented by each, for application to the payment of all Senior
Indebtedness of the Company or such Subsidiary Guarantor, as the case may be,
remaining unpaid, to the extent necessary to pay or to provide for the
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payment in full in cash of all such Senior Indebtedness after giving effect to
any concurrent payment or distribution to the holders of such Senior
Indebtedness.
If the Company fails to make any payment on the Notes when due or within any
applicable grace period, whether or not such failure is on account of the
subordination provisions referred to above, such failure would constitute an
Event of Default under the Indenture and would enable the holders of Notes to
accelerate the maturity of the Notes. See "--Events of Default."
By reason of the subordination provisions contained in the Indenture, in the
event of bankruptcy, liquidation, insolvency or other similar proceedings,
creditors of the Company who are holders of Senior Indebtedness may recover
more, ratably, than the holders of the Notes, and creditors of the Company
(other than holders of the Notes) who are not holders of Senior Indebtedness may
recover more, ratably, than the holders of the Notes.
SUBSIDIARY GUARANTEES
The Company's payment obligations under the Notes are jointly and severally
guaranteed (the "Subsidiary Guarantees") by the Subsidiary Guarantors. Each
Subsidiary Guarantee is an unsecured senior subordinated obligation of the
Subsidiary Guarantor with respect thereto and ranks junior in right of payment
to all existing and future Senior Indebtedness of such Subsidiary Guarantor,
including such Subsidiary Guarantor's guarantee of the Company's obligations
under the Credit Agreement and any guarantee by such Subsidiary Guarantor of
other Indebtedness of the Company which guarantee constitutes Senior
Indebtedness. The obligations of each Subsidiary Guarantor under its Subsidiary
Guarantee are limited so as not to constitute a fraudulent conveyance under
applicable law.
The Indenture provides that no Subsidiary Guarantor may consolidate with or
merge with or into (whether or not such Subsidiary Guarantor is the surviving
Person) another Person whether or not affiliated with such Subsidiary Guarantor
unless (i) the Person formed by or surviving any such consolidation or merger
(if other than such Subsidiary Guarantor) assumes all of the obligations of such
Subsidiary Guarantor pursuant to a supplemental indenture, in form and substance
satisfactory to the Trustee, under the Notes and the Indenture; (ii) immediately
after giving effect to such transaction, no Default exists; and (iii)
immediately after giving effect to such transaction, the Coverage Ratio
Incurrence Condition would be met. The foregoing does not apply to any
consolidation or merger that otherwise constitutes an Asset Sale.
The Indenture provides that in the event of a sale or other disposition of
all of the assets of any Subsidiary Guarantor, by way of merger, consolidation
or otherwise, or a sale or other disposition of all of the Capital Stock of any
Subsidiary Guarantor then held by the Company and its Restricted Subsidiaries,
then such Subsidiary Guarantor will be released and relieved of any obligations
under its Subsidiary Guarantee; PROVIDED that the Net Cash Proceeds of such sale
or other disposition are applied in accordance with the applicable provisions of
the Indenture, to the extent required thereby. See "Certain
Covenants--Limitations on Asset Sales." In addition, the Indenture provides that
any Subsidiary Guarantor that is designated as an Unrestricted Subsidiary or
that otherwise ceases to be a Subsidiary, in each case in accordance with the
provisions of the Indenture, will be released from its Subsidiary Guarantee upon
effectiveness of such designation or when it first ceases to be a Subsidiary, as
the case may be.
OPTIONAL REDEMPTION OF THE NOTES
The Notes may not be redeemed prior to May 1, 2004, but will be redeemable
at the option of the Company, in whole or in part, at any time on or after May
1, 2004, at the redemption prices (expressed as percentages of principal amount)
set forth below, together with accrued and unpaid interest thereon,
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if any, to the redemption date, if redeemed during the 12-month period beginning
May 1 of the years indicated:
<TABLE>
<CAPTION>
YEAR OPTIONAL REDEMPTION PRICE
- ------------------------------------------------------------------- -------------------------
<S> <C>
2004 104.625%
2005 103.083%
2006 101.542%
2007 and thereafter 100.000%
</TABLE>
Notwithstanding the foregoing, at any time prior to May 1, 2002, the Company
may redeem up to 35% of the sum of (i) the initial aggregate principal amount of
the Notes and (ii) the initial aggregate principal amount of any Additional
Notes with the net cash proceeds of one or more Equity Offerings at a redemption
price equal to 109.250% of the principal amount thereof, plus accrued and unpaid
interest thereon (including Special Interest), if any, to the redemption date;
PROVIDED that (a) 65% of the sum of (i) the initial aggregate principal amount
of Notes issued on the Issue Date and (ii) the initial aggregate principal
amount of any Additional Notes remains outstanding immediately after the
occurrence of such redemption and (b) such redemption occurs within 90 days of
the date of the closing of any such Equity Offering.
If less than all of the Notes are to be redeemed at any time, selection of
the Notes to be redeemed will be made by the Trustee from among the outstanding
Notes and any Additional Notes as one class on a PRO RATA basis, by lot or by
any other method permitted in the Indenture. Notice of redemption will be mailed
at least 30 days but not more than 60 days before the redemption date to each
holder whose Notes are to be redeemed at the registered address of such holder.
On and after the redemption date, interest will cease to accrue on the Notes or
portions thereof called for redemption.
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each holder of the Notes will
have the right to require that the Company repurchase such holder's Notes for a
cash price (the "Change of Control Purchase Price") equal to 101% of the
principal amount of the Notes, plus accrued and unpaid interest (including
Special Interest) thereon, if any, to the date of repurchase, all in accordance
with the following paragraph.
Within 30 days following any Change of Control, the Company will mail to the
Trustee (who shall mail to each Noteholder at the Company's expense) a notice
(i) describing the transaction or transactions that constitute the Change of
Control, (ii) offering to repurchase, pursuant to the procedures required by the
Indenture and described in such notice (a "Change of Control Offer"), on a date
specified in such notice (which shall be a business day not earlier than 30 days
or later than 60 days from the date such notice is mailed) and for the Change of
Control Purchase Price, all Notes properly tendered by such holder pursuant to
such offer to purchase for the Change of Control Purchase Price and (iii)
describing the procedures that holders must follow to accept the Change of
Control Offer. The Change of Control Offer is required to remain open for at
least 20 business days or for such longer period as is required by law.
The occurrence of the events constituting a Change of Control under the
Indenture may result in an event of default in respect of other Indebtedness
(including the Senior Indebtedness) of the Company and its Subsidiaries and,
consequently, the lenders thereof may have the right to require repayment of
such Indebtedness in full. If a Change of Control Offer is made, there can be no
assurance that the Company will have available funds sufficient to pay for all
or any of the Notes that might be delivered by holders of Notes seeking to
accept the Change of Control Offer. There can be no assurance that in the event
of a Change of Control the Company will be able to obtain the consents
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necessary to consummate a Change of Control Offer from the lenders under
agreements governing outstanding Indebtedness which may prohibit such an offer.
The Company's obligation to make a Change of Control Offer will be satisfied if
a third party makes the Change of Control Offer in the manner and at the times
and otherwise in compliance with the requirements applicable to a Change of
Control Offer made by the Company and purchases all Notes properly tendered and
not withdrawn under such Change of Control Offer. The definition of Change of
Control includes the sale of "all or substantially all" of the assets of (i) the
Company or (ii) the Company and its Subsidiaries taken as a whole, the
determination of which depends upon the circumstances of any such sale and is
subject to interpretation under applicable legal precedent.
The Change of Control feature of the Notes, by requiring a Change of Control
Offer, may in certain circumstances make more difficult or discourage a sale or
takeover of the Company, and, thus, the removal of incumbent management. The
Change of Control feature, however, is not part of a plan by management to adopt
a series of antitakeover provisions. Instead, the Change of Control feature is a
result of negotiations between the Company and the Initial Purchasers. Subject
to the limitations discussed below, the Company could, in the future, enter into
certain transactions, including acquisitions, refinancings or other
recapitalizations, that would not constitute a Change of Control under the
Indenture, but that could increase the amount of Indebtedness outstanding at
such time or otherwise affect the Company's capital structure or credit ratings.
The Company will comply with applicable tender offer rules, including the
requirements of Rule 14e-l under the Exchange Act and any other applicable laws
and regulations in connection with the purchase of Notes pursuant to a Change of
Control Offer.
CERTAIN COVENANTS
LIMITATIONS ON ADDITIONAL INDEBTEDNESS. The Indenture provides that the
Company will not, and will not permit any of its Restricted Subsidiaries to,
directly or indirectly, incur any Indebtedness (including Acquired
Indebtedness); PROVIDED that (i) the Company and its Restricted Subsidiaries may
incur Permitted Indebtedness and (ii) the Company may incur additional
Indebtedness if, after giving effect thereto, the Company's Consolidated
Interest Coverage Ratio on the date thereof would be at least 2.0 to 1,
determined on a PRO FORMA basis as if the incurrence of such additional
Indebtedness, and the application of the net proceeds therefrom, had occurred at
the beginning of the four-quarter period used to calculate the Company's
Consolidated Interest Coverage Ratio.
LIMITATION ON ISSUANCE OF SUBSIDIARY PREFERRED STOCK. The Indenture
provides that the Company will not permit any of its Restricted Subsidiaries to
issue any Preferred Stock (other than to the Company or a Wholly-Owned
Restricted Subsidiary) or permit any Person (other than the Company or a
Wholly-Owned Restricted Subsidiary) to own or hold any interest in any Preferred
Stock of any such Subsidiary unless such Restricted Subsidiary would be
permitted to incur (i) Permitted Indebtedness under clause (x) of the definition
thereof in an aggregate principal amount equal to the aggregate liquidation
value of such Preferred Stock or (ii) other Indebtedness under clause (ii) of
the proviso in the "Limitations on Additional Indebtedness" covenant.
LIMITATION ON THE ISSUANCE OR SALE OF CAPITAL STOCK OF RESTRICTED
SUBSIDIARIES. The Indenture provides that the Company will not, and will not
permit any Restricted Subsidiary to, directly or indirectly, sell or issue any
shares of Capital Stock of any Restricted Subsidiary (including options,
warrants or other rights to purchase shares of such Capital Stock) except (i) to
the Company or a Wholly-Owned Restricted Subsidiary, (ii) subject to compliance
with the covenant described under "-- Limitations on Asset Sales," a Permitted
Sale or Issuance, or (iii) to the extent such shares represent directors'
qualifying shares or shares required by applicable law to be held by a Person
other than the Company or a Wholly-Owned Restricted Subsidiary. The proceeds of
any sale or issuance of Capital Stock permitted hereunder and referred to in
clauses (ii) or (iii) above will be treated as Net Available
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Proceeds and must be applied in a manner consistent with the provisions of the
covenant described under "--Limitations on Asset Sales," to the extent such
transaction constitutes an Asset Sale.
LIMITATIONS ON LAYERING DEBT. The Indenture provides that the Company will
not, and will not permit any Restricted Subsidiary to, incur any Indebtedness
that is subordinate or junior in right of payment to any Senior Indebtedness of
the Company or such Restricted Subsidiary unless such Indebtedness by its terms
is PARI PASSU with, or subordinated to, the Notes or any Subsidiary Guarantee of
such Restricted Subsidiary, as the case may be.
LIMITATIONS ON 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 (except as permitted below) if at the
time of such Restricted Payment:
(i) a Default shall have occurred and be continuing or shall occur as a
consequence thereof;
(ii) the Company would be unable to meet the Coverage Ratio Incurrence
Condition; or
(iii) the amount of such Restricted Payment, when added to the aggregate
amount of all other Restricted Payments made after the Issue Date, exceeds the
sum of
(A) 50% of the Company's Consolidated Net Income (taken as one
accounting period) from November 1, 1998 to the end of the Company's most
recently ended fiscal quarter for which financial statements are publicly
available at the time of such Restricted Payment (or, if such aggregate
Consolidated Net Income shall be a deficit, minus 100% of such aggregate
deficit), PLUS
(B) the net cash proceeds from the issuance and sale (other than to a
Subsidiary of the Company) after the Issue Date of (l) the Company's Capital
Stock that is not Disqualified Capital Stock or (2) debt securities of the
Company that have been converted into the Company's Capital Stock that is
not Disqualified Capital Stock and that is not then held by a Subsidiary of
the Company, PLUS
(C) to the extent that any Restricted Investment that was made after the
Issue Date (other than an Existing Joint Venture Investment) is sold for
cash or otherwise liquidated or repaid for cash, the sum of (x) cash
realized from such sale, liquidation or repayment of such Restricted
Investment (less the cost of disposition, if any) up to (and not to exceed)
the amount of such Restricted Investment at the time it was made (net of
prior reductions), PLUS (y) 50% of the excess, if any, of the cash realized
from such sale, liquidation or repayment (less the cost of disposition, if
any) over the amount of such Restricted Investment at the time it was made
(net of prior reductions), PLUS
(D) when an Unrestricted Subsidiary is designated a Restricted
Subsidiary of the Company in accordance with the definition of "Unrestricted
Subsidiary" and becomes a Subsidiary Guarantor, the sum of (x) the Fair
Market Value of all Investments in such Subsidiary Guarantor immediately
following such designation, up to (and not to exceed) the aggregate amount
of such Investments at the time they were made (to the extent such
Investments reduced the amount available for subsequent Restricted Payments
under this clause (iii) and were not previously repaid or otherwise
reduced), PLUS (y) 50% of the excess, if any, of such Fair Market Value over
the amount of such Investments at the time they were made (to the extent
such Investments reduced the amount available for subsequent Restricted
Payments under this clause (iii) and were not previously repaid or reduced),
PLUS
(E) $7.5 million,
PROVIDED that any amounts that increase the amount available for
Restricted Payments under any subpart of this clause (iii) shall not
duplicatively increase amounts available for Restricted Payments under any
other subpart of this clause (iii) or for Restricted Investments under the
next paragraph.
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The foregoing provisions will not prohibit:
(1) the payment by the Company or any Restricted Subsidiary of any dividend
within 60 days after the date of declaration thereof, if at said date of
declaration such payment would have complied with the provisions of the
Indenture;
(2) the redemption, repurchase, retirement or other acquisition of any
Capital Stock of the Company or any Restricted Subsidiary in exchange for, or
out of the proceeds of, the substantially concurrent sale (other than to a
Subsidiary of the Company) of other Capital Stock of the Company (other than any
Disqualified Capital Stock);
(3) the defeasance, redemption, repurchase or other retirement of
Subordinated Indebtedness of the Company or any Restricted Subsidiary in
exchange for, or out of the proceeds of, the substantially concurrent issue and
sale of Capital Stock of the Company (other than (x) Disqualified Capital Stock,
(y) Capital Stock sold to a Subsidiary of the Company and (z) Capital Stock
purchased with the proceeds of loans from the Company or any of its
Subsidiaries);
(4) the defeasance, redemption, repurchase or other retirement of
Subordinated Indebtedness in exchange for, or out of the proceeds of, the
substantially concurrent issue and sale of Refinancing Indebtedness permitted to
be incurred under the "Limitations on Additional Indebtedness" covenant and the
other terms of the Indenture;
(5) the making of a Related Business Investment in joint ventures or
Subsidiaries that are not Subsidiary Guarantors in exchange for or out of the
proceeds of the substantially concurrent issue and sale of Capital Stock of the
Company (other than (x) Disqualified Capital Stock, (y) Capital Stock sold to a
Subsidiary of the Company and (z) Capital Stock purchased with the proceeds of
loans from the Company or any of its Subsidiaries);
(6) the making of (a) Related Business Investments in joint ventures or
Subsidiaries that are not Subsidiary Guarantors in an aggregate amount not to
exceed the aggregate amount realized in cash by the Company or any of the
Subsidiary Guarantors after the Issue Date in respect of (or the Fair Market
Value of any Investment (other than an Investment in Indebtedness incurred in
connection with or in anticipation of such transaction) in a joint venture
engaged in any Related Business received by the Company or any Subsidiary
Guarantor in exchange for) a Qualifying Joint Venture Investment, less the cost
of disposition, if any, when such Investments are sold for cash or otherwise
liquidated or repaid for cash (or exchanged for such Investment), but in each
case only to the extent the Company elects not to take such amounts into account
for purpose of calculating amounts available for Restricted Payments under
clause (iii) of the immediately preceding paragraph, and (b) Existing Joint
Venture Investments;
(7) the purchase, redemption, acquisition, cancellation or other retirement
for value of shares of Capital Stock of the Company held by officers, directors
or employees or former officers, directors or employees (or their transferees,
estates or beneficiaries under their estates), upon death, disability,
retirement, severance or termination of employment or service or pursuant to any
agreement under which such shares of Capital Stock or related rights were
issued; PROVIDED that the aggregate cash consideration paid for all such
purchases, redemptions, acquisitions, cancellations or other retirements of such
shares of Capital Stock (a) during any calendar year does not exceed $2.5
million (with unused amounts in any calendar year being usable in all subsequent
calendar years) and (b) during the period from the Issue Date through the
maturity date of the Notes does not exceed $7.5 million;
(8) payments to holders of Common Equity of the Company (a) in lieu of the
issuance of fractional shares of Common Equity, (b) to redeem or repurchase
stock purchase or similar rights issued as a shareholder rights device and (c)
to repurchase shares of Common Equity of the Company from holders who hold less
than 100 shares in each instance;
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(9) any Investments in a Receivables Subsidiary in connection with a
Qualifying Receivables Facility;
(10) the prepayment, purchase, redemption, defeasance or other acquisition
or retirement of Subordinated Indebtedness (other than Subordinated Indebtedness
held by Affiliates of the Company) upon a Change of Control or Asset Sale to the
extent required by the agreement governing such Subordinated Indebtedness, but
only (x) if the Company shall have complied with the covenant described under
the caption "Change of Control" or "Certain Covenants--Limitations on Asset
Sales", as the case may be, and repurchased all Notes tendered pursuant to the
offer required by such covenants prior to prepaying or otherwise acquiring or
retiring such Subordinated Indebtedness, (y) in the case of an Asset Sale, to
the extent of the Excess Proceeds remaining after the offer to Holders of the
Notes and Pari Passu Indebtedness required by such covenant is consummated and
(z) within 60 days of the date such offer is consummated; or
(11) Related Business Investments the aggregate amount of which (excluding
the amount of any Existing Joint Venture Investments), together with the amount
of all other Restricted Investments made pursuant to this clause (11) after the
Issue Date (including the initial amount of any such Restricted Investments
subsequently taken into account for purposes of clause (6)(a) above), does not
exceed $12.5 million at any time outstanding;
PROVIDED that, in the case of any Restricted Payment pursuant to any of the
foregoing clauses (3) through (11), no Default shall have occurred and be
continuing or occur as a consequence of the actions or payments set forth
therein.
Each Restricted Payment permitted pursuant to the preceding paragraph (other
than the Restricted Payments referred to in clauses (2), (3), (4) and (5)
thereof) shall be included once in calculating whether the conditions of clause
(iii) of the second preceding paragraph have been met with respect to any
subsequent Restricted Payments. If an issuance of Capital Stock of the Company
is applied to make a Restricted Payment pursuant to clause (2), (3) or (5)
above, then, in calculating whether the conditions of clause (iii) of the second
preceding paragraph have been met with respect to any subsequent Restricted
Payments, the proceeds of any such issuance shall be included under such clause
(iii) only to the extent such proceeds are not applied as so described in this
sentence. For purposes of determining compliance with this "Limitation on
Restricted Payments" covenant, in the event that a transaction meets the
criteria of more than one of the types of Restricted Payments described in the
clauses of the immediately preceding paragraph or any clause of the definition
of "Restricted Payment," the Company, in its sole discretion, shall classify
such transaction and only be required to include the amount and type of such
transaction in one of such clauses.
Not later than the date of making any Restricted Payment, the Company shall
deliver to the Trustee an Officers' Certificate stating that such Restricted
Payment is permitted and setting forth the basis upon which the calculations
required by the covenant "Limitations on Restricted Payments" were computed,
which calculations shall be based upon the Company's latest available financial
statements.
LIMITATIONS ON RESTRICTIONS ON DISTRIBUTIONS FROM RESTRICTED
SUBSIDIARIES. The Indenture provides that the Company will not, and will not
permit any of its Restricted Subsidiaries to, create or otherwise cause or
suffer to exist or become effective any consensual Payment Restriction with
respect to any of its Restricted Subsidiaries, except for:
(a) any such Payment Restriction in effect on the Issue Date under the
Credit Agreement or any similar Payment Restriction under any other Credit
Facility (whether or not in effect on the Issue Date) or any amendment,
restatement, renewal, replacement or refinancing of any of the foregoing;
PROVIDED that such similar Payment Restrictions are not, taken as a whole, more
restrictive than the Payment Restrictions in effect on the Issue Date under the
Credit Agreement;
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(b) any such Payment Restriction under any agreement evidencing any Acquired
Indebtedness that was permitted to be incurred pursuant to the Indenture in
effect at the time of such incurrence and not created in contemplation of such
event; PROVIDED that such Payment Restriction only applies to assets that were
subject to such restriction and encumbrances prior to the acquisition of such
assets by the Company or its Subsidiaries;
(c) any such Payment Restriction arising in connection with Refinancing
Indebtedness; PROVIDED that any such Payment Restrictions that arise under such
Refinancing Indebtedness are not, taken as a whole, more restrictive than those
under the agreement creating or evidencing the Indebtedness being refunded or
refinanced;
(d) any Payment Restriction created pursuant to an asset purchase agreement,
stock sale agreement or similar instrument pursuant to which a bona-fide Asset
Sale is to be consummated, the proceeds of which are applied as provided in the
Indenture, so long as such restriction or encumbrance shall apply only to the
assets subject to such Asset Sale and shall be effective only for a period from
the execution and delivery of such agreement or instrument through the earlier
of the consummation of such Asset Sale or the termination of such agreement or
instrument;
(e) customary nonassignment provisions of any lease governing any leasehold
interest of the Company or any Restricted Subsidiary;
(f) any Payment Restriction existing under or by reason of applicable law;
(g) any Payment Restriction imposed pursuant to an agreement that has been
entered into for the sale of all or substantially all of the Capital Stock of a
Restricted Subsidiary; and
(h) purchase money obligations for property acquired in the ordinary course
of business that impose restrictions of the type referred to in clause (d) of
the definition of "Payment Restriction."
LIMITATIONS ON TRANSACTIONS WITH AFFILIATES. The Indenture provides that
the Company will not, and will not permit any of its Restricted Subsidiaries to,
directly or indirectly, in one transaction or a series of related transactions,
sell, lease, transfer or otherwise dispose of any of its properties or assets
to, or purchase any property or assets from or enter into any contract,
agreement, understanding, loan, advance or Guarantee with, or for the benefit
of, any Affiliate (each of the foregoing, an "Affiliate Transaction"), unless:
(i) such Affiliate Transaction is on terms that are no less favorable to the
Company or the relevant Restricted Subsidiary than those that would have been
obtained in a comparable transaction by the Company or such Restricted
Subsidiary with an unrelated Person; and
(ii) the Company delivers to the Trustee:
(a) with respect to any Affiliate Transaction (or series of related
transactions) involving aggregate payments in excess of $5.0 million, an
Officers' Certificate certifying that such Affiliate Transaction complies
with clause (i) above and a Secretary's Certificate which sets forth and
authenticates a resolution that has been adopted by a vote of a majority of
the Independent Directors approving such Affiliate Transaction or, if at the
time fewer than three Independent Directors are then in office, a
Secretary's Certificate which sets forth and authenticates a resolution that
has been adopted unanimously by the Company's Board of Directors; and
(b) with respect to any Affiliate Transaction (or series of related
transactions) involving aggregate payments of $10.0 million or more, the
certificates described in the preceding clause (a) and an opinion as to the
fairness to the Company or such Subsidiary from a financial point of view
issued by an Independent Financial Advisor;
PROVIDED, HOWEVER, that the following shall not be deemed to be Affiliate
Transactions:
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(a) transactions exclusively between or among (1) the Company and one or
more Restricted Subsidiaries or (2) Restricted Subsidiaries; PROVIDED, in each
case, that no Affiliate of the Company (other than another Restricted
Subsidiary) owns Capital Stock of any such Restricted Subsidiary;
(b) transactions between the Company or any Restricted Subsidiary and any
qualified employee stock ownership plan established for the benefit of the
Company's employees, or the establishment or maintenance of any such plan;
(c) reasonable director, officer and employee compensation and other
benefits (including retirement, health and other benefit plans), and
indemnification arrangements, in each case approved by a majority of the
Independent Directors on the Board of Directors;
(d) Restricted Payments permitted by the "Limitations on Restricted
Payments" covenant (other than Investments covered by clause (a) above or clause
(h) below);
(e) the pledge of Capital Stock of Unrestricted Subsidiaries to support the
Indebtedness thereof;
(f) the entering into of a tax sharing agreement, or payments pursuant
thereto, between the Company and/or one or more Subsidiaries, on the one hand,
and any other Person with which the Company or such Subsidiaries are required or
permitted to file a consolidated tax return or with which the Company or such
Subsidiaries are part of a consolidated group for tax purposes, on the other
hand, which payments by the Company and its Restricted Subsidiaries are not in
excess of the tax liabilities that would have been payable by them on a
stand-alone basis);
(g) commission, travel and similar advances to officers and employees made
in the ordinary course of business and on customary terms;
(h) transactions exclusively between (1) the Company or any Restricted
Subsidiary and (2) any joint venture or a Subsidiary; PROVIDED, in each case,
that no Affiliate of the Company (other than a Restricted Subsidiary) owns
Capital Stock of any such joint venture or Subsidiary;
(i) the purchase of structural bolts from Southwest Bolt, Inc. on terms that
are no less favorable to the Company or the relevant Restricted Subsidiary than
those that would have been obtained in a comparable transaction by the Company
or such Restricted Subsidiary with an unrelated Person; and
(j) transactions pursuant to agreements entered into or in effect on the
Issue Date and described on a schedule to the Indenture, including amendments,
renewals and extensions thereof entered into after the Issue Date, PROVIDED that
the terms of any such amendment, renewal or extension are not, in the aggregate,
less favorable to the Company or such Restricted Subsidiary than the terms of
such agreement prior to such amendment, renewal or extension.
LIMITATIONS ON LIENS. The Company shall not, and shall not permit any
Restricted Subsidiary to, directly or indirectly, incur or permit to exist any
Lien of any nature whatsoever on any property of the Company or any Restricted
Subsidiary (including Capital Stock of a Restricted Subsidiary), whether owned
at the Issue Date or thereafter acquired, which secures Indebtedness that is not
Senior Indebtedness or secures trade payables, unless contemporaneously
therewith effective provision is made to secure the Notes equally and ratably
with (or if such Lien secures Indebtedness that is subordinated to the Notes,
prior to) such Indebtedness or trade payables so long as such Indebtedness or
trade payables are secured by a Lien.
The foregoing restrictions shall not apply to:
(i) Liens existing on the Issue Date securing Indebtedness outstanding on
the Issue Date;
(ii) Liens in favor of the Company or a Subsidiary Guarantor;
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(iii) Liens to secure purchase money Indebtedness referred to in clause
(viii) of the definition of "Permitted Indebtedness," provided such Liens are
limited to the assets acquired with the proceeds of such Indebtedness;
(iv) Liens securing Acquired Indebtedness permitted to be incurred under the
Indenture; provided that the Liens do not extend to property or assets not
subject to such Lien at the time of acquisition (other than improvements
thereon);
(v) Liens on property of a Person existing at the time such Person is
acquired or merged with or into or consolidated with the Company or any such
Restricted Subsidiary (and not created in anticipation or contemplation
thereof);
(vi) Liens to secure Refinancing Indebtedness of Indebtedness secured by
Liens referred to in the foregoing clauses (i), (iii), (iv) and (v); PROVIDED
that in each case such Liens do not extend to any additional property or assets
(other than improvements thereon);
(vii) any Lien securing the payment of workers' compensation or other
insurance;
(viii) good faith deposits in connection with tenders, leases or contracts
(other than contracts for the payment of money) or to secure public or statutory
obligations, or in lieu of surety or appeal bonds with respect to matters not
yet finally determined and being contested in good faith by appropriate
proceedings;
(ix) Liens on Receivables to reflect sales of Receivables to and by a
Receivables Subsidiary pursuant to a Receivables Facility; or
(x) Liens arising by operation of law in favor of mechanics, materialmen,
laborers, employees or suppliers (including under Article 2 of the Uniform
Commercial Code), incurred in the ordinary course of business for sums which are
not yet delinquent or are being contested in good faith by appropriate
proceedings.
LIMITATIONS ON ASSET SALES. (a) The Indenture provides that the Company
will not, and will not permit any of its Restricted Subsidiaries to, consummate
any Asset Sale unless:
(i) the Company or such Restricted Subsidiary receives consideration at
the time of such Asset Sale at least equal to the Fair Market Value of the
assets included in such Asset Sale (evidenced by the delivery by the Company
to the Trustee of an Officers' Certificate certifying that such Asset Sale
complies with this clause (i));
(ii) immediately before and immediately giving effect to such Asset
Sale, no Default shall have occurred and be continuing, and
(iii) all of the consideration received by the Company or such Restricted
Subsidiary therefor is in the form of cash paid at the closing thereof,
PROVIDED that the Company shall be permitted to receive property and
securities other than cash so long as the aggregate Fair Market Value of all
such property and securities received in Asset Sales and held by the Company
and its Restricted Subsidiaries at any one time (exclusive of amounts,
property, assets or Investments referred to in paragraph (b) below) does not
exceed 5% of Consolidated Tangible Assets.
(b) The (x) amount (without duplication) of any Indebtedness (other than
Subordinated Indebtedness) of the Company or such Restricted Subsidiary that is
expressly assumed by the transferee in such Asset Sale and with respect to which
the Company or such Restricted Subsidiary, as the case may be, is
unconditionally released by the holder of such Indebtedness, (y) amount of any
Cash Equivalents, or other notes, securities or items of property received from
such transferee that are within 30 days converted by the Company or such
Restricted Subsidiary to cash (to the extent of the cash actually so received),
and (z) the Fair Market Value of any property or assets of any Related Business
(or any Investment in a joint venture engaged in any such Related Business other
than an
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Investment in Indebtedness incurred in connection with or in anticipation of
such transaction) received by the Company or any Restricted Subsidiary in
exchange for similar property or assets (or a joint venture Investment in a
Person holding any such similar property or assets) and to be used in any
Related Business of the Company or such Restricted Subsidiary, shall be deemed
to be cash for purposes of clause (iii) of paragraph (a) above (but not Net
Available Proceeds for purposes of paragraph (c) below) and, in the case of
clause (x) above, shall also be deemed to constitute a repayment of, and a
permanent reduction in, the amount of such Indebtedness (or any commitment) for
purposes of the following paragraph (c). If at any time any non-cash
consideration received by the Company or any Restricted Subsidiary of the
Company, as the case may be, in connection with any Asset Sale is repaid or
converted into or sold or otherwise disposed of for cash (other than interest
received with respect to any such non-cash consideration), then the date of such
repayment, conversion or disposition shall be deemed to constitute the date of
an Asset Sale hereunder and the Net Available Proceeds thereof shall be applied
in accordance with this covenant.
(c) If the Company or any Restricted Subsidiary engages in an Asset Sale,
the Company or such Restricted Subsidiary shall, no later than one year after
such Asset Sale,
(i) apply all or any of the Net Available Proceeds therefrom to repay
amounts outstanding under the Credit Agreement or any other Senior
Indebtedness; PROVIDED, in each case, that the related loan commitment (if
any) is thereby permanently reduced by the amount of such Indebtedness so
repaid and/or
(ii) invest (or enter into a legally binding agreement to invest) all or
any part of the Net Available Proceeds thereof in the purchase of fixed
assets to be used by the Company and its Restricted Subsidiaries in a
Related Business (together with any short-term assets incidental thereto),
or the making of a Related Business Investment, PROVIDED, HOWEVER, that in
the case of any such legally binding agreement to invest proceeds of an
Asset Sale, such investment is made no later than one year after such
agreement is entered into.
The amount of such Net Available Proceeds not applied or invested as
provided in this paragraph (c) will constitute "Excess Proceeds."
(d) When the aggregate amount of Excess Proceeds equals or exceeds $10.0
million, the Company will be required to make an offer to purchase, from all
holders of the Notes and, if applicable, prepay, purchase or redeem (or make an
offer to do so) any Pari Passu Indebtedness of the Company the provisions of
which require the Company to prepay, purchase or redeem such Indebtedness with
the proceeds from any Asset Sales (or offer to do so), in an aggregate principal
amount of Notes and such Pari Passu Indebtedness equal to the amount of such
Excess Proceeds as follows:
(i) The Company will (1) make an offer to purchase (a "Net Proceeds
Offer") from all holders of the Notes in accordance with the procedures set
forth in the Indenture, and (2) prepay, purchase or redeem (or make an offer
to do so) any such other Pari Passu Indebtedness, PRO RATA in proportion to
the respective principal amounts of the Notes and such other Indebtedness
required to be prepaid, purchased or redeemed or tendered for, the maximum
principal amount (expressed as a multiple of $1,000) of Notes and Pari Passu
Indebtedness that may be purchased, prepaid or redeemed out of the amount
(the "Payment Amount") of such Excess Proceeds.
(ii) The offer price for the Notes will be payable in cash in an amount
equal to 100% of the principal amount of the Notes tendered pursuant to a
Net Proceeds Offer, plus accrued and unpaid interest (including Special
Interest) thereon, if any, to the date such Net Proceeds Offer is
consummated (the "Offered Price"), in accordance with the procedures set
forth in the Indenture and the prepayment, redemption, purchase or offer
price for such Pari Passu Indebtedness (the "Pari Passu Indebtedness Price")
shall be as set forth in the related documentation governing such
Indebtedness. To the extent that the sum of the aggregate Offered Price of
Notes tendered
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pursuant to a Net Proceeds Offer and the aggregate Pari Passu Indebtedness
Price paid to the holders of such Pari Passu Indebtedness is less than the
Payment Amount relating thereto (such shortfall constituting a "Net Proceeds
Deficiency"), the Company may use such Net Proceeds Deficiency, or a portion
thereof, for general corporate purposes, subject to the limitations of the
"Limitations on Restricted Payments" covenant.
(iii) If the aggregate Offered Price of Notes validly tendered and not
withdrawn by holders thereof exceeds the PRO RATA portion of the Payment
Amount allocable to the Notes, Notes to be purchased will be selected on a
PRO RATA basis.
(iv) Upon completion of such Net Proceeds Offer in accordance with the
foregoing provisions, the amount of Excess Proceeds with respect to which
such Net Proceeds Offer was made shall be deemed to be zero.
The Company will not permit any Restricted Subsidiary to enter into or
suffer to exist any agreement that would place any restriction of any kind
(other than pursuant to law or regulation) on the ability of the Company to make
a Net Proceeds Offer following any Asset Sale. The Company will comply with
applicable tender offer rules, including the requirements of Rule 14e-1 under
the Exchange Act and any other applicable laws and regulations in the event that
an Asset Sale occurs and the Company is required to purchase Notes as described
above,
LIMITATIONS ON MERGERS AND CERTAIN OTHER TRANSACTIONS. The Indenture
provides that the Company will not in a single transaction or a series of
related transactions, (a) consolidate or merge with or into (other than a merger
with a Wholly-Owned Restricted Subsidiary solely for the purpose of changing the
Company's jurisdiction of incorporation to another State of the United States),
or sell, lease, transfer, convey or otherwise dispose of or assign all or
substantially all of the assets of the Company or the Company and its
Subsidiaries (taken as a whole), or assign any of its obligations under the
Notes and the Indenture, to any Person or (b) adopt a Plan of Liquidation
unless, in either case:
(i) the Person formed by or surviving such consolidation or merger (if other
than the Company) or to which such sale, lease, conveyance or other disposition
or assignment shall be made (or, in the case of a Plan of Liquidation, any
Person to which assets are transferred) (collectively, the "Successor"), is a
corporation organized and existing under the laws of any State of the United
States of America or the District of Columbia, and the Successor assumes by
supplemental indenture in a form satisfactory to the Trustee all of the
obligations of the Company under the Notes and the Indenture;
(ii) immediately prior to and immediately after giving effect to such
transaction and the assumption of the obligations as set forth in clause (i)
above and the incurrence of any Indebtedness to be incurred in connection
therewith, no Default shall have occurred and be continuing;
(iii) immediately after and giving effect to such transaction and the
assumption of the obligations set forth in clause (i) above and the incurrence
of any Indebtedness to be incurred in connection therewith, and the use of any
net proceeds therefrom on a pro forma basis, (1) the Consolidated Net Worth of
the Company or the Successor, as the case may be, would be at least equal to the
Consolidated Net Worth of the Company immediately prior to such transaction and
(2) the Company or the Successor, as the case may be, could meet the Coverage
Ratio incurrence Condition; and
(iv) each Subsidiary Guarantor, unless it is the other party to the
transactions described above, shall have by amendment to its guarantee confirmed
that its guarantee of the Notes shall apply to the obligations of the Company or
the Successor under the Notes and the Indenture. For purposes of this covenant,
any Indebtedness of the Successor which was not Indebtedness of the Company
immediately prior to the transaction shall be deemed to have been incurred in
connection with such transaction.
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ADDITIONAL SUBSIDIARY GUARANTEES. The Indenture provides that if the
Company or any of its Subsidiaries shall acquire or create another Subsidiary
(other than (x) a Foreign Subsidiary that has not Guaranteed any Indebtedness of
the Company or any of the Subsidiary Guarantors or (y) a Subsidiary that has
been designated as an Unrestricted Subsidiary), then such newly acquired or
created Subsidiary will be required to execute a Subsidiary Guarantee, in
accordance with the terms of the Indenture.
REPORTS. Whether or not required by the rules and regulations of the
Commission, so long as any Notes are outstanding, the Company and the Subsidiary
Guarantors will file with the SEC, to the extent such filings are accepted by
the SEC, and will furnish to the holders of Notes all quarterly and annual
reports and other information, documents and reports that would be required to
be filed with the SEC pursuant to Section 13 of the Exchange Act if the Company
and the Subsidiary Guarantors were required to file under such section. In
addition, the Company and the Subsidiary Guarantors will make such information
available to prospective purchasers of the Notes, securities analysts and
broker-dealers who request it in writing. The Company and the Subsidiary
Guarantors have agreed that, for so long as any Notes remain outstanding, they
will furnish to the holders and beneficial holders of Notes and to prospective
purchasers of Notes designated by the holders of Transfer Restricted Securities
and to broker-dealers, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.
EVENTS OF DEFAULT
An "Event of Default" will be defined in the Indenture as
(i) failure by the Company to pay interest on any of the Notes when it
becomes due and payable and the continuance of any such failure for 30 days;
(ii) failure by the Company to pay the principal or premium, if any, on any
of the Notes when it becomes due and payable, whether at stated maturity, upon
redemption, upon repurchase, upon acceleration or otherwise;
(iii) failure by the Company to comply with any of its agreements or
covenants described above under "Certain Covenants--Limitations on Mergers and
Certain Other Transactions", or in respect of its obligations to make a Change
of Control Offer or a Net Proceeds Offer as described above under "Change of
Control" and "Certain Covenants--Limitations on Asset Sales", respectively;
(iv) failure by the Company to comply with any other covenant in the
Indenture and continuance of such failure for 30 days after notice of such
failure has been given to the Company by the Trustee or by the holders of at
least 25% of the aggregate principal amount of the Notes then outstanding;
(v) failure by either the Company or any of its Restricted Subsidiaries to
make any payment when due after the expiration of any applicable grace period,
in respect of any Indebtedness of the Company or any of such Subsidiaries, or
the acceleration of the maturity of such Indebtedness by the holders thereof
because of a default, PROVIDED that the aggregate amount unpaid or accelerated,
for all such Indebtedness under this clause (v), equals $20.0 million or more;
(vi) one or more judgments or orders that exceed $20.0 million in the
aggregate (net of amounts covered by insurance or bonded) for the payment of
money have been entered by a court or courts of competent jurisdiction against
the Company or any Subsidiary of the Company and such judgment or judgments have
not been satisfied, stayed, annulled or rescinded within 60 days of being
entered;
(vii) certain events of bankruptcy, insolvency or reorganization involving
the Company or any Significant Subsidiary; and
(viii) except as permitted by the Indenture (including with respect to
releases of Subsidiary Guarantees in connection with Asset Sales and the
designation of a Subsidiary Guarantor as
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Unrestricted Subsidiary), any Subsidiary Guarantee of any Significant Subsidiary
ceases to be in full force and effect or any Subsidiary Guarantor repudiates its
obligations under any Subsidiary Guarantee.
If an Event of Default (other than an Event of Default specified in clause
(vii) above involving the Company), shall have occurred and be continuing under
the Indenture, the Trustee, by written notice to the Company, or the holders of
at least 25% in aggregate principal amount of the Notes then outstanding by
written notice to the Company and the Trustee may declare all amounts owing
under the Notes to be due and payable immediately. Upon such declaration of
acceleration, the aggregate principal of, premium, if any, and interest on the
outstanding Notes shall immediately become due and payable. If an Event of
Default results from bankruptcy, insolvency or reorganization involving the
Company, all outstanding Notes shall become due and payable without any further
action or notice. In certain cases, the holders of a majority in aggregate
principal amount of the Notes then outstanding may waive an existing Default and
its consequences, except a default in the payment of principal of, premium, if
any, and interest on the Notes.
The holders may not enforce the provisions of the Indenture or the Notes
except as provided in the Indenture. Subject to certain limitations, holders of
a majority in principal amount of the Notes then outstanding may direct the
Trustee in its exercise of any trust or power; PROVIDED, HOWEVER, that such
direction does not conflict with the terms of the Indenture. The Trustee may
withhold from the holders notice of any continuing Default (except any Default
in payment of principal of, premium, if any, or interest on the Notes) if the
Trustee determines that withholding such notice is in the holders' interest.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture and, upon any Officer of the Company
becoming aware of any Default, a statement specifying such Default and what
action the Company is taking or proposes to take with respect thereto.
SATISFACTION AND DISCHARGE OF INDENTURE; DEFEASANCE
The Company may terminate its obligations under the Indenture at any time by
delivering all outstanding Notes to the Trustee for cancellation and paying all
sums payable by it thereunder. The Company, at its option, (i) will be
discharged from any and all obligations with respect to the Notes (except for
certain obligations of the Company to register the transfer or exchange of such
Notes, replace stolen, lost or mutilated Notes, maintain paying agencies and
hold moneys for payment in trust) or (ii) need not comply with certain of the
restrictive covenants with respect to the Indenture ("Covenant Defeasance"), if
the Company deposits with the Trustee, in trust, U.S. Legal Tender or U.S.
Government Obligations or a combination thereof that, through the payment of
interest and premium thereon and principal amount at maturity in respect thereof
in accordance with their terms, will be sufficient to pay all the principal
amount at maturity of and interest and premium on the Notes on the dates such
payments are due in accordance with the terms of such Notes as well as the
Trustee's fees and expenses. To exercise either such option, the Company is
required to deliver to the Trustee (A) an Opinion of Counsel and, in connection
with a discharge pursuant to clause (i) above, confirmation of such counsel that
(I) the Company has received from, or there has been published by, the Internal
Revenue Service a ruling or (II) since the date of the Indenture there has been
a change in the applicable federal income tax law, in each case to the effect
that the holders of the Notes will not recognize income, gain or loss for
federal income tax purposes as a result of the deposit and related defeasance
and will be subject to federal income tax on the same amount and in the same
manner and at the same times as would have been the case if such option had not
been exercised, (B) subject to certain qualifications, an Opinion of Counsel to
the effect that funds so deposited (1) will not violate the Investment Company
Act of 1940 and will not be subject to the effect of Section 547 of the United
States Bankruptcy Code (the "Bankruptcy Code") and (2) after the 91st day
following the deposit, will not be part of any "estate" formed by the bankruptcy
or reorganization of the Company or
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any Subsidiary Guarantor or subject to the "automatic stay" under the Bankruptcy
Code or, in the case of Covenant Defeasance, will be subject to a first priority
Lien in favor of the Trustee for the benefit of the holders of the Notes, and
(C) an Officers' Certificate and an Opinion of Counsel to the effect that the
Company has complied with all conditions precedent to the defeasance.
TRANSFER AND EXCHANGE
A holder will be able to register the transfer of or exchange Notes only in
accordance with the provisions of the Indenture. The Registrar may require a
holder, among other things, to furnish appropriate endorsements and transfer
documents and to pay any taxes and fees required by law or permitted by the
Indenture. Without the prior consent of the Company, the Registrar is not
required (i) to register the transfer of or exchange any Note selected for
redemption, (ii) to register the transfer of or exchange any Note for a period
of 15 days before a selection of Notes to be redeemed or (iii) to register the
transfer or exchange of a Note between a record date and the next succeeding
interest payment date. The registered holder of a Note will be treated as the
owner of such Note for all purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Subject to certain exceptions, the Indenture or the Notes may be amended or
supplemented with the consent (which may include consents obtained in connection
with a tender offer or exchange offer for Notes) of the holders of at least a
majority in principal amount of the Notes then outstanding, and any existing
Default under, or compliance with any provision of, the Indenture may be waived
(other than any continuing Default in the payment of the principal of, premium,
if any, or interest on the Notes) with the consent (which may include consents
obtained in connection with a tender offer or exchange offer for Notes) of the
holders of a majority in principal amount of the Notes then outstanding;
PROVIDED that:
(A) no such modification or amendment may, without the consent of the
holders of 75% in aggregate principal amount of such series of Notes then
outstanding, amend or modify the obligation of the Company under the caption
"Change of Control" or in the obligations of the Company to make a Net
Proceeds Offer or the definitions related thereto that could adversely
affect the rights of any holder of the Notes; and
(B) without the consent of each holder affected, the Company and the
Trustee may not: (i) extend the maturity of any Note; (ii) reduce the
amount, extend the due date or otherwise affect the terms of any scheduled
payment of interest (including Special Interest) on or principal of the
Notes; (iii) except as permitted by (A) above, reduce any premium payable
upon optional redemption or acceleration of the Notes, change the date on
which any Notes are subject to redemption or otherwise alter the provisions
with respect to the redemption of the Notes; (iv) make any Note payable in
money or currency other than that stated in the Notes; (v) take any action
that would subordinate the Notes or the Subsidiary Guarantees to any other
Indebtedness of the Company or any of its Subsidiaries, respectively (except
as provided under "Subordination" above), or otherwise affect the ranking of
the Notes or the Subsidiary Guarantees; (vi) reduce the percentage of
holders necessary to consent to an amendment, supplement or waiver to the
Indenture or the Notes; (vii) impair the rights of holders of Notes to
receive payments of principal of or premium, if any, or interest (including
Special Interest) on the Notes; (viii) release any Subsidiary Guarantor from
any of its obligations under its Subsidiary Guarantee or the Indenture,
except as permitted by the Indenture; or (ix) make any change in the
foregoing amendment and waiver provisions.
Without the consent of any holder, 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
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Notes in addition to or in place of certificated Notes, to provide for the
assumption of the Company's obligations to holders in the case of a merger or
acquisition, to release any Subsidiary Guarantor from any of its obligations
under its Subsidiary Guarantee or the Indenture, to the extent permitted by the
Indenture, or to make any change that does not adversely affect the rights of
any holder.
CONCERNING THE TRUSTEE
Harris Trust Company of New York is the Trustee under the Indenture and has
been appointed by the Company as Registrar and Paying Agent with regard to the
Notes. 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 (as defined in
the Indenture), it must eliminate such conflict 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
occurs and is not cured, the Trustee will be required, in the exercise of its
power, to use the degree of care of a prudent person in similar circumstances 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, unless such holder shall have offered to the
Trustee security and indemnity satisfactory to the Trustee.
GOVERNING LAW
Each of the Indenture, the Notes and the Subsidiary Guarantees provides that
it will be governed by, and construed in accordance with, the laws of the State
of New York.
BOOK-ENTRY, DELIVERY AND FORM OF SECURITIES
The Series B notes to be issued in this exchange offer will be represented
by one or more Global Notes in definitive form. The Global Notes will be
deposited on the date the exchange offer is completed with, or on behalf of, DTC
and registered in the name of Cede & Co., as nominee of DTC (such nominee being
referred to herein as the "Global Note Holder"). DTC will maintain the Series B
notes in denominations of $1,000 and integral multiples thereof through its
book-entry facilities.
DTC is a limited-purpose trust company that was created to hold securities
for its participating organizations (collectively, the "Participants" or the
"Depositary'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 Depositary's
Participants include securities brokers and dealers (including the Initial
Purchasers), banks and trust companies, clearing corporations and certain other
organizations. Access to DTC's system is also available to other entities such
as banks, brokers, dealers and trust companies (collectively, the "Indirect
Participants" or the "Depositary'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 DTC only through the Depositary's Participants or the
Depositary's Indirect Participants.
Pursuant to procedures established by DTC, ownership of the Notes will be
shown on, and the transfer of ownership thereof will be effected only through,
records maintained by DTC (with respect to the interests of the Depositary's
Participants), the Depositary's Participants and the Depositary's Indirect
Participants.
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The laws of some states require that certain persons take physical delivery
in definitive form of securities that they own. Consequently, the ability to
transfer the Series B notes will be limited to such extent.
So long as the Global Note Holder is the registered owner of any Series B
notes, the Global Note Holder will be considered the sole holder of outstanding
Series B notes represented by such Global Notes under the Indenture. Except as
provided below, owners of Series B notes will not be entitled to have Series B
notes registered in their names and will not be considered the owners or holders
thereof under the Indenture for any purpose, including with respect to the
giving of any directions, instructions, or approvals to the Trustee thereunder.
None of the Company, the Subsidiary Guarantors or the Trustee will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of Series B notes by DTC, or for maintaining,
supervising or reviewing any records of DTC relating to such Series B notes.
Payments in respect of the principal of, premium, if any, and interest on
any Series B notes registered in the name of a Global Note Holder on the
applicable record date will be payable by the Trustee to or at the direction of
such Global Note Holder in its capacity as the registered holder under the
Indenture. Under the terms of the Indenture, the Company and the Trustee may
treat the persons in whose names any Series B notes, including the Global Notes,
are registered as the owners thereof for the purpose of receiving such payments
and for any and all other purposes whatsoever. Consequently, neither the Company
or the Trustee has or will have any responsibility or liability for the payment
of such amounts to beneficial owners of Series B notes (including principal,
premium, if any, and interest). The Company believes, however, that it is
currently the policy of DTC to immediately credit the accounts of the relevant
Participants with such payments, in amounts proportionate to their respective
beneficial interests in the relevant security as shown on the records of DTC.
Payments by the Depositary's Participants and the Depositary's Indirect
Participants to the beneficial owners of Series B notes will be governed by
standing instructions and customary practice and will be the responsibility of
the Depositary's Participants or the Depositary's Indirect Participants.
Subject to certain conditions, any person having a beneficial interest in
the Global Notes may, upon request to the Trustee and confirmation of such
beneficial interest by the Depositary or its Participants or Indirect
Participants, exchange such beneficial interest for Series B notes in definitive
form. Upon any such issuance, the Trustee is required to register such Series B
notes in the name of and cause the same to be delivered to, such person or
persons (or the nominee of any thereof). Such Series B notes would be issued in
fully registered form and would be subject to the legal requirements described
herein under the caption "Notice to Investors." In addition, if (i) the Company
notifies the Trustee in writing that DTC is no longer willing or able to act as
a depositary 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 Series B notes in definitive form under the
Indenture, then, upon surrender by the relevant Global Note Holder of its Global
Note, Series B notes in such form will be issued to each person that such Global
Note Holder and DTC identifies as being the beneficial owner of the related
Series B notes.
Neither the Company nor the Trustee will be liable for any delay by the
Global Note Holder or DTC in identifying the beneficial owners of Series B 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 DTC for all purposes.
The Indenture requires that payments in respect of the Notes represented by
the Global Note (including principal, premium, if any, interest and Special
Interest) be made in same-day funds. The Series B notes are expected to be
eligible to trade in the FIPS Market and to trade in DTC's Same-Day Funds
Settlement System and any permitted secondary market trading activity in the
Series B notes will, therefore, be required by DTC to be settled in same-day
funds.
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ADDITIONAL INFORMATION
Anyone who receives this prospectus may obtain a copy of the Indenture
without charge by contacting the Company at 7301 Fairview, Houston, Texas 77041,
Attention: Chief Financial Officer, or by telephone at (713) 466-7788.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms.
"ACQUIRED INDEBTEDNESS" means (a) with respect to any Person that becomes a
Restricted Subsidiary after the date of the Indenture, Indebtedness of such
Person and its Subsidiaries existing at the time such Person becomes a
Restricted Subsidiary that was not incurred in connection with, or in
contemplation of, such Person becoming a Restricted Subsidiary and (b) with
respect to the Company or any of its Restricted Subsidiaries, any Indebtedness
of a Person (other than the Company or a Restricted Subsidiary) existing at the
time such Person is merged with or into the Company or a Restricted Subsidiary,
or Indebtedness assumed by the Company or any of its Restricted Subsidiaries in
connection with the acquisition of an asset or assets from another Person, which
Indebtedness was not, in any case, incurred by such other Person in connection
with, or in contemplation of, such merger or acquisition.
"AFFILIATE" of any Person means any Person (i) which directly or indirectly
controls or is controlled by, or is under direct or indirect common control
with, the referent Person, (ii) which beneficially owns or holds, directly or
indirectly, 10% or more of any class of the Voting Stock of the referent Person,
(iii) of which 10% or more of the Voting Stock is beneficially owned or held,
directly or indirectly, by the referent Person or (iv) with respect to an
individual, any immediate family member of such Person. For purposes of this
definition, control of a Person shall mean the power to direct the management
and policies of such Person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise.
"ASSET SALE" means any sale, issuance, conveyance, transfer, lease,
assignment or other disposition to any Person other than the Company or any of
its Restricted Subsidiaries (including by means of a Sale and Leaseback
Transaction or a merger or consolidation) (collectively, for purposes of this
definition, a "transfer"), directly or indirectly, in one transaction or a
series of related transactions, of (a) any Capital Stock of any Subsidiary or
(b) any other properties or assets of the Company or any of its Subsidiaries.
For purposes of this definition, the term "Asset Sale" shall not include: (i)
transfers of cash, Cash Equivalents, defaulted accounts receivable, inventory or
other properties or assets in the ordinary course of business (other than in
connection with a Receivables Facility); (ii) transfers of properties or assets
(including Capital Stock) that are governed by, and made in accordance with, the
provisions described under "Covenants--Limitations on Mergers and Certain Other
Transactions"; (iii) transfers of properties or assets to a Subsidiary,
including an Unrestricted Subsidiary, and a transfer of assets that constitutes
a Restricted Investment, in each case if permitted under the "Limitations on
Restricted Payments" covenant; (iv) transfers of damaged, worn-out or obsolete
equipment or assets that, in the Company's reasonable judgment, are no longer
used or useful in the business of the Company or its Subsidiaries; PROVIDED that
the proceeds thereof are used to purchase replacement or similar assets for use
in the business of the Company and its Subsidiaries; (v) any transfer or series
of related transfers that, but for this clause (v), would be Asset Sales, if
after giving effect to such transfers, the aggregate Fair Market Value of the
properties or assets transferred in such transaction or any such series of
related transactions does not exceed $1,000,000; (vi) a Sale/Leaseback
Transaction with respect to the Company's home office building being constructed
in Houston, Texas, PROVIDED (a) the Attributable Indebtedness with respect to
such Sale/Leaseback Transaction does not exceed a principal amount of $5.5
million and is otherwise permitted to be incurred under the
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Indenture, and (b) the gross cash proceeds of that Sale and Leaseback
Transaction are at least equal to the Fair Market Value of the asset subject
thereto; or (vii) a contribution, transfer or other disposition of Receivables
in connection with a Qualifying Receivables Facility.
"ATTRIBUTABLE INDEBTEDNESS," when used with respect to any Sale and
Leaseback Transaction, means, as at the time of determination, the present value
(discounted at a rate equivalent to the Company's then-current weighted average
cost of funds for borrowed money as at the time of determination, compounded on
a semi-annual basis) of the total obligations of the lessee for rental payments
during the remaining term of the lease included in any such Sale and Leaseback
Transaction.
"BOARD RESOLUTION" means a duly adopted resolution of the Board of Directors
of the Company and delivered to the Trustee.
"BSM" means Building Systems de Mexico, S.A. de C.V., a Mexican stock
corporation.
"Capitalized Lease" means a lease required to be capitalized for financial
reporting purposes in accordance with GAAP.
"CAPITAL STOCK" of any Person means (i) any and all shares or other equity
interests (including common stock, preferred stock and partnership interests) in
such Person and (ii) all rights to purchase, warrants or options (whether or not
currently exercisable), participations or other equivalents of or interests in
(however designated) such shares or other interests in such Person.
"CAPITALIZED LEASE OBLIGATIONS" of any Person means the obligations of such
Person to pay rent or other amounts under a Capitalized Lease, and the amount of
such obligation shall be the capitalized amount thereof determined in accordance
with GAAP.
"CASH EQUIVALENTS" means (i) marketable obligations with a maturity of 180
days or less issued or directly and fully guaranteed or insured by the United
States of America or any agency or instrumentality thereof (provided that the
full faith and credit of the United States of America is pledged in support
thereof); (ii) demand and time deposits and certificates of deposit or
acceptances with a maturity of 180 days or less of any financial institution
that is a member of the Federal Reserve System having combined capital and
surplus and undivided profits of not less than $500 million; (iii) commercial
paper maturing no more than 180 days from the date of creation thereof issued by
a corporation that is not the Company or an Affiliate of the Company, and is
organized under the laws of any State of the United States of America or the
District of Columbia and rated at least A-1 by S&P or at least P-1 by Moody's;
(iv) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clause (i) above entered into
with any commercial bank meeting the specifications of clause (ii) above; and
(v) investments in money market or other mutual funds substantially all of whose
assets comprise securities of the types described in clauses (i) through (iv)
above.
"CHANGE OF CONTROL" means the occurrence of any of the following: (i) any
Person or group (as such term is used in Section 13(d)(3) of the Exchange Act)
is or becomes the beneficial owner (as defined in Rule 13d-3 of the Exchange
Act), directly or indirectly, of Voting Stock representing more than 50% of the
voting power of the Voting Stock of the Company, (ii) the Company consolidates
with, or merges with or into, another Person or sells, assigns, conveys,
transfers, leases or otherwise disposes of all or substantially all of the
Company's assets or the assets of Company and its Subsidiaries taken as a whole
to any Person, or any Person consolidates with, or merges with or into, the
Company, in any such event pursuant to a transaction in which the outstanding
Voting Stock of the Company is converted into or exchanged for cash, securities
or other property, other than any such transaction where the outstanding Voting
Stock of the Company is converted into or exchanged for Voting Stock (other than
Disqualified Capital Stock) of the surviving or transferee corporation and the
beneficial owners of the Voting Stock of the Company immediately prior to such
transaction own, directly or indirectly, not less than a majority of the Voting
Stock of the surviving corporation (including the
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Company) or transferee corporation immediately after such transaction, or (iii)
during any consecutive two-year period, individuals who at the beginning of such
period constituted the Board of Directors of the Company (together with any new
directors whose election by such Board of Directors or whose nomination for
election by the stockholders of the Company was approved by a vote of two-thirds
of the directors then still in office who were either directors at the beginning
of such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Board of
Directors of the Company then in office.
"COMMISSION" means the U.S. Securities and Exchange Commission.
"COMMON EQUITY" of any Person means all Capital Stock of such Person that is
generally entitled to (i) vote in the election of directors of such Person or
(ii) if such Person is not a corporation, control, or vote or otherwise
participate in the selection of the governing body, partners, managers or others
that controls, the management and policies of such Person.
"CONSOLIDATED AMORTIZATION EXPENSE" for any period means the amortization
expense of the Company and its Restricted Subsidiaries for such period (to the
extent included in the computation of Consolidated Net Income), determined on a
consolidated basis in accordance with GAAP.
"CONSOLIDATED CASH FLOW" for any period means, without duplication, the sum
of the amounts for such period of (i) Consolidated Net Income plus (ii) in each
case to the extent deducted in determining Consolidated Net Income, (A)
Consolidated Income Tax Expense, (B) Consolidated Amortization Expense (but only
to the extent not included in Consolidated Interest Expense), (C) Consolidated
Depreciation Expense, (D) Consolidated Interest Expense and (E) all other
non-cash items reducing the Consolidated Net Income (including any charge on
account of contributions to employee benefit plans made in Common Equity of the
Company, but excluding any non-cash charge that results in an accrual of a
reserve for cash charges in any future period) for such period, in each case
determined on a consolidated basis in accordance with GAAP and minus (iii) the
aggregate amount of all non-cash items, determined on a consolidated basis, to
the extent such items increased Consolidated Net Income for such Period.
"CONSOLIDATED DEPRECIATION EXPENSE" for any period means the depreciation
expense of the Company and its Restricted Subsidiaries for such period (to the
extent included in the computation of Consolidated Net Income), determined on a
consolidated basis in accordance with GAAP.
"CONSOLIDATED INCOME TAX EXPENSE" for any period means the provision for
taxes based on income and profits of the Company and its Restricted Subsidiaries
to the extent such income or profits were included in computing Consolidated Net
Income for such period.
"CONSOLIDATED INTEREST COVERAGE RATIO" means, with respect to any
determination date, the ratio of (a) Consolidated Cash Flow for the four full
fiscal quarters immediately preceding the determination date for which financial
statements are publicly available (for any determination, the "Reference
Period"), to (b) Consolidated Interest Expense for such Reference Period. In
making such computations, (i) Consolidated Cash Flow and Consolidated Interest
Expense shall be calculated on a pro forma basis assuming that (A) the
Indebtedness to be incurred or the Disqualified Capital Stock or Preferred Stock
to be issued (and all other Indebtedness incurred or Disqualified Capital Stock
or Preferred Stock issued after the first day of such Reference Period referred
to in the covenant described under "--Certain Covenants--Limitations on
Additional Indebtedness" through and including the date of determination), and
(if applicable) the application of the net proceeds therefrom (and from any
other such Indebtedness, Disqualified Capital Stock or Preferred Stock),
including the refinancing of other Indebtedness, had been incurred or issued on
the first day of such Reference Period and, in the case of Acquired
Indebtedness, on the assumption that the related transaction (whether by means
of purchase, merger or otherwise) also had occurred on such date with the
appropriate adjustments with respect to such acquisition being included in such
pro forma calculation
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and (B) any acquisition or disposition by the Company or any Restricted
Subsidiary of any properties or assets outside the ordinary course of business
or any repayment of any principal amount of any Indebtedness of the Company or
any Restricted Subsidiary prior to the stated maturity thereof, in either case
since the first day of such Reference Period through and including the date of
determination, had been consummated on such first day of such Reference Period
(and, in the case of any such acquisition, Consolidated Cash Flow shall be
calculated without regard to clause (ii) of the proviso in the "Consolidated Net
Income" definition); (ii) the Consolidated Interest Expense attributable to
interest on any Indebtedness required to be computed on a pro forma basis in
accordance with the covenant described under "--Certain Covenants--Limitations
on Additional Indebtedness" and (A) bearing a floating interest rate shall be
computed as if the rate in effect on the date of computation had been the
applicable rate for the entire period and (B) which was not outstanding during
the period for which the computation is being made but which bears, at the
option of the Company, a fixed or floating rate of interest, shall be computed
by applying, at the option of the Company, either the fixed or floating rate;
(iii) the Consolidated Interest Expense attributable to interest on any
indebtedness under a revolving credit facility required to be computed on a pro
forma basis in accordance with the covenant described under "--Certain
Covenants--Limitations on Additional Indebtedness" shall be computed based upon
the average daily balance of such Indebtedness during the applicable period;
PROVIDED that such average daily balance shall be reduced by the amount of any
repayment of Indebtedness under a revolving credit facility during the
applicable period, to the extent such repayment permanently reduced the
commitments or amounts available to be reborrowed under such facility below the
amount of such average daily balance during the applicable period; (iv)
notwithstanding the foregoing clauses (ii) and (iii), interest on Indebtedness
determined on a floating rate basis, to the extent such interest is covered by
agreements relating to Hedging Obligations, shall be deemed to have accrued at
the rate per annum resulting after giving effect to the operation of such
agreements; and (v) if after the first day of the applicable Reference Period
and before the date of determination, the Company has permanently retired any
Indebtedness out of the net proceeds of the issuance and sale of shares of
Capital Stock (other than Disqualified Capital Stock) of the Company within 30
days of such issuance and sale, Consolidated Interest Expense shall be
calculated on a pro forma basis as if such Indebtedness had been retired on the
first day of such period.
"CONSOLIDATED INTEREST EXPENSE" for any period means the sum, without
duplication, of the total interest expense of the Company and its Restricted
Subsidiaries for such period, determined on a consolidated basis in accordance
with GAAP and including without duplication, (i) imputed interest on Capitalized
Lease Obligations and Attributable Indebtedness, (ii) commissions, discounts and
other fees and charges owed with respect to letters of credit securing financial
obligations, bankers' acceptance financing and receivables financings, (iii) the
net costs associated with Hedging Obligations, (iv) amortization of other
financing fees and expenses, (v) the interest portion of any deferred payment
obligations, (vi) amortization of debt discount or premium, if any, (vii) all
other non-cash interest expense, (viii) capitalized interest, (ix) the product
of (a) all cash dividend payments (and non-cash dividend payments in the case of
a Restricted Subsidiary) on any series of Preferred Stock of the Company or any
Restricted Subsidiary, MULTIPLIED BY (b) a fraction, the numerator of which is
one and the denominator of which is one MINUS the then current combined federal,
state and local statutory tax rate of the Company and its Restricted
Subsidiaries, expressed as a decimal, (x) all interest payable with respect to
discontinued operations, and (xi) all interest on any Indebtedness of any other
Person Guaranteed by the Company or any Restricted Subsidiary, provided that
Consolidated Interest Expense shall not include the write-off of debt issuance
costs or debt discount or premium in connection with an early retirement of
debt.
"CONSOLIDATED NET INCOME" for any period means the net income (or loss) of
the Company and its Restricted Subsidiaries for such period determined on a
consolidated basis in accordance with GAAP; PROVIDED that there shall be
excluded from such net income (to the extent otherwise included therein),
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without duplication: (i) the net income (or loss) of any Person (other than a
Restricted Subsidiary) in which any Person other than the Company and its
Restricted Subsidiaries has an ownership interest, except to the extent that
cash in an amount equal to any such income has actually been received by the
Company or any of its Wholly-Owned Restricted Subsidiaries during such period;
(ii) except to the extent includible in the consolidated net income of the
Company pursuant to the foregoing clause (i), the net income (or loss) of any
Person that accrued prior to the date that (a) such Person becomes a Restricted
Subsidiary or is merged into or consolidated with the Company or any Restricted
Subsidiary or (b) the assets of such Person are acquired by the Company or any
Restricted Subsidiary; (iii) the net income of any Restricted Subsidiary during
such period to the extent that the declaration or payment of dividends or
similar distributions by such Restricted Subsidiary of that income is not
permitted by operation of the terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation applicable to
that Subsidiary during such period; (iv) any gain (or loss), together with any
related provisions for taxes on any such gain (or the tax effect of any such
loss), realized during such period by the Company or any Restricted Subsidiary
upon (A) the acquisition of any securities, or the extinguishment of any
Indebtedness, of the Company or any Restricted Subsidiary or (B) any Asset Sale
by the Company or any of its Restricted Subsidiaries, (v) any extraordinary gain
(or extraordinary loss), together with any related provision for taxes on any
such extraordinary gain (or the tax effect of any such extraordinary loss),
realized by the Company or any Restricted Subsidiary during such period; and
(vi) in the case of a successor to the Company by consolidation, merger or
transfer of its assets, any income (or loss) of the successor prior to such
merger, consolidation or transfer of assets.
"CONSOLIDATED NET WORTH" means, with respect to any Person as of any date,
the consolidated stockholders' equity of such Person, determined on a
consolidated basis in accordance with GAAP, less (without duplication) (i) any
amounts thereof attributable to Disqualified Stock of such Person or its
Consolidated Subsidiaries and (ii) 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 twelve 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 Subsidiary of such Person.
"CONSOLIDATED TANGIBLE ASSETS" means, with respect to any Person, the total
assets of such Person and its Restricted Subsidiaries, determined on a
consolidated basis in accordance with GAAP as of the end of the most recent
fiscal quarter of such Person for which financial statements are publicly
available, less (without duplication) the sum of: (i) all intangible assets
(including patents, trademarks, copyrights, goodwill, organizational expenses
and similar intangible items), and (ii) all Investments in Persons that are not
Restricted Subsidiaries (except Cash Equivalents).
"COVERAGE RATIO INCURRENCE CONDITION" would be met at any specified time
only if the Company (or its Successor, as the case may be) would be able to
incur $1.00 of additional Indebtedness at such specified time pursuant to the
Consolidated Interest Coverage Ratio test set forth in clause (ii) of the
proviso in the covenant described under "--Certain Covenants--Limitations on
Additional Indebtedness."
"CREDIT AGREEMENT" means the Credit Agreement dated as of March 25, 1998 by
and among the Company, as Borrower, NationsBank, N.A. (formerly known as
NationsBank of Texas, N.A.), as Administrative Agent, certain financial
institutions as Arrangers, Syndication Agents and Documentation Agent, and the
Lenders named therein, together with any security documents, and guarantees in
connection therewith and any additional guarantees executed by the Subsidiary
Guarantors, as any of the foregoing may be subsequently amended, restated,
refinanced, or replaced from time to time.
"CREDIT FACILITIES" means, with respect to the Company or any Subsidiary
Guarantor, one or more credit facilities with banks or other institutional
lenders providing for revolving loans, term loans,
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receivables financing (including through the sale of receivables to such lenders
or to special purpose entities formed to borrow from or issue securities to such
lenders against such receivables) or letters of credit.
"DEFAULT" means (i) any Event of Default or (ii) any event, act or condition
that, after notice or the passage of time or both would be, an Event of Default.
"DESIGNATED SENIOR INDEBTEDNESS" means (i) Indebtedness under the Credit
Agreement (whether incurred pursuant to the definition of Permitted Indebtedness
or pursuant to clause (ii) of the covenant described under "--Limitations on
Additional Indebtedness") and (ii) any other Indebtedness constituting Senior
Indebtedness or Subsidiary Guarantor Senior Indebtedness that at the date of
determination, has an aggregate principal amount outstanding of at least $25.0
million and that is specifically designated by the Company or the Subsidiary
Guarantor, in the instrument creating or evidencing such Senior Indebtedness or
Subsidiary Guarantor Senior Indebtedness or in an Officers' Certificate
delivered to the Trustee, as "Designated Senior Indebtedness."
"DISQUALIFIED CAPITAL STOCK" means any Capital Stock of such Person or any
of its Subsidiaries that, by its terms, by the terms of any agreement related
thereto or by the terms of any security into which it is convertible, puttable
or exchangeable, is, or upon the happening of any event or the passage of time
would be, required to be redeemed or repurchased by such Person or any of its
Subsidiaries, whether or not at the option of the holder thereof, or matures or
is mandatorily redeemable, pursuant to a sinking find obligation or otherwise,
in whole or in part, on or prior to the final maturity date of the Notes;
PROVIDED, HOWEVER, that any class of Capital Stock of such Person that, by its
terms, authorizes such Person to satisfy in full its obligations with respect to
the payment of dividends or upon maturity, redemption (pursuant to a sinking
fund or otherwise) or repurchase thereof or otherwise by the delivery of Capital
Stock that is not Disqualified Capital Stock, and that is not convertible,
puttable or exchangeable for Disqualified Capital Stock or Indebtedness, shall
not be deemed to be Disqualified Capital Stock so long as such Person satisfies
its obligations with respect thereto solely by the delivery of Capital Stock
that is not Disqualified Capital Stock.
"EQUITY OFFERING" means an offering or sale of Capital Stock (other than
Disqualified Capital Stock) of the Company pursuant to a registration statement
filed with the Commission in accordance with the Securities Act or pursuant to
an exemption from the registration requirements thereof.
"EXCHANGE ACT" means the U.S. Securities Exchange Act of 1934.
"EXISTING JOINT VENTURE INVESTMENTS" means the Investments of the Company
and its Restricted Subsidiaries in Midwest Metal Coatings, LLC, a Delaware
limited liability company, BSM, Metallic de Mexico, S.A. de C.V., a Mexican
stock corporation, and DOUBLECOTE, L.L.C., a Delaware limited liability company,
to the extent in existence on the Issue Date or required to be made following
the Issue Date pursuant to legally binding commitments in effect on the Issue
Date. The aggregate amount of all Existing Joint Venture Investments existing or
committed on the Issue Date equals approximately $38.1 million.
"FAIR MARKET VALUE" of any asset or items means the fair market value of
such asset or items as determined in good faith by the Board of Directors and
evidenced by a Board Resolution.
"FOREIGN SUBSIDIARY" means any Subsidiary of the Company that is not
incorporated or organized in the United States or in any State thereof and
substantially all of the assets of which are located outside of the United
States or that conducts substantially all of its business outside of the United
States.
"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
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such other statements by such other entity as may be approved by a significant
segment of the accounting profession of the United States, as in effect on the
Issue Date.
"GUARANTEE" means a direct or indirect guarantee by any Person of any
Indebtedness of any other Person and includes any obligation, direct or
indirect, contingent or otherwise, of such Person: (i) to purchase or pay (or
advance or supply funds for the purchase or payment of) Indebtedness of such
other Person (whether arising by virtue of partnership arrangements, or by
agreements to keep-well, to purchase assets, goods, securities or services
(unless such purchase arrangements are on arm's-length terms and are entered
into in the ordinary course of business), to take-or-pay, or to maintain
financial statement conditions or otherwise); or (ii) entered into for purposes
of assuring in any other manner the obligee of such Indebtedness of the payment
thereof or to protect such obligee against loss in respect thereof (in whole or
in part). "Guarantee," when used as a verb, and "Guaranteed" have correlative
meanings.
"HEDGING OBLIGATIONS" of any Person means the obligations of such Person
pursuant to (i) any interest rate swap agreement, interest rate collar agreement
or other similar agreement or arrangement designed to protect such Person
against fluctuations in interest rates, (ii) agreements or arrangements designed
to protect such Person against fluctuations in foreign currency exchange rates
in the conduct of its operations, or (iii) any forward contract, commodity swap
agreement, commodity option agreement or other similar agreement or arrangement
designed to protect such Person against fluctuations in commodity prices, in
each case, entered into in the ordinary course of business for BONA FIDE hedging
purposes and not for the purpose of speculation.
"INCUR" means, with respect to any Indebtedness or Obligation, incur,
create, issue, assume, Guarantee or otherwise become directly or, indirectly
liable, contingently or otherwise, with respect to such Indebtedness or
Obligation; PROVIDED that (i) the Indebtedness of a Person existing at the time
such Person became a Restricted Subsidiary shall be deemed to have been incurred
by such Restricted Subsidiary and (ii) neither the accrual of interest nor the
accretion of accreted value shall be deemed to be an incurrence of Indebtedness.
"INDEBTEDNESS" of any Person at any date means, without duplication: (i) all
liabilities, contingent or otherwise, of such Person for borrowed money (whether
or not the recourse of the lender is to the whole of the assets of such person
or only to a portion thereof); (ii) all obligations of such Person evidenced by
bonds, debentures, notes or other similar instruments; (iii) all obligations of
such Person in respect of letters of credit or other similar instruments (or
reimbursement obligations with respect thereto); (iv) all obligations of such
Person to pay the deferred and unpaid purchase price of property or services,
except trade payables and accrued expenses incurred by such Person in the
ordinary course of business in connection with obtaining goods, materials or
services, which payable is not overdue by more than 60 days according to the
original terms of sale unless such payable is being contested in good faith; (v)
the maximum fixed redemption or repurchase price of all Disqualified Capital
Stock of such Person; (vi) all Capitalized Lease Obligations of such Person;
(vii) all Indebtedness of others secured by a Lien on any asset of such Person,
whether or not such Indebtedness is assumed by such Person; (viii) all
Indebtedness of others Guaranteed by such Person to the extent of such
Guarantee; PROVIDED that Indebtedness of the Company or its Subsidiaries that is
Guaranteed by the Company or the Company's Subsidiaries shall only be counted
once in the calculation of the amount of Indebtedness of the Company and its
Subsidiaries on a consolidated basis; (ix) all Attributable Indebtedness; and
(x) to the extent not otherwise included in this definition, Hedging Obligations
of such Person. The amount of Indebtedness of any Person at any date shall be
the outstanding balance at such date of all unconditional obligations as
described above, the maximum liability of such Person for any such contingent
obligations at such date and, in the case of clause (vii), the lesser of (A) the
Fair Market Value of any asset subject to a Lien securing the Indebtedness of
others on the date that the Lien attaches and (B) the amount of the Indebtedness
secured. For purposes of the preceding sentence, the "maximum fixed redemption
or repurchase price" of any Disqualified Capital Stock that
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does not have a fixed redemption or repurchase price shall be calculated in
accordance with the terms of such Disqualified Capital Stock as if such
Disqualified Capital Stock were purchased or redeemed on any date on which
Indebtedness shall be required to be determined pursuant to the Indenture, and
if such price is based upon, or measured by, the fair market value of such
Disqualified Capital Stock (or any equity security for which it may be exchanged
or convened), such fair market value shall be determined in good faith by the
Board of Directors of such Person, which determination shall be evidenced by a
Board Resolution. "Indebtedness" shall include with respect to any receivables
facility under which the purchaser has recourse to such Person or any Restricted
Subsidiary of such Person, the sum of (a) the aggregate uncollected balances of
Accounts Receivable (as defined in the definition of "Receivables") transferred
("Transferred Receivables") in such Receivables Facility plus (b) the aggregate
amount of all collections of Transferred Receivables theretofore received by
such Person or a Subsidiary of such Person but not yet remitted to the
purchaser, net of all reserves or holdbacks retained by or for the benefit of
the purchaser and net of any interest retained by such Person and reasonable
costs and expenses (including fees and commissions and taxes other than income
taxes) incurred by such Person in connection therewith and not payable to any
Affiliate of such Person.
"INDEPENDENT DIRECTOR" means a director of the Company who (i) is in fact
independent with respect to the transaction at issue; (ii) does not have any
direct financial interest or any material indirect financial interest in the
Company or any of its Subsidiaries, or in any Affiliate of the Company or any of
its Subsidiaries (other than as a result of holding securities of the Company);
and (iii) has not and whose Affiliates have not, at any time during the twelve
months prior to the taking of any action hereunder, directly or indirectly,
received, or entered into any understanding or agreement to receive, any
compensation, payment or other benefit, of any type or form, from the Company or
any of its Affiliates, other than customary directors' fees for serving on the
Board of Directors of the Company or any Affiliate and reimbursement of
out-of-pocket expenses for attendance at the Company's or Affiliate's board and
board committee meetings.
"INDEPENDENT FINANCIAL ADVISOR" means an accounting, appraisal or investment
banking firm of nationally recognized standing that is, in the reasonable
judgment of the Company's Board of Directors, qualified to perform the task for
which it has been engaged and disinterested and independent with respect to the
Company and its Affiliates.
"INVESTMENTS" of any Person means (i) all direct or indirect investments by
such Person in any other Person in the form of loans, advances or capital
contributions (excluding commission, travel and similar advances to officers and
employees made in the ordinary course of business) or other credit extensions
constituting Indebtedness of such other Person, and any Guarantee of
Indebtedness of any other Person, (ii) all purchases (or other acquisitions for
consideration) by such Person of Indebtedness, Capital Stock or other securities
of any other Person and (iii) all other items that would be classified as
investments (including purchases of assets outside the ordinary course of
business) on a balance sheet of such Person prepared in accordance with GAAP.
Except as otherwise expressly specified herein, the amount of any Investment
(other than an Investment made in cash) shall be the fair market value thereof
on the date such Investment is made. If the Company or any Subsidiary sells or
otherwise disposes of any Capital Stock of any direct or indirect Subsidiary
such that, after giving effect to any such sale or disposition, such Person is
no longer a Subsidiary, the Company shall be deemed to have made an Investment
on the date of any such sale or other disposition equal to the Fair Market Value
of the Capital Stock of and all other Investments in such Subsidiary not sold or
disposed of, which amount shall be determined by the Board of Directors.
"ISSUE DATE" means the date on which the initial $125.0 million in Notes are
issued.
"LIEN" means, with respect to any asset or property, any mortgage, deed of
trust, lien (statutory or other), pledge, lease, easement, restriction,
covenant, charge, security interest or other encumbrance of any kind or nature
in respect of such asset or property, whether or not filed, recorded or
otherwise
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perfected under applicable law, including any conditional sale or other title
retention agreement, and any lease in the nature thereof (including mortgages or
liens that are or would be deemed to exist on property subject to leases in
effect on January 31, 1999 which mortgages or liens are or under GAAP should be
recorded as Capital Leases), any option or other agreement to sell, and any
filing of, or agreement to give, any financing statement under the Uniform
Commercial Code (or equivalent statutes) of any jurisdiction (other than
cautionary filings in respect of operating leases).
"MOODY'S" means Moody's Investors Service, Inc., and its successors.
"NET AVAILABLE PROCEEDS" means, with respect to any Asset Sale, the proceeds
thereof in the form of cash or Cash Equivalents including payments in respect of
deferred payment obligations when received in the form of cash or Cash
Equivalents (except to the extent that such obligations are financed or sold
with recourse to the Company or any Restricted Subsidiary), net of (i) brokerage
commissions and other fees and expenses (including fees and expenses of legal
counsel, accountants and investment banks) related to such Asset Sale, (ii)
provisions for all taxes payable as a result of such Asset Sale (after taking
into account any available tax credits or deductions and any tax sharing
arrangements), (iii) amounts required to be paid to any Person (other than the
Company or any Restricted Subsidiary) owning a beneficial interest in the
properties or assets subject to the Asset Sale or having a Lien therein and (iv)
appropriate amounts to be provided by the Company or any Restricted Subsidiary,
as the case may be, as a reserve required in accordance with GAAP against any
liabilities associated with such Asset Sale and retained by the Company or any
Restricted Subsidiary, as the case may be, after such Asset Sale, including
pensions and other postemployment benefit liabilities, liabilities related to
environmental matters and liabilities under any indemnification obligations
associated with such Asset Sale, all as reflected in an Officers' Certificate
delivered to the Trustee; PROVIDED, HOWEVER, that any amounts remaining after
adjustments, revaluations or liquidations of such reserves shall constitute Net
Available Proceeds.
"NON-RECOURSE PURCHASE MONEY INDEBTEDNESS" means Indebtedness of the Company
or any of its Restricted Subsidiaries incurred to finance the purchase of any
assets of the Company or any of its Subsidiaries within 90 days of such
purchase, (a) to the extent the amount of Indebtedness thereunder does not
exceed 100% of the purchase cost of such assets, (b) to the extent the purchase
cost of such assets is or should be included in "additions to property, plant
and equipment" in accordance with GAAP, and (c) to the extent that the lenders
thereunder expressly agree in the related documentation that such Indebtedness
is non-recourse to the Company and its Restricted Subsidiaries and their
respective assets, other than the assets so purchased.
"OBLIGATION" means any principal, interest (including, in the case of Senior
Indebtedness or Subsidiary Guarantor Senior Indebtedness, interest accruing
subsequent to the filing of a petition in bankruptcy or insolvency at the rate
specified in the document relating to such Indebtedness, whether or not such
interest is an allowed claim permitted to be enforced against the obligor under
applicable law), penalties, fees, indemnification, reimbursements, costs,
expenses, damages and other liabilities payable under the documentation
governing any Indebtedness.
"OFFICER" means any of the following of the Company: the Chairman of the
Board of Directors, the Chief Executive Officer, the Chief Financial Officer,
the President, any Vice President, the Treasurer or the Secretary.
"OFFICERS' CERTIFICATE" means a certificate signed by two Officers.
"PARI PASSU INDEBTEDNESS" means any Indebtedness of the Company that ranks
PARI PASSU with the Notes.
"PAYMENT RESTRICTION" with respect to a Subsidiary of any Person, means any
encumbrance, restriction or limitation, whether by operation of the terms of its
charter or by reason of any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation, on the ability
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of (i) such Subsidiary to (a) pay dividends or make other distributions on its
Capital Stock or make payments on any obligation, liability or Indebtedness owed
to such Person or any other Subsidiary of such Person, (b) make loans or
advances to such Person or any other Subsidiary of such Person, (c) Guarantee
any Indebtedness of the Company or any Restricted Subsidiary, or (d) transfer
any of its properties or assets to such Person or any other Subsidiary of such
Person (other than customary restrictions on transfers of property subject to a
Lien permitted under the Indenture) or (ii) such Person or any other Subsidiary
of such Person to receive or retain any such dividends, distributions or
payments, loans or advances, Guarantees or transfer of properties or assets.
"PERMITTED INDEBTEDNESS" means any of the following:
(i) Indebtedness of the Company and any Subsidiary Guarantor under
Credit Facilities in an aggregate principal amount (or face amount, in the
case of letters of credit) at any time outstanding not to exceed the sum of
(a) $200.0 million, less the amount thereof that has been repaid (or the
amount of any permanent commitment reduction) under the covenant described
under "--Limitations on Asset Sales" and (b) the greater of (x) $240.0
million, less the amount thereof that has been repaid (or the amount of any
permanent commitment reduction) under the covenant described under
"--Limitations on Asset Sales," and (y) the sum of 80% of the book value of
the accounts receivable and 50% of inventory of the Company and its
Restricted Subsidiaries, calculated on a consolidated basis and in
accordance with GAAP;
(ii) Indebtedness under the Notes (other than any Additional Notes), the
Subsidiary Guarantees and the Indenture;
(iii) Indebtedness of the Company and its Restricted Subsidiaries
outstanding on the Issue Date and described in this Offering Memorandum
(other than Indebtedness referred to in clauses (i) and (ii) above, and
after giving effect to the intended use of proceeds of the Notes);
(iv) Indebtedness under Hedging Obligations; PROVIDED that (1) such
Hedging Obligations are related to payment obligations on Permitted
Indebtedness or Indebtedness otherwise permitted by the "Limitations on
Additional Indebtedness" covenant, and (2) the notional principal amount of
such Hedging Obligations at the time incurred does not exceed the principal
amount of such Indebtedness to which such Hedging Obligations relate;
(v) Indebtedness of the Company to a Subsidiary Guarantor and
Indebtedness of any Subsidiary Guarantor to the Company or any other
Subsidiary Guarantor; PROVIDED, HOWEVER, that upon either (1) the subsequent
issuance (other than directors' qualifying shares), sale, transfer or other
disposition of any Capital Stock or any other event which results in any
such Subsidiary Guarantor ceasing to be a Subsidiary Guarantor or (2) the
transfer or other disposition of any such Indebtedness (except to the
Company or a Subsidiary Guarantor), the provisions of this clause (v) shall
no longer be applicable to such Indebtedness and such Indebtedness shall be
deemed, in each case, to be incurred and shall be treated as an incurrence
for purposes of the "Limitations on Additional Indebtedness" covenant at the
time the Subsidiary Guarantor in question ceased to be a Subsidiary
Guarantor or the time such transfer or other disposition occurred;
(vi) Guarantees by Subsidiary Guarantors of Indebtedness of the Company
permitted to be incurred by clause (ii) of the proviso to the "Limitations
on Additional Indebtedness" covenant;
(vii) Indebtedness in respect of bid, performance or surety bonds issued
for the account of the Company in the ordinary course of business, including
Guarantees or obligations of the Company with respect to letters of credit
supporting such bid, performance or surety obligations (in each case other
than for an obligation for money borrowed);
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(viii) Indebtedness incurred by the Company or any Restricted Subsidiary
in respect of (a) Non-Recourse Purchase Money Indebtedness, or (b) other
purchase money Indebtedness (including Capitalized Leases) incurred for the
purpose of financing all or any part of the purchase price of property,
plant or equipment used in the business of the Company or such Restricted
Subsidiary within 90 days of such purchase, PROVIDED the aggregate principal
amount of such Indebtedness under this clause (b) does not exceed $10.0
million at any time outstanding;
(ix) Refinancing Indebtedness with respect to Indebtedness incurred
pursuant to clause (ii), (iii) or (viii) above; and
(x) Indebtedness of the Company and the Subsidiary Guarantors, other
than Indebtedness incurred pursuant to the foregoing clauses of this
definition, with an aggregate principal face or stated amount (as
applicable) at any time outstanding for all such Indebtedness incurred
pursuant to this clause not in excess of $10.0 million.
"PERMITTED JUNIOR SECURITIES" means (i) capital stock of the Company (other
than Disqualified Capital Stock), (ii) securities of the Company, any Subsidiary
Guarantor or any other corporation authorized by an order or decree giving
effect, and stating in such order or decree that effect is given, to the
subordination of the Notes or Subsidiary Guarantee to the Senior Indebtedness or
Subsidiary Guarantor Senior Indebtedness, and made by a court of competent
jurisdiction in a reorganization proceeding under any applicable bankruptcy,
insolvency or other similar law, or (iii) any securities of the Company or any
Subsidiary Guarantor provided for by a plan of reorganization or readjustment
that are subordinated in right of payment to all Senior Indebtedness or
Subsidiary Guarantor Senior Indebtedness that may at the time be outstanding to
substantially the same extent as, or to a greater extent than, the Notes or
Subsidiary Guarantee are subordinated to Senior Indebtedness or Subsidiary
Guarantor Senior Indebtedness.
"PERMITTED SALE OR ISSUANCE" means (i) any sale by the Company of Capital
Stock of a Restricted Subsidiary or (ii) any issuance by a Restricted Subsidiary
of its Capital Stock, in each case in a single transaction or series of
substantially contemporaneous related transactions, provided that (a)
immediately following such sale or issuance, the Company and its Restricted
Subsidiaries own, in the aggregate, no more than 10% of any class of Capital
Stock of such former Subsidiary, and (b) the remaining ownership interest in
such former Subsidiary shall be deemed to be the making of a Restricted
Investment in the amount set forth in the definition of "Investment" and the
Company and its Restricted Subsidiaries is able to make such Restricted
Investment at the time of such sale or issuance under the "Limitations on
Restricted Payments" covenant.
"PERSON" means any individual, corporation, partnership, limited liability
company, joint venture, incorporated or unincorporated association, joint-stock
company, trust, unincorporated organization or government or other agency or
political subdivision thereof or other entity of any kind.
"PLAN OF LIQUIDATION" with respect to any Person, means a plan that provides
for, contemplates or the effectuation of which is preceded or accompanied by
(whether or not substantially contemporaneously, in phases or otherwise): (i)
the sale, lease, conveyance or other disposition of all or substantially all of
the assets of such Person otherwise than as an entirety or substantially as an
entirety; and (ii) the distribution of all or substantially all of the proceeds
of such sale, lease, conveyance or other disposition of all or substantially all
of the remaining assets of such Person to holders of Capital Stock of such
Person.
"PREFERRED STOCK" means, with respect to any Person, any and all preferred
or preference stock or other equity interests (however designated) of such
Person whether now outstanding or issued after the Issue Date.
"QUALIFYING JOINT VENTURE INVESTMENT" means (i) any Existing Joint Venture
Investment or (ii) any Restricted Investment made after the Issue Date into a
joint venture, or a Subsidiary that is not a
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Subsidiary Guarantor, engaged in a Related Business, provided the amount of such
Investment, when made, reduced the amount available for subsequent Restricted
Payments under clause (iii) of the first paragraph of the "Limitations on
Restricted Payments" covenant.
"QUALIFYING RECEIVABLES FACILITY" means any Receivables Facility, provided
that (a) consideration in an amount at least equal to the fair market value of
the Receivables sold in such facility is received, directly or indirectly, by
the Company or any of its Restricted Subsidiaries, and (b) all the net cash
proceeds of such facility are remitted to the Company or any Restricted
Subsidiary.
"RECEIVABLES" means, collectively, (a) the Indebtedness and other
obligations owed to the Company or any of its Subsidiaries (before giving effect
to any sale or transfer thereof pursuant to a Receivables Facility), whether
constituting an account, chattel paper, an instrument, a document or general
intangible, arising in connection with the sale of goods and/or services by the
Company or such Subsidiary, including the obligation to pay any late fees,
interest or other finance charges with respect thereto (each of the foregoing,
collectively, an "Account Receivable"), (b) all of the Company's or such
Subsidiary's interest in the goods (including returned goods), if any, the sale
of which gave rise to any Account Receivable, and all insurance contracts with
respect thereto, (c) all other security interests or Liens and property subject
thereto from time to time, if any, purporting to secure payment of any Account
Receivable, together with all financing statements and security agreements
describing any collateral securing such Account Receivable, (d) all Guarantees,
insurance and other agreements or arrangements of whatever character from time
to time supporting or securing payment of any Account Receivable, (e) all
contracts, invoices, books and records of any kind related to any Account
Receivable, (f) all cash collections in respect of, and cash proceeds of, any of
the foregoing and any and all lockboxes, lockbox accounts, collection accounts,
concentration accounts and similar accounts in or into which such collections
and cash proceeds are now or hereafter deposited, collected or concentrated, and
(g) all proceeds of any of the foregoing.
"RECEIVABLES FACILITY" means, with respect to any Person, any Receivables
securitization or factoring program pursuant to which such Person receives
proceeds pursuant to a sale, pledge or other encumbrance of its Receivables. A
Receivables Facility involving the sale, pledge or other encumbrance of
Receivables of, and the direct or indirect receipt of the proceeds thereof by,
the Company or any Restricted Subsidiary thereof shall constitute a Receivables
Facility of the "Company" and/or its "Restricted Subsidiaries" whether or not as
part of such securitization or factoring program such Receivables are initially
contributed or otherwise transferred to an Unrestricted Subsidiary of the
Company (and then resold or encumbered by such Unrestricted Subsidiary).
"RECEIVABLES SUBSIDIARY" means any Subsidiary created primarily to purchase
or finance the Receivables of the Company and/or its Subsidiaries pursuant to a
Receivables Facility, so long as (i) no portion of the Indebtedness or any other
obligation (contingent or otherwise) of such Subsidiary (a) is Guaranteed by the
Company or any Restricted Subsidiary, (b) is recourse to the Company or any
Restricted Subsidiary or (c) subjects any property or asset of the Company or
any Restricted Subsidiary, directly or indirectly, contingently or otherwise, to
the satisfaction thereof and (ii) no default or event of default with respect to
any Indebtedness of such Subsidiary would permit any holder of any Indebtedness
of the Company or any Restricted Subsidiary (other than the Notes) to declare
such Indebtedness of the Company or any Restricted Subsidiary due and payable
prior to its maturity. If, at any time, such Receivables Subsidiary would fail
to meet the foregoing requirements as a Receivables Subsidiary, it shall
thereafter cease to be a Receivables Subsidiary for purposes of the Indenture
and any Indebtedness of such Receivables Subsidiary shall be deemed to be
incurred by a Subsidiary of the Company as of such date (and, if such
Indebtedness is not permitted to be incurred as of such date under the
"Limitations on Indebtedness" covenant, the Company shall be in default of such
covenant).
"REFINANCING INDEBTEDNESS" means Indebtedness of the Company or a Restricted
Subsidiary issued in exchange for, or the proceeds from the issuance and sale or
disbursement of which are used
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substantially concurrently to repay, redeem, refund, refinance, discharge or
otherwise retire for value, in whole or in part (collectively, "repay"), or
constituting an amendment, modification or supplement to or a deferral or
renewal of (collectively, an "amendment"), any Indebtedness of the Company or
any Restricted Subsidiary (the "Refinanced Indebtedness") in a principal amount
not in excess of the principal amount of the Refinanced Indebtedness so repaid
or amended (or, if such Refinancing Indebtedness refinances Indebtedness under a
revolving credit facility or other agreement providing a commitment for
subsequent borrowings, with a maximum commitment not to exceed the maximum
commitment under such revolving credit facility or other agreement); PROVIDED
that: (i) the Refinancing Indebtedness is the obligation of the same Person as
that of the Refinanced Indebtedness, (ii) if the Refinanced Indebtedness was
subordinated to or PARI PASSU with the Note Indebtedness or the Subsidiary
Guarantee Indebtedness, as the case may be, then such Refinancing Indebtedness,
by its terms, is expressly PARI PASSU with (in the case of Refinanced
Indebtedness that was PARI PASSU with) or subordinate in right of payment to (in
the case of Refinanced Indebtedness that was subordinated to) the Note
Indebtedness or the Subsidiary Guarantee Indebtedness, as the case may be, at
least to the same extent as the Refinanced Indebtedness; (iii) the Refinancing
Indebtedness is scheduled to mature either (a) no earlier than the Refinanced
Indebtedness being repaid or amended or (b) after the maturity date of the
Notes; (iv) the portion, if any, of the Refinancing Indebtedness that is
scheduled to mature on or prior to the maturity date of the Notes has a Weighted
Average Life to Maturity at the time such Refinancing Indebtedness is incurred
that is equal to or greater than the Weighted Average Life to Maturity of the
portion of the Refinanced Indebtedness being repaid that is scheduled to mature
on or prior to the maturity date of the Notes; and (v) the Refinancing
Indebtedness is secured only to the extent, if at all, and by the assets, that
the Refinanced Indebtedness being repaid or amended is secured.
"RELATED BUSINESS" means any business or industry in which the Company and
its Subsidiaries operate on the Issue Date, or that is reasonably related or
complementary to the business of the Company and its Subsidiaries as such
business exists on the Issue Date.
"RELATED BUSINESS INVESTMENT" means any Investment directly by the Company
or its Restricted Subsidiaries in any Related Business.
"RESTRICTED DEBT PAYMENT" means any prepayment, purchase, redemption,
defeasance (including covenant defeasance or legal defeasance) or other
acquisition or retirement for value, directly or indirectly, by the Company or a
Restricted Subsidiary, prior to the scheduled maturity or prior to any scheduled
repayment of principal or sinking fund payment, as the case may be, in respect
of Subordinated Indebtedness.
"RESTRICTED INVESTMENT" means any Investment by the Company or any
Restricted Subsidiary, except (i) an Investment in Cash Equivalents, (ii) an
Investment in a Subsidiary Guarantor, and (iii) an 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 Subsidiary Guarantor or (b) such Person, in
one transaction or a series of substantially concurrent related transactions, 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
Subsidiary Guarantor.
"RESTRICTED PAYMENT" means with respect to any Person: (i) the declaration
or payment of any dividend (other than a dividend declared by a Wholly-Owned
Restricted Subsidiary to holders of its Common Equity) or the making of any
other payment or distribution of cash, securities or other property or assets in
respect of such Person's Capital Stock (except that a dividend payable solely in
Capital Stock (other than Disqualified Capital Stock) of such Person shall not
constitute a Restricted Payment); (ii) any payment on account of the purchase,
redemption, retirement or other acquisition for value of such Person's Capital
Stock (or, in the case of the Company, the Capital Stock of any Subsidiary
Guarantor or, in the case of any Restricted Subsidiary, the Capital Stock of the
Company or
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any Subsidiary Guarantor) or any other payment or distribution made in respect
of any such Capital Stock, either directly or indirectly (other than a payment
solely in Capital Stock that is not Disqualified Capital Stock); (iii) any
Restricted Investment; or (iv) any Restricted Debt Payment.
"RESTRICTED SUBSIDIARY" means any Subsidiary of the Company other than an
Unrestricted Subsidiary.
"S&P" means Standard & Poor's Ratings Services, a division of the
McGraw-Hill Companies, Inc., and its successors.
"SALE AND LEASEBACK TRANSACTIONS" means with respect to any Person an
arrangement with any bank, insurance company or other lender or investor or to
which such lender or investor is a party, providing for the leasing by such
Person of any property or asset of such Person which has been or is being sold
or transferred by such Person to such lender or investor or to any Person to
whom funds have been or are to be advanced by such lender or investor on the
security of such property or asset.
"SECRETARY'S CERTIFICATE" means a certificate signed by the Secretary of the
Company.
"SECURITIES ACT" means the U.S. Securities Act of 1933.
"SENIOR INDEBTEDNESS" means all Indebtedness and other Obligations specified
below payable directly or indirectly by the Company, whether outstanding on the
Issue Date or thereafter created, incurred or assumed by the Company: (i) the
principal of and interest on and all other Obligations under the Credit
Agreement (including all loans, letters of credit and unpaid drawings with
respect thereto and other extensions of credit under the Credit Agreement, and
all expenses, fees, reimbursements, indemnities and other amounts owing pursuant
to the Credit Agreement), (ii) amounts payable in respect of any Hedging
Obligations with respect to Senior Indebtedness, and (iii) all other
Indebtedness of the Company referred to in clauses (i), (ii), (iii), (iv), (vi)
and (vii) of the definition of "Indebtedness" and all Guarantees of the Company
of any such Indebtedness, in each case to the extent not prohibited by the
"Limitations on Additional Indebtedness" covenant, provided such Indebtedness is
not expressly PARI PASSU with, or subordinated to, the Notes. Notwithstanding
anything to the contrary in the foregoing Senior Indebtedness will not include
(a) any Indebtedness which by the express terms of the agreement or instrument
creating, evidencing or governing the same is junior or subordinate in right of
payment to any item of Senior Indebtedness, (b) any trade payable or accrued
expense arising from the purchase of goods or materials or for services obtained
in the ordinary course of business, (c) Indebtedness incurred (but only to the
extent incurred) in violation of the Indenture as in effect at the time of the
respective incurrence, (d) any Indebtedness of the Company that, when incurred,
was without recourse to the Company, (e) any Indebtedness to any employee of the
Company or any of its respective Subsidiaries, (f) any Indebtedness of the
Company to any of its Subsidiaries or Affiliates of the Company (including any
of their respective officers or directors) or (g) any liability for taxes owed
or owing by the Company.
"SIGNIFICANT SUBSIDIARY" means any 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 Securities Act as such Regulation is in effect on
the Issue Date.
"SPECIAL INTEREST" means special interest as set forth in the Registration
Rights Agreement.
"SUBORDINATED INDEBTEDNESS" means Indebtedness of the Company or any
Restricted Subsidiary that is subordinated in right of payment to the Notes or
the Subsidiary Guarantees, respectively.
"SUBSIDIARY" of any Person means (i) any corporation of which at least a
majority of the aggregate voting power of all classes of the Common Equity is
owned by such Person directly or through one or more other Subsidiaries of such
Person and (ii) any entity other than a corporation in which such Person,
directly or indirectly, owns at least a majority of the Common Equity of such
entity. Unless otherwise specified, "Subsidiary" means a Subsidiary of the
Company.
100
<PAGE>
"SUBSIDIARY GUARANTEES" mean the guarantees endorsed on the notes by the
Subsidiary Guarantors.
"SUBSIDIARY GUARANTOR SENIOR INDEBTEDNESS" means all Indebtedness and other
Obligations specified below payable directly or indirectly by any Subsidiary
Guarantor, whether outstanding on the Issue Date or thereafter created, incurred
or assumed by such Subsidiary Guarantor: (i) the Guarantees by any Subsidiary
Guarantor of principal of and interest on and all other Obligations under the
Credit Agreement (including all loans, letters of credit and unpaid drawings
with respect thereto and other extensions of credit under the Credit Agreement,
and all expenses, fees, reimbursements, indemnities and other amounts owing
pursuant to the Credit Agreement), (ii) amounts payable in respect of any
Hedging Obligations with respect to Subsidiary Guarantor Senior Indebtedness,
and (iii) all other Indebtedness of a Subsidiary Guarantor referred to in
clauses (i), (ii), (iii), (iv), (vi) and (vii) of the definition of
"Indebtedness" and all Guarantees of any such Indebtedness of the Company or any
Subsidiary Guarantor, in each case to the extent not prohibited under the
"Limitations on Additional Indebtedness" covenant, provided such Indebtedness is
not expressly PARI PASSU with, or subordinated to, the Notes. Notwithstanding
anything to the contrary in the foregoing, Senior Indebtedness will not include
(a) any Indebtedness which by the express terms of the agreement or instrument
creating, evidencing or governing the same is junior or subordinate in right of
payment to any item of Subsidiary Guarantor Senior Indebtedness, (b) any trade
payable or accrued expense arising from the purchase of goods or materials or
for services obtained in the ordinary course of business, (c) Indebtedness
incurred (but only to the extent incurred) in violation of the Indenture as in
effect at the time of the respective incurrence, (d) any Indebtedness of a
Subsidiary Guarantor that, when incurred, was without recourse to such
Subsidiary Guarantor, (e) any Indebtedness to any employee of a Subsidiary
Guarantor or the Company or any of its respective Subsidiaries, (f) any
Indebtedness of a Subsidiary Guarantor to the Company or any of its Subsidiaries
or Affiliates (including any of their respective officers or directors) or (g)
any liability for taxes owed or owing by the Subsidiary Guarantor.
"SUBSIDIARY GUARANTORS" means each Restricted Subsidiary of the Company on
the Issue Date, and each other Person who is required to become a Subsidiary
Guarantor by the terms of the Indenture after the Issue Date (or whom the
Company otherwise causes to become a Subsidiary Guarantor).
"UNRESTRICTED SUBSIDIARY" means (i) any Subsidiary that at the time of
determination shall be designated an Unrestricted Subsidiary by the Board of
Directors of the Company in the manner provided below and (ii) any Subsidiary of
an Unrestricted Subsidiary. Initially, BSM is designated an Unrestricted
Subsidiary. The Board of Directors of the Company may designate any Restricted
Subsidiary to be an Unrestricted Subsidiary, and any such designation shall be
deemed to be a Restricted Investment at the time of and immediately upon such
designation by the Company and its Restricted Subsidiaries in the amount of the
Consolidated Net Worth of such designated Subsidiary and its consolidated
Subsidiaries at such time; PROVIDED that such designation shall be permitted
only if (A) the Company and its Restricted Subsidiaries would be able to make
the Restricted Investment deemed made pursuant to such designation at such time,
(B) no portion of the Indebtedness or any other obligation (contingent or
otherwise) of such Subsidiary (x) is Guaranteed by the Company or any Restricted
Subsidiary, (y) is recourse to the Company or any Restricted Subsidiary or (z)
subjects any property or asset of the Company or any Restricted Subsidiary,
directly or indirectly, contingently or otherwise, to the satisfaction thereof
and (C) no default or event of default with respect to any Indebtedness of such
Subsidiary would permit any holder of any Indebtedness of the Company or any
Restricted Subsidiary (other than the Notes) to declare such Indebtedness of the
Company or any Restricted Subsidiary due and payable prior to its maturity. The
Board of Directors of the Company may designate any Unrestricted Subsidiary to
be a Restricted Subsidiary, and any such designation shall be deemed to be an
incurrence by the Company and its Subsidiaries of the Indebtedness (if any) of
such Subsidiary so designated for purposes of the "--Limitations on Additional
Indebtedness" covenant as of the date of such designation; PROVIDED that such
designation shall be permitted only if immediately after giving effect to such
designation and the incurrence of any such additional Indebtedness deemed
101
<PAGE>
to have been incurred thereby (x) the Company would meet the Coverage Ratio
Incurrence Condition and (y) no Default shall be continuing. Any such
designation by the Board of Directors described in the two preceding sentences
shall be evidenced to the Trustee by the filing with the Trustee of a certified
copy of the Board Resolution giving effect to such designation and an Officer's
Certificate certifying that such designation complied with the foregoing
conditions and setting forth the underlying calculations of such certificate.
If, at any time after being designated as such, any Unrestricted Subsidiary
fails to meet any of the requirements of the proviso of the second sentence of
this definition, it shall thereafter cease to be an Unrestricted Subsidiary for
purposes of the Indenture, such Subsidiary shall be deemed to have been acquired
on such date and any Indebtedness or Preferred Stock of and Investments made by
such Subsidiary shall be deemed to be incurred or acquired by a Restricted
Subsidiary as of such date (and, if such Indebtedness, Preferred Stock or
Investments are not permitted to be incurred, issued or acquired as of such date
under any of the covenants described under the caption "Covenants--Limitations
on Additional Indebtedness," "Limitation on Issuance of Subsidiary Preferred
Stock" or "--Limitations on Restricted Payments," as applicable, the Company
shall be in default of such covenant).
"VOTING STOCK" with respect to any Person, means securities of any class of
Capital Stock of such Person entitling the holders thereof (whether at all times
or only so long as no senior class of stock or other relevant equity interest
has voting power by reason of any contingency) to vote in the election of
members of the board of directors of such Person.
"WEIGHTED AVERAGE LIFE TO MATURITY" when applied to any Indebtedness at any
date, means 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 payment of principal, including
payment at final maturity, in respect thereof by (b) the number of years
(calculated to the nearest one-twelfth) that will elapse between such date and
the making of such payment by (ii) the then outstanding principal amount of such
Indebtedness.
"WHOLLY-OWNED RESTRICTED SUBSIDIARY" means a Restricted Subsidiary of which
100% of the Capital Stock (except for directors' qualifying shares or certain
minority interests owned by other Persons solely due to local law requirements
that there be more than one stockholder, but which interest is not in excess of
what is required for such purpose) is owned directly by the Company or through
one or more Wholly-Owned Restricted Subsidiaries.
102
<PAGE>
U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following is a discussion of material United States federal income tax
consequences relevant to the exchange of Series A notes for Series B notes. The
U.S. federal income tax considerations discussed below are based upon currently
existing provisions of the Internal Revenue Code of 1986, applicable Treasury
Regulations, judicial authority and current administrative rulings and
pronouncements of the IRS. We can give you no assurance that the IRS will not
take a contrary view, and we have not asked, and do not intend to ask, for a
ruling from the IRS on these issues. Legislative, judicial or administrative
changes or interpretations may be forthcoming that could alter or modify the
statements and conclusions made below. Any changes or interpretations may or may
not be retroactive and could affect the tax consequences discussed below. The
description below does not consider the effect of any applicable foreign, state,
local or other tax laws or estate of gift tax considerations.
BECAUSE INDIVIDUAL CIRCUMSTANCES MAY DIFFER, EACH HOLDER OF THE NOTES IS
STRONGLY URGED TO CONSULT HIS OR HER OWN TAX ADVISOR WITH RESPECT TO HIS OR HER
PARTICULAR TAX SITUATION AND AS TO ANY FEDERAL, FOREIGN, STATE, LOCAL OR OTHER
TAX CONSIDERATIONS (INCLUDING ANY POSSIBLE CHANGES IN TAX LAW) AFFECTING THE
PURCHASE, HOLDING AND DISPOSITION OF THE NOTES.
The exchange of Series A notes for Series B notes in the exchange offer
should not constitute a sale or an exchange for federal income tax purposes.
Accordingly, this exchange should have no federal income tax consequences to
you. You should have a basis in the Series B notes equal to the basis of your
Series A notes and your holding period for the Series B notes should include the
period during which you held your Series A notes.
A holder who does not tender his Series A notes will not recognize any gain
or loss for federal income tax purposes from the exchange offer.
103
<PAGE>
PLAN OF DISTRIBUTION
Based on an interpretation by the staff of the SEC provided in no action
letters issued to third parties in similar transactions, we believe that Series
B notes issued in the exchange offer in exchange for Series A notes may be
offered for resale, resold or otherwise transferred by holders, other than any
holder that is our "affiliate" within the meaning of Rule 405 under the
Securities Act, without compliance with the registration and prospectus delivery
provisions of the Securities Act. This applies, however, only if Series B notes
are acquired in the ordinary course of the holders' business and the holders
have no arrangement with any person to participate in the distribution of the
Series B notes. We refer you to the "Morgan Stanley & Co. Inc." SEC No-Action
Letter available June 5, 1991, "Exxon Capital Holdings Corporation" SEC
No-Action Letter available May 13, 1988 and "Shearman & Sterling" SEC No-Action
Letter available July 2, 1993 for support of our belief.
Each broker-dealer that receives Series B notes for its own account in the
exchange offer must acknowledge that it will deliver a prospectus with any
resale of the Series B notes. This prospectus may be used by a broker-dealer in
connection with resales of Series B notes received in exchange for Series A
notes where the Series A notes were acquired as a result of market-making
activities or other trading activities. We have agreed that, for a period of 180
days after the exchange offer begins, we will make this prospectus, as amended
or supplemented, available to any broker-dealer for use in connection with any
such resale. In addition, until , 1999, all dealers effecting
transactions in the Series B notes may be required to deliver this prospectus.
Series B notes received by a broker-dealer for its own accounts in 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 of the Series B notes or a combination of these methods of resale, at
market prices prevailing at the time of resale, at prices related to the
prevailing market prices or negotiated prices. Any resale may be made directly
to purchasers or to or through brokers or dealers who my receive compensation in
the form of commissions or concessions from any such broker-dealer or the
purchasers of any of the Series B notes. Any broker-dealer that resells Series B
notes that were received by it for its own account and any broker or dealer that
participates in a distribution of Series B notes may be deemed to be an
underwriter within the Securities Act, and any profit on any resale of Series B
notes, commissions or concessions received by any of these persons may be
underwriting compensation under the Securities Act.
The letter of transmittal states that by acknowledging that it will deliver
and by delivering a prospectus meeting the requirements of the Securities Act, a
broker-dealer will not be admitting that it is an underwriter within the meaning
of the Securities Act.
We have agreed to pay all expenses incident to the exchange offer, including
the expenses of one counsel for the holders of the Series A notes, other than
commissions or concessions of any broker-dealers. We have agreed to indemnify
holders of the notes, including any broker-dealers, against some liabilities,
including some liabilities under the Securities Act.
104
<PAGE>
LEGAL MATTERS
The validity of the Notes offered hereby is being passed upon for us by
Gardere & Wynne, L.L.P., Dallas, Texas. Partners of Gardere & Wynne, L.L.P., who
participated in the preparation of this prospectus beneficially own 16,000
shares of our common stock.
EXPERTS
The (1) consolidated financial statements and related financial statement
schedule of NCI Building Systems, Inc. as of October 31, 1998 and 1997, and for
each of the three years in the period ended October 31, 1998, and (2)
consolidated financial statements of Amatek Holdings, Inc. and subsidiaries as
of December 31, 1997 and 1996, and for each of the three years in the period
ended December 31, 1997, appearing or incorporated by reference in this
prospectus and registration statement have been audited by Ernst & Young LLP,
independent auditors, as set forth in their reports thereon appearing elsewhere
or incorporated by reference herein, and are included in reliance upon such
reports given upon the authority of such firm as experts in accounting and
auditing.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document we file at the
SEC's public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549,
as well as at public reference rooms in New York, New York and Chicago,
Illinois. Please call the SEC at 1-800-SEC-0330 for further information on the
public reference rooms. Our SEC filings are also available to the public from
the SEC's Website at "http://www.sec.gov."
We have filed with the SEC a registration statement on Form S-4 to register
the Series B notes. This prospectus is part of the registration statement. This
prospectus does not include all the information contained in the registration
statement. For further information about us and the Series B notes, you should
review the registration statement. You can inspect or copy the registration
statement, at prescribed rates, at the SEC's public facilities or obtain a copy
from the SEC's Website.
The SEC allows us to "incorporate by reference" the information we file with
them, which means that we can disclose important information to you by referring
you to those documents. The information incorporated by reference is considered
to be part of this prospectus, and information that we file later with the SEC
will automatically update and supersede this information. We incorporate by
reference the documents listed below and any future filings we will make with
the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act:
(1) our Annual Report on Form 10-K for the fiscal year ended October 31,
1998, including the information required by Item 402 (executive
compensation) and Item 404 (certain relationships and related transactions)
from our Proxy Statement dated February 2, 1999, filed in definitive form on
February 1, 1999;
(2) our Quarterly Report on Form 10-Q for the fiscal quarter ended
January 31, 1999;
(3) our Current Report on Form 8-K relating to the proposed offering of
the Series A notes and filed with the SEC on April 30, 1999;
(4) our Current Report on Form 8-K relating to the completion of the
offering of the Series A notes and filed with the SEC on May 10, 1999;
(5) the description of our capital stock contained in our Registration
Statement on Form 8-A filed with the SEC on July 20, 1998; and
105
<PAGE>
(6) the description of our preferred stock purchase rights contained in
our Registration Statement on Form 8-A filed with the SEC on July 20, 1998.
You may request a copy of these filings, at no cost, by writing or
telephoning Robert J. Medlock, our Executive Vice President and Chief Financial
Officer, at the following address:
NCI Building Systems, Inc.
7301 Fairview
Houston, TX 77041
(713) 466-7788
106
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Consolidated Financial Statements of NCI:
Report of Ernst & Young LLP.............................................................................. F-2
Consolidated Balance Sheets--October 31, 1997 and 1998, and January 31, 1999 (Unaudited)................. F-3
Consolidated Statements of Income--Years Ended October 31, 1996, 1997 and 1998, and for the Three Months
Ended January 31, 1998 and 1999 (Unaudited)............................................................ F-4
Consolidated Statements of Shareholders' Equity--Years Ended October 31, 1996, 1997 and 1998, and for the
Three Months Ended January 31, 1999 (Unaudited)........................................................ F-5
Consolidated Statements of Cash Flows--Years Ended October 31, 1996, 1997 and 1998, and for the Three
Months Ended January 31, 1998 and 1999 (Unaudited)..................................................... F-6
Notes to Consolidated Financial Statements............................................................... F-7
Consolidated Financial Statements of Amatek:
Report of Ernst & Young LLP.............................................................................. F-18
Consolidated Balance Sheets--December 31, 1996 and 1997, and March 31, 1998 (Unaudited).................. F-19
Consolidated Statements of Operations--Years Ended December 31, 1995, 1996 and 1997, and for the Three
Months Ended March 31, 1997 and 1998 (Unaudited)....................................................... F-20
Consolidated Statements of Cash Flows--Years Ended December 31, 1995, 1996 and 1997, and for the Three
Months Ended March 31, 1997 and 1998 (Unaudited)....................................................... F-21
Consolidated Statements of Shareholder's Equity--Years Ended December 31, 1995, 1996 and 1997, and for
the Three Months Ended March 31, 1998 (Unaudited)...................................................... F-22
Notes to Consolidated Financial Statements............................................................... F-23
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
NCI Building Systems, Inc.
We have audited the accompanying consolidated balance sheets of NCI Building
Systems, Inc. as of October 31, 1998 and 1997, and the related consolidated
statements of income, shareholders' equity and cash flows for each of the three
years in the period ended October 31, 1998. 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 NCI Building
Systems, Inc. at October 31, 1998 and 1997 and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
October 31, 1998, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Houston, Texas
December 8, 1998
F-2
<PAGE>
NCI BUILDING SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
OCTOBER 31,
-------------------- JANUARY 31,
1997 1998 1999
--------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................................. $ 32,166 $ 4,599 $ 4,687
Accounts receivable, net................................... 47,006 99,261 89,836
Inventories................................................ 37,381 78,001 89,058
Deferred income taxes...................................... 3,463 6,495 6,867
Prepaid expenses........................................... 942 4,214 4,899
--------- --------- -----------
Total current assets....................................... 120,958 192,570 195,347
Property, plant and equipment, net........................... 51,223 179,500 186,318
Excess of cost over fair value of acquired net assets........ 21,072 413,288 404,548
Other assets, primarily investment in joint ventures......... 3,079 38,179 39,678
--------- --------- -----------
Total assets................................................. $ 196,332 $ 823,537 $ 825,891
--------- --------- -----------
--------- --------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt.......................... $ 47 $ 31,297 $ 31,297
Accounts payable........................................... 23,921 62,694 60,422
Accrued compensation and benefits.......................... 9,688 16,261 7,629
Other accrued expense...................................... 10,556 23,925 24,119
--------- --------- -----------
Total current liabilities.................................. 44,212 134,177 123,467
Long-term debt, noncurrent portion........................... 1,679 444,477 445,364
Deferred income taxes........................................ 2,626 21,271 21,389
Contingencies
Shareholders' equity:
Preferred stock, $1 par value, 1,000 shares authorized,
none outstanding......................................... -- -- --
Common Stock, $.01 par value, 50,000 shares authorized,
8,126, 18,064 shares and 18,363 issued and outstanding,
respectively............................................. 82 181 184
Additional paid-in capital................................. 51,109 89,489 94,120
Retained earnings.......................................... 96,624 133,942 141,367
--------- --------- -----------
Total shareholders' equity................................. 147,815 223,612 235,671
--------- --------- -----------
Total liabilities and shareholders' equity................... $ 196,332 $ 823,537 $ 825,891
--------- --------- -----------
--------- --------- -----------
</TABLE>
See Independent Auditor's Report and
Accompanying Notes to the Consolidated Financial Statements.
F-3
<PAGE>
NCI BUILDING SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
OCTOBER 31, JANUARY 31,
---------------------------------- ---------------------
1996 1997 1998 1998 1999
---------- ---------- ---------- --------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Sales................................................. $ 332,880 $ 407,751 $ 675,331 $ 97,323 $ 214,347
Cost of sales......................................... 241,374 299,407 497,862 71,886 160,070
---------- ---------- ---------- --------- ----------
Gross profit........................................ 91,506 108,344 177,469 25,437 54,277
---------- ---------- ---------- --------- ----------
Operating expenses.................................... 53,095 66,055 94,040 16,641 32,070
Nonrecurring acquisition expenses..................... -- -- 2,060 -- --
---------- ---------- ---------- --------- ----------
Income from operations.............................. 38,411 42,289 81,369 8,796 22,207
Interest expense...................................... (108) (163) (20,756) (47) (9,751)
Other income.......................................... 1,586 1,999 499 699 670
Joint venture income.................................. -- -- 737 -- 20
---------- ---------- ---------- --------- ----------
Income before income taxes.......................... 39,889 44,125 61,849 9,448 13,146
---------- ---------- ---------- --------- ----------
Provision (benefit) for income taxes
Current............................................. 15,898 15,920 16,573 3,552 5,975
Deferred............................................ (822) 318 7,958 (156) (254)
---------- ---------- ---------- --------- ----------
Total income tax...................................... 15,076 16,238 24,531 3,396 5,721
---------- ---------- ---------- --------- ----------
Net income............................................ $ 24,813 $ 27,887 $ 37,318 $ 6,052 $ 7,425
---------- ---------- ---------- --------- ----------
---------- ---------- ---------- --------- ----------
Net income per common and common equivalent
share--Basic........................................ $ 1.60 $ 1.73 $ 2.17 $ .37 $ .41
---------- ---------- ---------- --------- ----------
---------- ---------- ---------- --------- ----------
Net income per common and common equivalent
share--Diluted...................................... $ 1.51 $ 1.64 $ 2.05 $ .35 $ .39
---------- ---------- ---------- --------- ----------
---------- ---------- ---------- --------- ----------
</TABLE>
See Independent Auditor's Report and
Accompanying Notes to the Consolidated Financial Statements.
F-4
<PAGE>
NCI BUILDING SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN RETAINED SHAREHOLDERS'
STOCK CAPITAL EARNINGS EQUITY
----------- ----------- ---------- -------------
<S> <C> <C> <C> <C>
Balance, October 31, 1995....................................... $ 63 $ 13,696 $ 43,923 $ 57,682
Proceeds from stock offering.................................... 11 24,759 -- 24,770
Proceeds from exercise of stock options, including tax benefit
thereon....................................................... 2 2,723 -- 2,725
Shares issued for contribution to 401(k) plan................... 1 1,008 -- 1,009
Shares issued in connection with the purchase of Doors &
Building Components, Inc...................................... 3 5,172 -- 5,175
Net income...................................................... -- -- 24,814 24,814
----- ----------- ---------- -------------
Balance, October 31, 1996....................................... 80 47,358 68,737 116,175
Proceeds from exercise of stock options, including tax benefit
thereon....................................................... 1 2,234 -- 2,235
Shares issued for contribution to 401(k) plan................... 1 1,517 -- 1,518
Net income...................................................... -- -- 27,887 27,887
----- ----------- ---------- -------------
Balance, October 31, 1997....................................... 82 51,109 96,624 147,815
Proceeds from exercise of stock options, including tax benefit
thereon....................................................... 2 4,317 -- 4,319
Two for one split of common stock............................... 82 (82) -- --
Shares issued in connection with the purchase of Metal Building
Components, Inc............................................... 14 32,186 -- 32,200
Shares issued for contribution to 401(k) plan................... 1 1,959 -- 1,960
Net income...................................................... -- -- 37,318 37,318
----- ----------- ---------- -------------
Balance, October 31, 1998....................................... 181 89,489 133,942 223,612
Proceeds from exercise of stock options, including tax benefit
thereon (unaudited)........................................... 2 2,204 -- 2,206
Shares issued for contribution to 401(k) plan
(unaudited)................................................... 1 2,427 -- 2,428
Net income (unaudited).......................................... -- -- 7,425 7,425
----- ----------- ---------- -------------
Balance, January 31, 1999 (unaudited)........................... $ 184 $ 94,120 $ 141,367 $ 235,671
----- ----------- ---------- -------------
----- ----------- ---------- -------------
</TABLE>
See Independent Auditor's Report and
Accompanying Notes to the Consolidated Financial Statements.
F-5
<PAGE>
NCI BUILDING SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
OCTOBER 31, JANUARY 31,
-------------------------------- --------------------
1996 1997 1998 1998 1999
--------- --------- ---------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income.............................................. $ 24,814 $ 27,887 $ 37,318 $ 6,052 $ 7,425
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization......................... 5,791 7,876 17,818 2,205 7,034
(Gain) loss on sale of fixed assets................... 1 (3) (32) -- 54
Provision for doubtful accounts....................... 681 1,223 2,625 282 985
Deferred income tax (benefit) provision............... (822) 318 7,958 (15) (254)
Changes in current assets and liability accounts, net of
effects of acquisitions:
(Increase) in accounts, notes and other receivables... (9,857) (10,481) (3,663) 8,219 8,441
(Increase) decrease in inventories.................... (4,521) (5,552) 9,951 (6,410) (11,058)
(Increase) decrease in prepaid expenses............... (35) (625) 109 11 (684)
Increase in accounts payable.......................... 3,043 2,394 24,189 (8,155) (2,272)
Increase in accrued expenses.......................... 5,446 5,579 13,772 (1,013) 167
--------- --------- ---------- --------- ---------
Net cash provided by operating activities........... 24,541 28,616 110,045 1,176 9,838
--------- --------- ---------- --------- ---------
Cash flows from investing activities:
Proceeds from the sale of fixed assets.................. 115 25 98 12 890
Acquisition of Mesco Metal Buildings.................... (20,631) -- -- -- --
Acquisition of Doors & Building Components Inc.......... (11,000) -- -- -- --
Acquisition of Carlisle Engineered Metals, Inc.......... (2,840) (6,230) -- -- --
Acquisition of Metal Building Components, Inc........... -- -- (553,510) -- --
Acquisition of California Finished Metals, Inc.......... -- -- (15,458) -- --
(Increase) decrease of other noncurrent assets.......... (1,988) (1,147) (24,450) (658) (891)
Capital expenditures.................................... (10,319) (11,332) (20,834) (2,135) (11,165)
--------- --------- ---------- --------- ---------
Net cash provided by (used in) investing activities..... (46,663) (18,684) (614,154) (2,781) (11,166)
--------- --------- ---------- --------- ---------
Cash flows from financing activities:
Net proceeds from sale of stock......................... 24,770 -- -- -- --
Exercise of stock options............................... 750 1,340 2,494 165 529
Borrowings on line of credit and notes.................. -- -- 592,700 -- 77,500
Principal payments on long-term debt, line of credit and
notes payable......................................... (85) (50) (118,652) (13) (76,613)
--------- --------- ---------- --------- ---------
Net cash provided by (used in) financial activities....... 25,435 1,290 476,542 152 1,416
--------- --------- ---------- --------- ---------
Net increase (decrease) in cash........................... 3,313 11,222 (27,567) (1,453) 88
Cash at beginning of period............................... 17,631 20,944 32,166 32,166 4,599
--------- --------- ---------- --------- ---------
Cash at end of period..................................... $ 20,944 $ 32,166 $ 4,599 $ 30,713 $ 4,687
--------- --------- ---------- --------- ---------
--------- --------- ---------- --------- ---------
</TABLE>
See Independent Auditor's Report and
Accompanying Notes to the Consolidated Financial Statements.
F-6
<PAGE>
NCI BUILDING SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION PRESENTED FOR THE THREE MONTH PERIODS ENDED JANUARY 31, 1998 AND
1999 IS UNAUDITED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) REPORTING ENTITY
These financial statements include the operations and activities of NCI
Building Systems, Inc. and its wholly-owned subsidiaries (Company) after the
elimination of all material intercompany accounts and balances. The Company
designs, manufactures and markets engineered building systems and components for
commercial, industrial, agricultural and community service use. The Company
recognizes revenues as jobs are shipped or as services are performed.
Certain prior year amounts have been reclassified to conform with the
current year presentation.
(B) ACCOUNTS RECEIVABLE
The Company reports accounts receivable net of the allowance for doubtful
accounts of $3,802,000, $1,498,000 and $2,321,000 at January 31, 1999, October
31, 1997 and 1998, respectively. Trade accounts receivable are the result of
sales of building systems and components to customers throughout the United
States and affiliated territories including international builders who resell to
end users. Although the Company's sales historically have been concentrated in
Texas and surrounding states, in recent years it has been expanding its
authorized builder organization and customer base into the midwestern states
and, to a lesser extent, into south central, southeastern and coastal states.
All sales are denominated in United States dollars. Credit sales do not normally
require a pledge of collateral; however, various types of liens may be filed to
enhance the collection process.
(C) INVENTORIES
Inventories are stated at the lower of cost or market value, using specific
identification or the weighted-average method for steel coils and other raw
materials. A summary of inventories follows (in thousands):
<TABLE>
<CAPTION>
OCTOBER 31,
-------------------- JANUARY 31,
1997 1998 1999
--------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Raw materials.......................................... $ 28,943 $ 55,190 $ 69,221
Work-in-process and finished goods..................... 8,438 22,811 19,837
--------- --------- -----------
$ 37,381 $ 78,001 $ 89,058
--------- --------- -----------
--------- --------- -----------
</TABLE>
(D) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost and depreciated over their
estimated useful lives. Depreciation is computed using the straight-line method
for financial reporting purposes and both straight-line and accelerated methods
for income tax purposes. Depreciation expense for the three
F-7
<PAGE>
NCI BUILDING SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION PRESENTED FOR THE THREE MONTH PERIODS ENDED JANUARY 31, 1998 AND
1999 IS UNAUDITED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
months ended January 31, 1999 and the years ended October 31, 1996, 1997 and
1998 was $7,034,000, $4,236,000, $5,893,000 and $9,970,000, respectively.
<TABLE>
<CAPTION>
OCTOBER 31,
----------------------- JANUARY 31,
1997 1998 1999
----------- ---------- -----------
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C>
Land.............................................................. $ 3,969 $ 11,184 $ 11,870
Buildings and improvements........................................ 23,600 74,510 74,484
Machinery, equipment and furniture................................ 41,393 112,013 120,887
Transportation equipment.......................................... 1,089 4,711 4,537
Computer software................................................. 481 5,753 6,352
----------- ---------- -----------
70,532 208,171 218,130
Less accumulated depreciation..................................... (19,309) (28,671) (31,812)
----------- ---------- -----------
$ 51,223 $ 179,500 $ 186,318
----------- ---------- -----------
----------- ---------- -----------
</TABLE>
<TABLE>
<S> <C>
Estimated useful lives for depreciation are:
10-40
Buildings and improvements.............................................. years
Machinery, equipment and furniture...................................... 5-13 years
Transportation equipment................................................ 3-10 years
Computer software....................................................... 5 years
</TABLE>
(E) STATEMENT OF CASH FLOWS
For purposes of the cash flows statement, the Company considers all highly
liquid investments with an original maturity date of three months or less to be
cash equivalents. Total interest paid for the three months ended January 31,
1999 and the years ended October 31, 1996, 1997 and 1998 was $9,751,000,
$108,000, $163,000 and $16,733,000, respectively. Income taxes paid, net of
refunds received, for the three months ended January 31, 1999 and the years
ended October 31, 1996, 1997 and 1998 was $72,966, $12,638,000, $15,676,000 and
$19,915,000, respectively. Non-cash investing or financing activities included:
$2,428,000 for the 1998 contribution for the 401(k) plan which was paid in
common stock in 1999, $1,960,000 for the 1997 contribution for the 401(k) plan
which was paid in common stock in 1998, $1,518,000 for the 1996 contribution for
the 401(k) plan which was paid in common stock in 1997 and common stock valued
at $32.2 million paid in connection with the acquisition of MBCI, as discussed
at Note 11.
(F) EXCESS OF COST OVER FAIR VALUE OF ACQUIRED NET ASSETS
Excess of cost over fair value of acquired net assets is amortized on a
straight-line basis over fifteen to forty years. Accumulated amortization as of
January 31, 1999 was $12,762,000, October 31, 1998 was $9,788,000 and $3,042,000
as of October 31, 1997. The carrying value of goodwill is reviewed if the facts
and circumstances suggest that it may be impaired. If this review indicates that
goodwill will not be recoverable, as determined based on the undiscounted cash
flows of the entity acquired over the
F-8
<PAGE>
NCI BUILDING SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION PRESENTED FOR THE THREE MONTH PERIODS ENDED JANUARY 31, 1998 AND
1999 IS UNAUDITED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
remaining amortization period, the Company's carrying value of the goodwill
would be reduced by the estimated shortfall of cash flows.
(G) USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(H) ADVERTISING COSTS
Advertising costs are expensed as incurred. Advertising expense was
$857,000, $1,267,000, $1,416,000 and $2,301,000 for the three months ended
January 31, 1999 and for the three years ended October 31, 1996, 1997 and 1998,
respectively.
(I) LONG-LIVED ASSETS
Impairment losses are recognized when indicators of impairment are present
and the estimated undiscounted cash flows are not sufficient to recover the
assets carrying amount. Assets held for disposal are measured at the lower of
carrying value or estimated fair value, less costs to sell.
(J) STOCK-BASED COMPENSATION
The Company uses the intrinsic value method in accounting for its
stock-based employee compensation plans.
(K) COMPREHENSIVE INCOME
During the third quarter of fiscal 1998, the Company adopted Financial
Accounting Standards Board (FASB) Statement No. 130, REPORTING COMPREHENSIVE
INCOME. Statement 130 establishes new rules for the reporting and display of
comprehensive income and its components. Certain items which were previously
required to be reported separately in shareholder's equity, such as unrealized
gains or loses on available-for-sale securities, minimum pension liability
adjustments and foreign currency translation adjustments, are now required to be
included in other comprehensive income. For the three months ended January 31,
1999 and for fiscal 1996, 1997 and 1998 the Company's comprehensive income was
the same as net income, and the adoption of this statement had no impact on the
presentation of the financial statements.
(L) PENDING ACCOUNTING CHANGES
In June 1997, the FASB issued Statement No. 131, DISCLOSURES ABOUT SEGMENTS
OF AN ENTERPRISE AND RELATED INFORMATION, which establishes new standards for
reporting information about operating segments in both annual and interim
financial statements. It also establishes standards for related disclosures
about products and services, geographic areas and major customers. The Statement
is
F-9
<PAGE>
NCI BUILDING SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION PRESENTED FOR THE THREE MONTH PERIODS ENDED JANUARY 31, 1998 AND
1999 IS UNAUDITED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
effective for the Company's fiscal year ending October 31, 1999. Management has
not completed its review of Statement 131.
(2) LONG-TERM DEBT
<TABLE>
<CAPTION>
OCTOBER 31,
-------------------- JANUARY 31,
1997 1998 1999
--------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Five-year revolving credit line with a bank bearing
interest at a rate of 30-day LIBOR plus 1.75% (7.0%
at January 31, 1999), maturing on July 1, 2003....... $ -- $ 141,600 $ 150,000
Five-year term loan payable to a bank bearing interest
at a rate of 90-day LIBOR plus 1.75% (7.6% at January
31, 1999), repayable beginning on October 31, 1998,
in quarterly payments beginning with $7.5 million and
gradually increasing to $12.5 million on the maturity
date, July 1, 2003................................... -- 192,500 185,000
364-day revolving credit facility with a bank bearing
interest at a rate of 30-day LIBOR plus 1.75% (7.0%
at January 31, 1999) maturing on May 3, 1999......... -- 140,000 140,000
Note payable to employee bearing interest at 7%
maturing April 1, 2001, with an option to convert
into common stock at $14.96 per share................ 1,500 1,500 1,500
Other.................................................. 226 174 161
--------- --------- -----------
1,726 475,774 476,661
Current portion of long-term debt...................... (47) (31,297) (31,297)
--------- --------- -----------
$ 1,679 $ 444,477 $ 445,364
--------- --------- -----------
--------- --------- -----------
</TABLE>
Aggregate required principal reductions as of October 31, 1998 are as
follows:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
- ----------------------------------------------------------------------------------
(IN THOUSANDS)
<S> <C>
1999.............................................................................. $ 31,297
2000.............................................................................. 36,305
2001.............................................................................. 42,807
2002.............................................................................. 46,260
2003.............................................................................. 319,105
----------
$ 475,774
----------
----------
</TABLE>
F-10
<PAGE>
NCI BUILDING SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION PRESENTED FOR THE THREE MONTH PERIODS ENDED JANUARY 31, 1998 AND
1999 IS UNAUDITED)
(2) LONG-TERM DEBT (CONTINUED)
The Company has a $600.0 million senior credit facility from a bank, which
consists of (i) a five-year revolving credit facility of up to $200.0 million,
of which up to $20.0 million may be utilized in the form of commercial and
standby letters of credit, (ii) a five-year term loan facility in the principal
amount of $200.0 million and (iii) a 364-day revolving credit facility of up to
$200.0 million. On May 4, 1998, the Company borrowed $140.0 million under the
five-year revolver, $200.0 million under the five-year loan and $200.0 million
under the 364-day revolver to fund the MBCI acquisition. Loans and letters of
credit under the five-year revolver will be available, and amounts repaid may be
reborrowed, at any time until July 2003, subject to the fulfillment of certain
conditions precedent, including the absence of default under the senior credit
facility. The term loan was fully drawn down as of the acquisition date, and any
amounts repaid may not be reborrowed. The Company's obligations under the senior
credit facility are secured by the pledge of all capital stock, partnership
interests and other equity interests of the Company's subsidiaries. All
obligations are also guaranteed by each of the Company's corporate subsidiaries
and operating limited partnerships. The senior credit facility contains
customary financial and restrictive covenants with amounts and ratios negotiated
between the Company and the lender.
The Company has an interest rate swap agreement in place which caps interest
on LIBOR loans at 5.9% plus the applicable LIBOR margin for the principal amount
of the term loan which was $185.0 million at January 31, 1999. The estimated
fair value of the swap transactions as of October 31, 1998 was not significant.
If the 364-day revolving credit facility is not repaid by the Company or
extended by the lenders, the Company has the option to convert it to a
three-year term note. The Company is required to make mandatory prepayments on
the senior credit facility upon the occurrence of certain events, including the
sale of assets and the issuance and sale of equity securities, in each case
subject to certain limitations.
The carrying amount of the Company's long-term debt approximates its fair
value.
(3) RELATED PARTY TRANSACTIONS
During the three months ended January 31, 1999 and in the years ended
October 31, 1996, 1997 and 1998, the Company purchased $449,000, $1,417,000,
$1,869,000 and $1,862,000, respectively, of materials from a related party under
arm's length transactions.
(4) INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.
F-11
<PAGE>
NCI BUILDING SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION PRESENTED FOR THE THREE MONTH PERIODS ENDED JANUARY 31, 1998 AND
1999 IS UNAUDITED)
(4) INCOME TAXES (CONTINUED)
Taxes on income from continuing operations consist of the following:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED OCTOBER 31, JANUARY 31,
------------------------------- --------------------
1996 1997 1998 1998 1999
--------- --------- --------- --------- ---------
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Current:
Federal.......................................... $ 14,530 $ 15,478 $ 15,371 $ 3,405 $ 5,560
State............................................ 1,368 442 1,202 147 415
--------- --------- --------- --------- ---------
Total current...................................... 15,898 15,920 16,573 3,552 5,975
Deferred:
Federal.......................................... (745) 304 7,292 (150) (233)
State............................................ (77) 14 666 (6) (21)
--------- --------- --------- --------- ---------
Total deferred..................................... (822) 318 7,958 (156) (254)
--------- --------- --------- --------- ---------
Total provision.................................... $ 15,076 $ 16,238 $ 24,531 $ 3,396 $ 5,721
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
The reconciliation of income tax computed at the United States federal
statutory tax rate to the effective income tax rate is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED OCTOBER 31, JANUARY 31,
------------------------------- --------------------
1996 1997 1998 1998 1999
--------- --------- --------- --------- ---------
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Statutory federal income tax rate....................... 35.0% 35.0% 35.0% 35.0% 35.0%
Non-deductible goodwill amortization.................... -- -- 2.7 0.0 6.4
State income taxes...................................... 2.4 1.2 2.1 1.0 2.0
Other................................................... 0.4 0.6 (0.1) (0.1) 0.1
--- --- --- --- ---
Effective tax rate.................................... 37.8% 36.8% 39.7% 35.9% 43.5%
--- --- --- --- ---
--- --- --- --- ---
</TABLE>
F-12
<PAGE>
NCI BUILDING SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION PRESENTED FOR THE THREE MONTH PERIODS ENDED JANUARY 31, 1998 AND
1999 IS UNAUDITED)
(4) INCOME TAXES (CONTINUED)
Significant components of the Company's deferred tax liabilities and assets
are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS
OCTOBER 31, ENDED
-------------------- JANUARY 31,
1997 1998 1999
--------- --------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Deferred tax assets
Inventory......................................... $ 1,632 $ 1,968 $ 1,964
Bad debt reserve.................................. 527 1,446 1,706
Accrued insurance reserves........................ 595 1,258 1,467
Deferred compensation............................. -- 711 711
Other reserves.................................... 709 1,112 1,019
--------- --------- -------------
Total deferred tax assets........................... 3,463 6,495 6,867
--------- --------- -------------
Deferred tax liabilities
Depreciation and amortization..................... 1,675 18,327 18,697
Other............................................. 951 2,944 2,692
--------- --------- -------------
Total deferred tax liabilities...................... $ 2,626 $ 21,271 $ 21,389
--------- --------- -------------
Net deferred tax asset (liability).................. $ 837 $ (14,776) $ (14,522)
--------- --------- -------------
--------- --------- -------------
</TABLE>
(5) OPERATING LEASE COMMITMENTS
Total rental expense incurred from operating non-cancelable leases for the
three months ended January 31, 1999 and for the years ended October 31, 1996,
1997 and 1998 was $1,569,000, $3,990,000, $4,644,000 and $5,527,000,
respectively.
Aggregate minimum required annual payments on long-term operating leases at
October 31, 1998 were as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
- -------------------------------------------------------------------------------------
<S> <C>
1999................................................................................. $ 2,319
2000................................................................................. 1,184
2001................................................................................. 634
2002................................................................................. 314
2003................................................................................. 58
---------
$ 4,509
---------
---------
</TABLE>
(6) SHAREHOLDERS' RIGHTS PLAN
In June 1998, the Board of Directors adopted a Shareholders' Rights Plan in
which one preferred stock purchase right (Right) was declared as a dividend for
each common share outstanding. Each Right entitles shareholders to purchase,
under certain conditions, one hundredth of a share of newly authorized Series A
Junior Participating Preferred Stock at an exercise Price of $125. Rights will
be
F-13
<PAGE>
NCI BUILDING SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION PRESENTED FOR THE THREE MONTH PERIODS ENDED JANUARY 31, 1998 AND
1999 IS UNAUDITED)
(6) SHAREHOLDERS' RIGHTS PLAN (CONTINUED)
exercisable only if a person or group acquires beneficial ownership of 20
percent or more of the common shares or commences a tender or exchange offer,
upon consummation of which such person or group would beneficially own 20
percent or more of the common shares. In the event that a person or group
acquires 20 percent or more of the common shares, the Rights enable dilution of
the acquiring person's or group's interest by providing for a 50 percent
discount on the purchase of common shares by the non-controlling shareholders.
The company will generally be entitled to redeem the Rights at $0.01 per Right
at any time before a person or group acquires 20 percent or more of the common
shares. Rights will expire on June 24, 2008, unless earlier exercised, redeemed
or exchanged.
(7) COMMON STOCK
In June 1998, the Company's Board of Directors approved a two-for-one split
of the Common Stock effective for stockholders of record on July 8, 1998. Share
and per share amounts have been restated to reflect the stock split. The Board
of Directors has approved a non-statutory employee stock option plan. This plan
includes the future granting of stock options to purchase up to 4,100,000 shares
as an incentive and reward for key management personnel. Options expire ten
years from date of grant. The right to acquire the option shares is earned in
25% increments over the first four years of the option period. Stock option
transactions during 1996, 1997 and 1998 are as follows (in thousands, except per
share amounts):
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
NUMBER EXERCISE
OF SHARES PRICE
----------- -------------
<S> <C> <C>
Balance, October 31, 1995..................................................... 1,524 $ 3.36
Granted..................................................................... 630 12.75
Canceled.................................................................... (46) (9.83)
Exercised................................................................... (492) (1.52)
----- -------------
Balance, October 31, 1996..................................................... 1,616 7.39
Granted..................................................................... 314 15.23
Canceled.................................................................... (10) (12.09)
Exercised................................................................... (211) (6.34)
----- -------------
Balance, October 31, 1997..................................................... 1,709 8.94
Granted..................................................................... 517 23.65
Canceled.................................................................... (22) (14.56)
Exercised................................................................... (313) (7.98)
----- -------------
Balance, October 31, 1998..................................................... 1,891 $ 13.06
----- -------------
----- -------------
</TABLE>
Options exercisable at October 31, 1996, 1997 and 1998 were 783,000, 841,000
and 910,000, respectively. The weighted average exercise prices for options
exercisable at October 31, 1996, 1997 and 1998 were $3.00, $4.60 and $6.67.
Exercise prices for options outstanding at October 31, 1998 range from $.80 to
$27.00. The weighted average remaining contractual life of options outstanding
at October 31, 1998 is 6.7 years.
F-14
<PAGE>
NCI BUILDING SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION PRESENTED FOR THE THREE MONTH PERIODS ENDED JANUARY 31, 1998 AND
1999 IS UNAUDITED)
(7) COMMON STOCK (CONTINUED)
In accordance with the terms of APB No. 25, because the exercise price of
the Company's employee stock options equals the market price of the underlying
stock on the date of the grant, the Company records no compensation expense for
its stock option awards. As required by SFAS No. 123, the Company provides the
following disclosure of hypothetical values for these awards. The weighted
average grant-date fair value of options granted during 1996, 1997 and 1998 was
$6.53, $7.89 and $12.07, respectively. These values were estimated using the
Black-Scholes option-pricing model with the following weighted average
assumptions: no expected dividend, expected volatility of 38.1%, risk free
interest rates ranging from 5.5% to 6.7% for 1996, 6.4% to 6.9% for 1997 and
4.6% to 5.9% for 1998, and expected lives of 7 years. Had compensation expense
been recorded based on these hypothetical values, the Company's net income and
earnings per share would have been as follows (in thousands, except per share
data):
<TABLE>
<CAPTION>
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
Pro forma net income................................................... $ 24,379 $ 27,081 $ 35,887
Pro forma net income per share--Basic.................................. $ 1.57 $ 1.68 $ 2.08
Pro forma net income per share--Diluted................................ $ 1.48 $ 1.59 $ 1.98
</TABLE>
Because options vest over several years and additional options grants are
expected, the effects of these hypothetical calculations are not likely to be
representative of similar future calculations.
(8) LITIGATION
The Company is involved in certain litigation that the Company considers to
be in the normal course of business. Management of the Company believes that
such litigation will not result in any material losses.
(9) NET INCOME PER SHARE
During the first quarter of fiscal 1998, the Company adopted FASB No. 128,
EARNINGS PER SHARE, which requires the presentation of basic and diluted
earnings per share. Under this statement, the dilutive effect of stock options
is excluded from basic earnings per share, but included in the
F-15
<PAGE>
NCI BUILDING SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION PRESENTED FOR THE THREE MONTH PERIODS ENDED JANUARY 31, 1998 AND
1999 IS UNAUDITED)
(9) NET INCOME PER SHARE (CONTINUED)
computation of diluted earnings per share. Earnings per share amounts for all
periods presented have been restated. The computations are as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED OCTOBER 31, JANUARY 31,
------------------------------- --------------------
1996 1997 1998 1998 1999
--------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE (UNAUDITED)
DATA)
<S> <C> <C> <C> <C> <C>
Net income......................................... $ 24,814 $ 27,887 $ 37,318 $ 6,052 $ 7,425
Add:
Interest, net of tax, on convertible debenture
assumed converted.............................. 38 66 66 17 17
--------- --------- --------- --------- ---------
Adjusted net income................................ $ 24,852 $ 27,953 $ 37,384 $ 6,069 $ 7,442
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Weighted average common shares outstanding......... 15,499 16,127 17,212 16,325 18,168
Add: Common stock equivalents:
Stock options.................................... 898 858 880 861 833
Convertible debenture............................ 58 100 100 100 100
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Weighted average share outstanding, assuming
dilution......................................... 16,455 17,085 18,192 17,286 19,101
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Net income per share--basic........................ $ 1.60 $ 1.73 $ 2.17 $ .37 $ .41
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Net income per share--diluted...................... $ 1.51 $ 1.64 $ 2.05 $ .35 $ .39
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
(10) EMPLOYEE BENEFIT PLAN
The Company has a 401(k) profit sharing plan (the "Savings Plan") which
covers all eligible employees. The Savings Plan requires the Company to match
employee contributions up to a certain percentage of a participant's salary. No
other contributions may be made to the Savings Plan. Contributions accrued for
the Savings Plan for the year ended October 31, 1996, 1997 and 1998 were
$1,155,000, $1,604,000 and $2,219,000, respectively.
(11) ACQUISITIONS
In November 1995, the Company acquired substantially all of the assets and
assumed certain liabilities of Doors and Building Components, Inc. ("DBCI"), a
manufacturer of roll-up steel overhead doors used primarily in self-storage and
commercial/industrial applications, for approximately $12 million in cash and
600,000 shares of common stock of the Company, valued at $5.2 million. Based on
the final determination of book value of the purchased assets, the price was
reduced by approximately $2.5 million of which $1.5 million was due from the
seller and was recorded as a receivable in the October 31, 1996 balance sheet.
This amount was settled in cash in December, 1996. The acquisition was accounted
for using the purchase method of accounting. The excess of cost over fair value
of the acquired net assets recorded was $11.4 million.
F-16
<PAGE>
NCI BUILDING SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION PRESENTED FOR THE THREE MONTH PERIODS ENDED JANUARY 31, 1998 AND
1999 IS UNAUDITED)
(11) ACQUISITIONS (CONTINUED)
In April, 1996, the Company acquired substantially all of the assets and
assumed certain liabilities of Mesco Metal Buildings, a division of Anderson
Industries, Inc., a manufacturer of engineered building systems and components,
for approximately $20.8 million in cash and a $1.5 million 7% convertible
subordinated debenture due April, 2001. The acquisition was accounted for using
the purchase method of accounting. The excess of cost over fair value of the
acquired net assets recorded was $10.9 million.
On May 4, 1998, the Company acquired Metal Building Components, Inc.
("MBCI") through the purchase of all of the outstanding capital stock of Amatek
Holdings, Inc. from BTR Australia Limited, a wholly owned subsidiary of BTR plc,
for a purchase price of approximately $588.5 million, including cash of $550.0
million (plus transaction costs) and 1.4 million shares of the Company's common
stock valued at $32.2 million. MBCI designs, manufacturers, sells and
distributes metal components for commercial, industrial, architectural,
agricultural and residential construction uses. MBCI also processes its own hot
roll coil metal for use in component manufacturing, as well as processing hot
roll coil metal and toll coating light gauge metal for use by other parties in
the construction of metal building components and numerous other products. The
funds for this acquisition were provided from the proceeds of a new $600.0
million credit facility from a bank under which the Company initially borrowed
$540.0 million. The acquisition was accounted for using the purchase method of
accounting. The excess cost of over the fair value of the acquired assets was
approximately $395.1 million (which was adjusted to $389.5 million during the
first quarter of fiscal 1999), based on the preliminary purchase price
allocation, which may be adjusted upon final valuation of certain assets and
liabilities.
The consolidated results of operations for 1998 include MBCI since the date
of acquisition. Assuming the acquisition of MBCI had been consummated as at the
beginning of the respective periods presented, the pro forma unaudited results
of operations are as follows (in thousands, except per share date):
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
----------------------
1997 1998
---------- ----------
<S> <C> <C>
Sales................................................................. $ 815,718 $ 871,026
Net income............................................................ $ 31,431 $ 37,143
Net income per share--basic........................................... $ 1.79 $ 2.07
Net income per share--diluted......................................... $ 1.70 $ 1.97
</TABLE>
F-17
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Stockholder
Amatek Holdings, Inc.
We have audited the accompanying consolidated balance sheets of Amatek
Holdings, Inc. and subsidiaries (the "Company"), as of December 31, 1997, and
1996, and the related consolidated statements of operations, cash flows, and
shareholder's equity 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Amatek
Holdings, Inc. and subsidiaries as of December 31, 1997 and 1996, and the
results of their operations and their 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
Houston, Texas
August 5, 1998
F-18
<PAGE>
AMATEK HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- MARCH 31,
1996 1997 1998
--------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................................... $ 3,622 $ 7,012 $ 1,345
Accounts receivable:
Trade, net of allowance for doubtful accounts of $576, $658 and $395...... 41,942 44,599 43,162
Other..................................................................... 2,835 6,659 3,737
Inventories................................................................. 32,410 43,479 47,516
Prepaid expenses............................................................ 2,004 2,715 3,419
Income taxes receivable..................................................... -- 437 --
Deferred tax asset.......................................................... 853 1,186 1,186
--------- --------- -----------
Total current assets.......................................................... 83,666 106,087 100,365
Property, plant and equipment:
Land........................................................................ 4,390 5,916 6,227
Buildings and improvements.................................................. 31,104 40,845 41,425
Machinery and equipment..................................................... 72,381 88,354 90,283
Construction-in-progress.................................................... 11,659 8,272 7,116
--------- --------- -----------
119,534 143,387 145,051
Less accumulated depreciation............................................... (34,813) (39,252) (41,088)
--------- --------- -----------
84,721 104,135 103,963
Receivable from affiliate..................................................... 19,261 1,364 --
Investments in and advances to DOUBLECOTE..................................... 19,031 19,200 19,415
Intangible assets............................................................. 13,822 13,652 13,612
Other assets.................................................................. -- 5,325 5,871
--------- --------- -----------
Total assets................................................................ $ 220,501 $ 249,763 $ 243,226
--------- --------- -----------
--------- --------- -----------
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Accounts payable............................................................ $ 32,638 $ 18,174 $ 9,288
Accrued liabilities......................................................... 13,945 15,659 11,526
Income taxes payable........................................................ 2,544 -- 3,426
--------- --------- -----------
Total current liabilities................................................. 48,677 33,833 24,240
Deferred tax liability...................................................... 6,776 11,142 10,588
Shareholder's equity:
Common stock--par value $-0-; 119,500, 3,500, 3,500 shares issued and
outstanding at March 31, 1998, December 31, 1997 and December 31,
1996.................................................................... 2,600 2,600 182,172
Additional paid-in capital.................................................. 4,380 4,380 4,380
Retained earnings........................................................... 158,068 197,808 21,846
--------- --------- -----------
Total shareholder's equity.................................................... 165,048 204,788 208,398
--------- --------- -----------
Total liabilities and shareholder's equity.................................... $ 220,501 $ 249,763 $ 243,226
--------- --------- -----------
--------- --------- -----------
</TABLE>
See accompanying notes.
F-19
<PAGE>
AMATEK HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------------- --------------------
1995 1996 1997 1997 1998
---------- ---------- ---------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Sales................................................ $ 315,737 $ 362,867 $ 407,967 $ 82,505 $ 84,172
Cost of sales........................................ (234,042) (271,299) (312,329) (63,896) (68,864)
---------- ---------- ---------- --------- ---------
Gross profit......................................... 81,695 91,568 95,638 18,609 15,308
Selling, general and administrative expenses......... (24,900) (29,652) (36,637) (8,543) (9,598)
Equity in income (losses) of DOUBLECOTE.............. (1,293) (304) 83 (170) (161)
Interest income, net................................. 1,379 1,871 2,019 267 267
Unusual/nonrecurring gain............................ -- -- 3,284 -- --
---------- ---------- ---------- --------- ---------
Income before income taxes........................... 56,881 63,483 64,387 10,163 5,816
Provision for income taxes........................... (22,993) (24,920) (24,647) (4,096) (2,206)
---------- ---------- ---------- --------- ---------
Net income........................................... $ 33,888 $ 38,563 $ 39,740 $ 6,067 $ 3,610
---------- ---------- ---------- --------- ---------
---------- ---------- ---------- --------- ---------
</TABLE>
See accompanying notes.
F-20
<PAGE>
AMATEK HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------- --------------------
1995 1996 1997 1997 1998
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income................................................. $ 33,888 $ 38,563 $ 39,740 $ 6,067 $ 3,610
Adjustments to reconcile net income to net cash (used in)
provided by operating activities:
Depreciation and amortization............................ 4,136 5,477 6,844 1,639 2,019
Provision for deferred income taxes...................... 82 716 4,033 1,866 (554)
Provision for losses on accounts receivable.............. 71 (266) 262 1,867 (82)
Changes in operating assets and liabilities:
Increase in accounts receivable--trade................. (1,980) (5,517) (2,919) 924 1,519
Increase in other accounts receivable.................. 134 (2,326) (3,824) (1,357) 2,922
Increase in inventories................................ 5,383 (6,744) (11,069) 102 (4,037)
Increase in prepaid expenses........................... (123) (1,163) (711) 208 (704)
(Increase) decrease in other assets.................... (432) 1,018 (5,962) 84 (546)
(Decrease) increase in accounts payable and accrued
liabilities.......................................... 2,307 13,169 (12,300) (18,808) (13,019)
(Decrease) increase in income taxes payable............ (1,438) 1,239 (2,544) 1,053 3,426
--------- --------- --------- --------- ---------
Net cash (used in) provided by operating activities........ 42,028 44,166 11,550 (6,355) (5,446)
INVESTING ACTIVITIES
Purchase of property, plant and equipment.................. (12,501) (21,146) (27,166) (5,847) (1,646)
Proceeds from sale of property, plant and equipment........ 32 73 1,632 -- --
Advances to and investments in DOUBLECOTE.................. (2,835) (2,000) (86) (369) (376)
Cash paid for acquired business............................ -- (21,221) -- -- --
--------- --------- --------- --------- ---------
Net cash used in investing activities...................... (15,304) (44,294) (25,620) (6,216) (2,022)
FINANCING ACTIVITIES
Net borrowings under credit facilities..................... (4,754) -- -- -- --
Proceeds to related party.................................. (21,471) 1,080 17,460 13,549 1,801
--------- --------- --------- --------- ---------
Net cash provided by (used in) financing activities........ (26,225) 1,080 17,460 13,549 1,801
--------- --------- --------- --------- ---------
Net (decrease) increase in cash and cash equivalents....... 499 952 3,390 978 (5,667)
Cash and cash equivalents at beginning of year............. 2,171 2,670 3,622 3,622 7,012
--------- --------- --------- --------- ---------
Cash and cash equivalents at end of year................... $ 2,670 $ 3,622 $ 7,012 $ 4,600 $ 1,345
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
See accompanying notes.
F-21
<PAGE>
AMATEK HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS TOTAL
---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Balance at December 31, 1994......................... $ 2,600 $ 4,380 $ 85,617 $ 92,597
Net income......................................... -- -- 33,888 33,888
---------- ----------- ----------- -----------
Balance at December 31, 1995......................... 2,600 4,380 119,505 126,485
Net income......................................... -- -- 38,563 38,563
---------- ----------- ----------- -----------
Balance at December 31, 1996......................... 2,600 4,380 158,068 165,048
Net income......................................... -- -- 39,740 39,740
---------- ----------- ----------- -----------
Balance at December 31, 1997......................... 2,600 4,380 197,808 204,788
Net income (unaudited)............................. -- -- 3,610 3,610
Dividend to parent (unaudited)..................... -- -- (179,572) (179,572)
Capital contribution from parent (unaudited)....... 179,572 -- -- 179,572
---------- ----------- ----------- -----------
Balance at March 31, 1998 (unaudited)................ $ 182,172 $ 4,380 $ 21,846 $ 208,398
---------- ----------- ----------- -----------
---------- ----------- ----------- -----------
</TABLE>
See accompanying notes.
F-22
<PAGE>
AMATEK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. OWNERSHIP AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
All outstanding common stock of Amatek Holdings, Inc. ("AHI"), is owned by
Amatek Limited (the "Parent," which is an Australian company), a wholly owned
subsidiary of BTR Nylex (an Australian company), which is ultimately owned by
BTR plc (a British company). AHI is a manufacturer of steel roofing and siding
products. Principal markets are in the continental United States.
The consolidated financial statements include the accounts of AHI and all
majority-owned subsidiaries (the "Company"). The Company's investment in
DOUBLECOTE, L.L.C. ("DOUBLECOTE") is accounted for using the equity method (see
Note 9). All significant intercompany balances and transactions have been
eliminated in consolidation.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of all cash balances and highly liquid
investments which have a maturity of three months or less when acquired.
INVENTORY
Inventories are valued at the lower of cost or market, determined on the
first-in, first-out method.
PROPERTY, PLANT, AND EQUIPMENT
Property, plant and equipment are stated at cost. The cost of repairs and
maintenance is charged to operations as incurred. Depreciation of property,
plant and equipment is provided on a straight-line basis over the estimated
useful lives of the assets as follows:
<TABLE>
<S> <C>
Building and improvements..................................... 40 years
4 to 13
Machinery and equipment....................................... years
3 to 10
Computer and office equipment................................. years
</TABLE>
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 121, ACCOUNTING FOR THE IMPAIRMENT OF
LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF. This statement
generally requires a periodic review of long-lived assets for indications that
their carrying amounts may not be recoverable and governs the measurement and
disclosure of any resulting impairment loss. Its application did not have a
material impact on the Company's financial position or results of operations.
INCOME TAXES
The Company uses SFAS No. 109, ACCOUNTING FOR INCOME TAXES, in accounting
for income taxes. This statement requires an asset and liability approach for
financial accounting and reporting of income taxes.
INTANGIBLE ASSETS
Goodwill of $15,479,000, $15,333,000 and $14,777,000, which relates to the
acquisition of certain assets and other shareholder interest at March 31, 1998
and December 31, 1997 and 1996, respectively, is being amortized on a
straight-line basis over 20 years. Accumulated amortization of goodwill was
F-23
<PAGE>
AMATEK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. OWNERSHIP AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
$1,867,000, $1,681,000 and $955,000 as of March 31, 1998 and December 31, 1997
and 1996, respectively.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of the Company's financial instruments (cash, accounts
receivable and accounts payable) approximates fair value.
MANAGEMENT ESTIMATES
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires the Company to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
RECLASSIFICATIONS
Certain reclassifications have been made to 1996 financial information in
order to conform to 1997 presentation.
In the opinion of management, the unaudited consolidated financial
statements include all adjustments, consisting solely of normal recurring
adjustments, necessary for a fair presentation of the financial position as of
March 31, 1998, and the results of operations and cash flows for each of the
three-month periods ended March 31, 1998 and 1997. Although management believes
the disclosures in these financial statements are adequate to make the
information presented not misleading, certain information and footnote
disclosures normally included in annual audited financial statements prepared in
accordance with generally accepted accounting principals have been condensed or
omitted pursuant to the rules and regulations of the Securities and Exchange
Commission. The results of operations and the cash flows for the three-month
period ended March 31, 1998 are not necessarily indicative of the results to be
expected for the full year.
2. INVENTORIES
The components of inventories were as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- MARCH 31,
1996 1997 1998
--------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Raw materials.................................. $ 22,581 $ 34,638 $ 35,247
Finished goods................................. 9,829 8,841 12,269
--------- --------- -----------
Total.......................................... $ 32,410 $ 43,479 $ 47,516
--------- --------- -----------
--------- --------- -----------
</TABLE>
F-24
<PAGE>
AMATEK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. NOTES PAYABLE TO BANK
The Company had an overdraft line of credit facility for $10.0 million which
terminated on March 31, 1998. There were no advances outstanding at March 31,
1998 and December 31, 1997 and 1996.
4. RELATED PARTY TRANSACTIONS
The Company periodically advances funds to its Parent and charges the Parent
interest at a rate which approximates prime for net advances. In addition, the
Company remits its federal income taxes payable to the Parent (see Notes 5 and
7). Based on intercompany lending rates for advances and payables with similar
terms, the fair value of these advances approximates their carrying values.
5. FEDERAL INCOME TAX
The provisions for federal income taxes are composed of the following (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
------------------------------- --------------------
1995 1996 1997 1997 1998
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Current income taxes............................... $ 22,917 $ 24,203 $ 20,612 $ 2,229 $ 2,761
Deferred income taxes.............................. 76 717 4,035 1,867 (555)
--------- --------- --------- --------- ---------
Total.............................................. $ 22,993 $ 24,920 $ 24,647 $ 4,096 $ 2,206
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
The effective income tax rate of the Company approximates the sum of the
statutory federal income tax rate and certain state income tax rates less
related federal tax benefit.
Significant components of the Company's deferred tax assets and liabilities
were as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------
MARCH 31,
1996 1997 1998
------------------------ ------------------------ ------------------------
CURRENT LONG-TERM CURRENT LONG-TERM CURRENT LONG-TERM
----------- ----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Property.............................. $ -- $ (9,442) $ -- $ (14,069) $ -- $ (14,368)
Insurance reserves.................... 461 -- 782 -- 782 --
Bad debt reserve...................... 147 -- 248 -- 248 --
Inventory............................. 245 -- 183 -- 183 --
Deferred compensation and incentive
plan................................ -- 2,660 -- 2,931 -- 3,780
Other................................. -- 11 (27) -- (27) --
----- ----------- ----------- ----------- ----------- -----------
Total................................. $ 853 $ (6,771) $ 1,186 $ (11,138) $ 1,186 $ (10,588)
----- ----------- ----------- ----------- ----------- -----------
----- ----------- ----------- ----------- ----------- -----------
Total deferred tax assets............. $ 3,524 $ 4,346 $ 4,993
Total deferred tax liabilities........ (9,442) (14,298) (14,395)
----------- ----------- -----------
Net deferred tax liability............ $ (5,918) $ (9,952) $ (9,402)
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
F-25
<PAGE>
AMATEK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. LEASES
The Company leases certain equipment (primarily vehicles) and operating
facilities under operating leases expiring at various dates through 2000. Total
rental expense under operating leases was $1,514,000, $1,291,000 and $1,096,000
in 1997, 1996 and 1995, respectively.
Aggregate minimum lease payments under operating leases are as follows (in
thousands):
<TABLE>
<S> <C>
1998................................................................ $ 508
1999................................................................ 567
2000................................................................ 391
2001................................................................ 72
---------
$ 1,538
---------
---------
</TABLE>
7. SUPPLEMENTAL CASH FLOW DISCLOSURES
Cash paid for interest during the years ended December 31, 1997, 1996 and
1995 was $81,000, $80,000 and $131,000, respectively. Cash paid for income taxes
during the years ended December 31, 1997, 1996 and 1995 was $24,349,000,
$21,402,000 and $23,639,000, respectively.
8. EMPLOYEE BENEFIT PLANS
The Company sponsors a 401(k) savings plan for its full-time employees. The
Company matches 100% of employee-elected pre-tax contributions to a maximum of
4% of their salaries. The Company's contributions were $1,132,000, $943,000 and
$830,000 in 1997, 1996 and 1995, respectively.
An Incentive Compensation Plan (the "Plan") was established in 1992, in part
because of the purchase of the minority interest of a partnership of which
certain officers of the Company were limited partners. Under the terms of the
Plan, an annual contribution is determined based upon the Company's earnings and
revenues. Annual contributions are placed in trust (with the trustee,
NationsBank) and vest to participants over a seven- to ten-year period. In the
event that a participant voluntarily leaves the Company or is terminated for
"good cause," the unvested portion of contributions to the Plan is forfeited to
the Company. The contributions were $4,302,000, $3,714,000 and $2,766,000 for
1997, 1996 and 1995, respectively.
9. INVESTMENT IN DOUBLECOTE
The Company, through a subsidiary, owns 50% of the common stock in
DOUBLECOTE, a corporate joint venture.
F-26
<PAGE>
AMATEK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. INVESTMENT IN DOUBLECOTE (CONTINUED)
Summarized financial information of DOUBLECOTE is as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- MARCH 31,
1996 1997 1998
--------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Current assets........................................ $ 7,266 $ 8,165 $ 9,210
Noncurrent assets..................................... 30,524 28,601 28,102
--------- --------- -----------
Total assets.......................................... $ 37,790 $ 36,766 $ 37,312
--------- --------- -----------
--------- --------- -----------
Liabilities--advances from shareholder................ $ 36,232 $ 36,404 $ 37,157
Other liabilities..................................... 2,753 1,390 1,505
Shareholders' equity:
Contributed capital................................. 2,000 2,000 2,000
Accumulated deficit................................. (3,195) (3,028) (3,350)
--------- --------- -----------
Total liabilities and shareholders' equity............ $ 37,790 $ 36,766 $ 37,312
--------- --------- -----------
--------- --------- -----------
Sales................................................. $ 28,034 $ 30,348 $ 6,427
Cost of sales......................................... (24,682) (26,150) (5,722)
--------- --------- -----------
Gross profit.......................................... 3,352 4,198 705
Selling, general and administrative expenses.......... (964) (1,080) (303)
Interest expense...................................... (2,997) (2,952) (724)
--------- --------- -----------
Net income (loss)..................................... $ (609) $ 166 $ (322)
--------- --------- -----------
--------- --------- -----------
</TABLE>
The facility owned by DOUBLECOTE was completed and began operations in 1995.
DOUBLECOTE is charged interest at prime for advances by the Company. Total
interest income earned by the Company was $1,500,000 in 1997 and 1996 and
$1,465,000 in 1995.
10. LUBBOCK PLANT FIRE
In February 1997, the Company's Lubbock, Texas, plant sustained major damage
from a fire. The Company has since rebuilt the plant, and resumed operations in
July 1997.
The Company maintains insurance under one policy for both property damage
and business interruption applicable to its production facilities. The policy
provides coverage subject to a $25,000 deductible. Insurance recoveries as of
December 31, 1997 included $1.5 million for property damage and $500,000 for
business interruption. The Company is pursuing additional recoveries of $4
million related to the damage of the Lubbock plant.
Insurance recoveries for property damage associated with events of this type
require the recognition of a new cost basis for the rebuilt facility. As a
result, the Company has recognized a $3.3 million unusual/nonrecurring
adjustment in its income statement for the year ended December 31, 1997. Total
spending to restore the Lubbock plant was approximately $4.8 million.
11. ACQUISITION OF BUSINESS
On April 1, 1996, the Company purchased certain assets of Steelco Metal
Construction Products and Construction Metals ("Steelco") for a total cost of
approximately $21,221,000. Steelco was engaged
F-27
<PAGE>
AMATEK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. ACQUISITION OF BUSINESS (CONTINUED)
in the manufacturing of steel roofing and siding products. The acquisition was
accounted for as a purchase. The excess of the purchase price over the fair
values of the net assets acquired of $11,266,000 has been recorded as goodwill
and is being amortized over a period of 20 years. The statement of operations
for 1996 includes the operating results of Steelco since the date of
acquisition.
12. YEAR 2000 (UNAUDITED)
The Company has conducted a comprehensive review of its computer systems to
identify the systems that could be affected by the "Year 2000" issue and is
implementing its plan to resolve the issue. The Year 2000 problem is a result of
computer programs being written using two digits (rather than four) to define
the applicable year. Any of the Company's programs that have time-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. This could result in major system failure or miscalculation. The Company
presently believes that, with modifications to existing software and converting
to new software, the Year 2000 problem will not pose significant operational
problems for the Company's computer systems as so modified and converted.
However, if such modifications or conversions are not made, or not completed
timely, the Year 2000 issue could have a material impact on the Company's
operations.
13. COMMITMENTS AND CONTINGENCIES
In March 1998, the Company entered into an agreement with NCI Building
Systems, Inc. to purchase 100% of the stock of the Company, which was effective
May 4, 1998. Upon the successful completion of this acquisition, certain
executives of the Company will receive compensation payments totaling
approximately $8.5 million.
F-28
<PAGE>
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS, THE
ACCOMPANYING LETTER OF TRANSMITTAL OR TO WHICH WE HAVE REFERRED YOU. WE HAVE NOT
AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT INFORMATION. WE ARE NOT OFFERING
THESE SECURITIES IN ANY JURISDICTION WHERE AN OFFERING IS NOT PERMITTED. THE
INFORMATION IN THIS PROSPECTUS AND THE LETTER OF TRANSMITTAL MAY ONLY BE
ACCURATE ON THE DATE OF THIS DOCUMENT.
________________________________TABLE OF CONTENTS_______________________________
<TABLE>
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 12
The MBCI Acquisition...................................................... 19
Use of Proceeds........................................................... 20
Capitalization............................................................ 20
Unaudited Pro Forma Condensed Combined Financial Statements............... 21
Selected Historical Consolidated Financial Information.................... 27
Management's Discussion and Analysis of Financial Condition and Results of
Operations.............................................................. 30
Industry Overview......................................................... 38
Business.................................................................. 40
Management................................................................ 52
Principal Stockholders.................................................... 56
Description of Senior Credit Facility..................................... 58
The Exchange Offer........................................................ 61
Description of Registered Notes........................................... 68
U. S. Federal Income Tax Considerations................................... 103
Plan of Distribution...................................................... 104
Legal Matters............................................................. 105
Experts................................................................... 105
Where You Can Find More Information....................................... 105
Index to Financial Statements............................................. F-1
</TABLE>
PROSPECTUS June , 1999
[LOGO]
Offer to Exchange
All Outstanding
9 1/4% Series A Senior
Subordinated
Notes due 2009
for
9 1/4% Series B Senior Subordinated
Notes due 2009
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
As permitted by the Delaware General Corporation Law, the Registrant's
Amended and Restated By-Laws provide that the directors and officers of the
Registrant shall be indemnified by the Registrant against certain liabilities
that those persons may incur in their capacities as directors or officers.
Furthermore, the Registrant's Restated Certificate of Incorporation eliminates
the liability of directors of the Registrant, under certain circumstances, to
the maximum extent permitted by the Delaware General Corporation Law.
The Note Purchase Agreement filed as Exhibit 10.18 hereto contains
reciprocal agreements of indemnity between the Registrant and the initial
purchasers of the securities offered hereby as to certain liabilities, including
liabilities under the Securities Act and in certain circumstances provides for
indemnification of the Registrant's directors and officers.
ITEM 21. EXHIBITS.
<TABLE>
<C> <S>
3.1 Restated Certificate of Incorporation of the Registrant (filed as Exhibit 3.1 to the
Registrant's registration statement no. 33-45612 and incorporated by reference
herein)
3.2 Certificate of Amendment to Restated Certificate of Incorporation of the Registrant
(filed as Exhibit 3.1.1 to the Registrant's registration statement no. 33-45612 and
incorporated by reference herein)
3.3 Certificate of Amendment to Restated Certificate of Incorporation of the Registrant
(filed as Exhibit 3.3 to the Registrant's Annual Report on Form 10-K for the fiscal
year ended October 31, 1994 and incorporated by reference herein)
3.4 Certificate of Amendment to Restated Certificate of Incorporation of the Registrant
(filed as Exhibit 2.4 to the Registrant's registration statement on Form 8-A filed
with the Securities and Exchange Commission on July 20, 1998 and incorporated by
reference herein)
3.5 Certificate of Amendment to Restated Certificate of Incorporation of the Registrant
(filed as Exhibit 3.5 to the Registrant's Annual Report on Form 10-K for the fiscal
year ended October 31, 1998 and incorporated by reference herein)
3.6 Amended and Restated By-Laws of the Registrant, as amended through February 5, 1992
(filed as Exhibit 3.2 to the Registrant's registration statement no. 33-45612 and
incorporated by reference herein)
*3.7 Amendment No. 1 to the Amended and Restated By-Laws of the Registrant
4.1 Form of certificate representing shares of Registrant's common stock (filed as
Exhibit 1 to the Registrant's registration statement on Form 8-A filed with the
Securities and Exchange Commission on July 20, 1998 and incorporated by reference
herein)
4.2 Credit Agreement, dated March 25, 1998 (the "Credit Agreement"), by and among the
Registrant, NationsBank, N.A. (as successor in interest to NationsBank of Texas,
N.A.), as administrative agent ("NationsBank"), NationsBanc Montgomery Securities
LLC, as arranger and syndication agent, UBS AG (as successor in interest to Swiss
Bank Corporation), as documentation agent ("UBS"), and the several lenders named
therein (filed as Exhibit 4.3 to the Registrant's Annual Report on Form 10-K for the
fiscal year ended October 31, 1998 and incorporated by reference herein)
</TABLE>
II-1
<PAGE>
<TABLE>
<C> <S>
4.3 First Amendment to Credit Agreement, dated May 1, 1998, among the Registrant,
NationsBank, UBS and the parties named therein (filed as Exhibit 4.4 to the
Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1998
and incorporated by reference herein)
4.4 Second Amendment to Credit Agreement, dated May 5, 1998, among the Registrant,
NationsBank, UBS and the parties named therein (filed as Exhibit 4.5 to the
Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1998
and incorporated by reference herein)
*4.5 Waiver, Consent and Third Amendment to Credit Agreement, dated May 5, 1999, among
the Registrant, NationsBank, UBS and the parties named therein
4.6 Master Assignment and Acceptance, dated as of May 6, 1998, among NationsBank, Swiss
Bank and the several lenders named therein (filed as Exhibit 4.6 to the Registrant's
Annual Report on Form 10-K for the fiscal year ended October 31, 1998 and
incorporated by reference herein)
4.7 Facility A Notes (Revolving Credit), dated May 6, 1998, of the Registrant in favor
of lenders named therein (filed as Exhibit 4.7 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended October 31, 1998 and incorporated by reference
herein)
4.8 Facility B Notes (Term Loan), dated May 6, 1998, of the Registrant in favor of
lenders named therein (filed as Exhibit 4.8 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended October 31, 1998 and incorporated by reference
herein)
*4.9 Facility C Notes (364-day Revolving Facility), dated May 5, 1999, of the Registrant
in favor of lenders named therein
4.10 Guaranty, dated May 1, 1998, between NationsBank and A&S Building Systems,
L.P.(filed as Exhibit 4.10 to the Registrant's Annual Report on Form 10-K for the
fiscal year ended October 31, 1998 and incorporated by reference herein)
4.11 Guaranty, dated May 1, 1998, between NationsBank and NCI Building Systems,
L.P.(filed as Exhibit 4.11 to the Registrant's Annual Report on Form 10-K for the
fiscal year ended October 31, 1998 and incorporated by reference herein)
4.12 Guaranty, dated May 1, 1998, between NationsBank and NCI Holding Corp.(filed as
Exhibit 4.12 to the Registrant's Annual Report on Form 10-K for the fiscal year
ended October 31, 1998 and incorporated by reference herein)
4.13 Guaranty, dated May 1, 1998, between NationsBank and NCI Operating Corp.(filed as
Exhibit 4.13 to the Registrant's Annual Report on Form 10-K for the fiscal year
ended October 31, 1998 and incorporated by reference herein)
4.14 Guaranty, dated May 1, 1998, between NationsBank and Metal Building Components
Holding, Inc.(filed as Exhibit 4.14 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended October 31, 1998 and incorporated by reference herein)
4.15 Guaranty, dated May 1, 1998, between NationsBank and Metal Coaters Holding,
Inc.(filed as Exhibit 4.15 to the Registrant's Annual Report on Form 10-K for the
fiscal year ended October 31, 1998 and incorporated by reference herein)
4.16 Guaranty, dated May 1, 1998, between NationsBank and Metal Building Components, L.P.
(formerly MBCI Operating, L.P.)(filed as Exhibit 4.16 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended October 31, 1998 and incorporated by
reference herein)
4.17 Guaranty, dated May 1, 1998, between NationsBank and Metal Coaters Operating,
L.P.(filed as Exhibit 4.17 to the Registrant's Annual Report on Form 10-K for the
fiscal year ended October 31, 1998 and incorporated by reference herein)
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S>
4.18 Guaranty, dated May 13, 1998, between NationsBank and Metal Coaters of California,
Inc.(filed as Exhibit 4.18 to the Registrant's Annual Report on Form 10-K for the
fiscal year ended October 31, 1998 and incorporated by reference herein)
4.19 Pledge Agreement, dated May 1, 1998, between the Registrant and NationsBank (filed
as Exhibit 4.19 to the Registrant's Annual Report on Form 10-K for the fiscal year
ended October 31, 1998 and incorporated by reference herein)
4.20 Pledge Agreement, dated May 1, 1998, between NCI Holding Corp. and NationsBank
(filed as Exhibit 4.20 to the Registrant's Annual Report on Form 10-K for the fiscal
year ended October 31, 1998 and incorporated by reference herein)
4.21 Pledge Agreement, dated May 13, 1998, between the Metal Coaters Holding, Inc. and
NationsBank (filed as Exhibit 4.21 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended October 31, 1998 and incorporated by reference herein)
4.22 Assignment of Partnership Interests, dated May 1, 1998, between NCI Operating Corp.
and NationsBank (filed as Exhibit 4.22 to the Registrant's Annual Report on Form
10-K for the fiscal year ended October 31, 1998 and incorporated by reference
herein)
4.23 Assignment of Partnership Interests, dated May 1, 1998, between NCI Holding Corp.
and NationsBank (filed as Exhibit 4.23 to the Registrant's Annual Report on Form
10-K for the fiscal year ended October 31, 1998 and incorporated by reference
herein)
4.24 Assignment of Partnership Interests, dated May 1, 1998, between Metal Building
Components Holding, Inc. and NationsBank (filed as Exhibit 4.24 to the Registrant's
Annual Report on Form 10-K for the fiscal year ended October 31, 1998 and
incorporated by reference herein)
4.25 Assignment of Partnership Interests, dated May 1, 1998, between Metal Coaters
Holding, Inc. and NationsBank (filed as Exhibit 4.25 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended October 31, 1998 and incorporated by
reference herein)
4.26 Promissory Note, dated May 5, 1998, of NCI Holding Corp. in favor of the Registrant
(filed as Exhibit 4.26 to the Registrant's Annual Report on Form 10-K for the fiscal
year ended October 31, 1998 and incorporated by reference herein)
4.27 Note Pledge Agreement, dated May 5, 1998, between the Registrant and NationsBank
(filed as Exhibit 4.27 to the Registrant's Annual Report on Form 10-K for the fiscal
year ended October 31, 1998 and incorporated by reference herein)
4.28 Loan Agreement "A," dated September 1, 1991, between the City of Mattoon and the
Registrant (filed as Exhibit 4.11 to the Registrant's registration statement no.
33-45612 and incorporated by reference herein)
4.29 $250,000 Promissory Note A, dated October 31, 1991, in favor of the City of Mattoon
executed by the Registrant (filed as Exhibit 4.12 to the Registrant's registration
statement no. 33-45612 and incorporated by reference herein)
4.30 Loan Agreement "B," dated September 1, 1991, between the City of Mattoon and the
Registrant (filed as Exhibit 4.13 to the Registrant's registration statement no.
33-45612 and incorporated by reference herein)
4.31 $250,000 Promissory Note B, dated January 20, 1992, in favor of the City of Mattoon
executed by the Registrant (filed as Exhibit 4.14 to the Registrant's registration
statement no. 33-45612 and incorporated by reference herein)
4.32 Stock Retention and Registration Agreement, dated November 13, 1995, by and between
the Registrant, Doors & Building Components, Inc., and David B. Curtis (filed as
Exhibit 4.14 to the Registrant's Annual Report on Form 10-K for the fiscal year
ended October 31, 1995, and incorporated by reference herein)
</TABLE>
II-3
<PAGE>
<TABLE>
<C> <S>
4.33 7% Convertible Subordinated Debenture dated April 1, 1996, Due April 1, 2001,
between NCI Building Systems, Inc. and John T. Eubanks (filed as Exhibit 4.15 to the
Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1996,
and incorporated by reference herein)
4.34 Rights Agreement, dated June 24, 1998, between the Registrant and Harris Trust and
Savings Bank (filed as Exhibit 2 to the Registrant's registration statement on Form
8-A and incorporated by reference herein)
*5.1 Legal Opinion of Gardere & Wynne, L.L.P., regarding the legality of securities being
registered
10.1 Employment Agreement, dated April 10, 1989, between the Registrant and Johnie
Schulte, Jr. (filed as Exhibit 10.1 to the Registrant's registration statement no.
33-45612 and incorporated by reference herein)
10.2 Amendment to Employment Agreement, dated February 21, 1992, between the Registrant
and Johnie Schulte, Jr. (filed as Exhibit 10.1.1 to the Registrant's registration
statement no. 33-45612 and incorporated by reference herein)
10.3 Amended and Restated Bonus Program, as amended and restated on December 11, 1998
(filed as Exhibit 10.3 to the Registrant's Annual Report on Form 10-K for the fiscal
year ended October 31, 1998 and incorporated by reference herein)
10.4 Amended and Restated Nonqualified Stock Option Plan, as amended and restated on
December 12, 1996 (filed as Exhibit 10.4 to the Registrant's Annual Report on Form
10-K for the fiscal year ended October 31, 1998 and incorporated by reference
herein)
10.5 Form of Employee Stock Option Agreement (filed as Exhibit 4.3 to the Registrant's
registration statement no. 33-52080 and incorporated by reference herein)
10.6 Form of Director Stock Option Agreement (filed as Exhibit 4.4 to the Registrant's
registration statement no. 33-52080 and incorporated by reference herein)
10.7 401(k) Profit Sharing Plan (filed as Exhibit 4.1 to the Registrant's registration
statement no. 33-52078 and incorporated by reference herein)
10.8 Form of Metallic Builder Agreement (filed as Exhibit 10.10 to the Registrant's
registration statement no. 33-45612 and incorporated by reference herein)
10.9 Form of A&S Builder Agreement (filed as Exhibit 10.17 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended October 31, 1992 and incorporated by
reference herein)
10.10 Purchase Agreement, dated September 7, 1994, between NCI Building Systems, L.P.,
Ellis Building Components, Inc., Tony Ellis and Ronald Ellis (filed as Exhibit 2.1
to the Registrant's Current Report on Form 8-K dated October 14, 1994 and
incorporated by reference herein)
10.11 Amendment to Purchase Agreement, dated October 14, 1994, between NCI Building
Systems, L.P., Ellis Building Components, Inc., Tony Ellis and Ronald Ellis (filed
as Exhibit 2.2 to the Registrant's Current Report on Form 8-K dated October 14, 1994
and incorporated by reference herein)
10.12 Form of Mesco Metal Buildings Agreement (filed as Exhibit 4.13 to the Registrant's
Annual Report on Form 10-K for the fiscal year ended October 31, 1996 and
incorporated by reference herein)
10.13 Asset Purchase Agreement, dated October 13, 1995, by and among Doors & Building
Components, Inc., David B. Curtis, DBCI Acquisition Corp. and the Registrant (filed
as Exhibit 2 to the Registrant's Current Report on Form 8-K dated November 13, 1995
and incorporated by reference herein)
</TABLE>
II-4
<PAGE>
<TABLE>
<C> <S>
10.14 Asset Purchase Agreement, dated April 1, 1996, by and among Anderson Industries,
Inc., Charles W. Anderson, Thomas L. Anderson, Jr., John T. Eubanks, Robert K.
Landon, NCI Building Systems, L.P. and the Registrant (filed as Exhibit 2 to the
Registrant's Current Report on Form 8-K dated April 1, 1996 and incorporated by
reference herein)
10.15 Employment Agreement, dated April 1, 1996, between the Registrant and John T.
Eubanks (filed as Exhibit 10.19 to the Registrant's Annual Report on Form 10-K for
the fiscal year ended October 31, 1997 and incorporated by reference herein)
10.16 Stock Purchase Agreement, dated March 25, 1998, by and among BTR Australia Limited
and the Registrant, and joined therein for certain purposes by BTR plc (filed as
Exhibit 2.1 to the Registrant's Current Report on Form 8-K dated May 19, 1998 and
incorporated by reference herein)
10.17 Letter Agreement, dated May 4, 1998, by and among the Registrant, BTR Australia
Limited and BTR plc, amending the Stock Purchase Agreement (filed as Exhibit 2.2 to
the Registrant's Current Report on Form 8-K dated May 19, 1998 and incorporated by
reference herein)
*10.18 Note Purchase Agreement, dated April 30, 1999, by and among the Registrant, the
guarantors named therein, Warburg Dillon Read LLC, Montgomery NationsBanc Securities
LLC, First Union Capital Markets Corp. and Bear, Stearns & Co. Inc.
*10.19 Registration Rights Agreement, dated May 5, 1999, by and among the Registrant, the
guarantors named therein, Warburg Dillon Read LLC, Montgomery NationsBanc Securities
LLC, First Union Capital Markets Corp. and Bear, Stearns & Co. Inc.
*10.20 Indenture, dated May 5, 1999, by and among the Registrant, the guarantors named
therein and Harris Trust Company of New York
21.1 List of Subsidiaries (filed as Exhibit 21 to the Registrant's Annual Report on Form
10-K for the fiscal year ended October 31, 1998 and incorporated by reference
herein)
*23.1 Consent of Ernest & Young LLP
*23.2 Consent of Gardere & Wynne, L.L.P. (included in Exhibit 5.1)
*24.1 Power of Attorney (set forth on page II-7)
*99.1 Letter of Transmittal and Notice of Guaranteed Delivery
</TABLE>
- ------------------------
* Filed herewith.
ITEM 22. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) That, for purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) That, for the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and this offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) That insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore,
II-5
<PAGE>
unenforceable. If a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
(4) To respond to requests for information that is incorporated herein by
reference into the prospectus pursuant to Items 4, 10(b), 11 or 13 of this Form,
within one business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date of the
registration statement through the date of responding to the request.
(5) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein, that
was not the subject of and included in the registrations statement when it
became effective.
(6) That, for purposes of determining any liability under the Securities
Act, each filing of the Registrant's annual report pursuant to Section 13(a) or
Section 15(d) of the Exchange Act (and, where applicable, each filing of an
employee benefits plan's annual report pursuant to Section 15(d) of the Exchange
Act) 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.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Houston, State of Texas
on the 4th day of June, 1999.
<TABLE>
<S> <C> <C>
NCI BUILDING SYSTEMS, INC.
By: /s/ JOHNIE SCHULTE
-----------------------------------------
Johnie Schulte,
CHIEF EXECUTIVE OFFICER
</TABLE>
POWER OF ATTORNEY
Each of the undersigned hereby appoints Johnie Schulte and Robert J. Medlock
and each of them (with full power to act alone), as attorneys and agents for the
undersigned, with full power of substitution, for and in the name, place and
stead of the undersigned, to sign and file with the Commission under the
Securities Act any and all amendments and exhibits to this Registration
Statement, any registration statement for the same offering that is to be
effective upon filing pursuant to Rule 462(b) under the Securities Act, and any
and all applications, instruments and other documents to be filed with the
Commission pertaining to the registration of the securities covered hereby or
thereby, with full power and authority to do and perform any and all acts and
things whatsoever requisite or desirable.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed below by the following persons and in the capacities
indicated on the 4th day of June, 1999.
<TABLE>
<CAPTION>
NAME TITLE
- ------------------------------ --------------------------
<C> <S>
Chief Executive Officer
/s/ JOHNIE SCHULTE and Director
- ------------------------------ (principal executive
Johnie Schulte officer)
Executive Vice President,
/s/ ROBERT J. MEDLOCK Chief Financial Officer
- ------------------------------ and Director
Robert J. Medlock (principal financial and
accounting officer)
/s/ THOMAS C. ARNETT
- ------------------------------ Director
Thomas C. Arnett
/s/ WILLIAM D. BREEDLOVE
- ------------------------------ Director
William D. Breedlove
/s/ GARY L. FORBES
- ------------------------------ Director
Gary L. Forbes
/s/ A.R. GINN
- ------------------------------ Director, President and
A.R. Ginn Chief Operating Officer
</TABLE>
II-7
<PAGE>
<TABLE>
<CAPTION>
NAME TITLE
- ------------------------------ --------------------------
<C> <S>
/s/ KENNETH W. MADDOX Director and Executive
- ------------------------------ Vice President,
Kenneth W. Maddox Administration
/s/ ROBERT N. MCDONALD
- ------------------------------ Director
Robert N. McDonald
/s/ C.A. RUNDELL, JR.
- ------------------------------ Director
C.A. Rundell, Jr.
/s/ DANIEL D. ZABCIK
- ------------------------------ Director
Daniel D. Zabcik
</TABLE>
II-8
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
3.1 Restated Certificate of Incorporation of the Registrant (filed as Exhibit 3.1 to the Registrant's
registration statement no. 33-45612 and incorporated by reference herein)
3.2 Certificate of Amendment to Restated Certificate of Incorporation of the Registrant (filed as Exhibit
3.1.1 to the Registrant's registration statement no. 33-45612 and incorporated by reference herein)
3.3 Certificate of Amendment to Restated Certificate of Incorporation of the Registrant (filed as Exhibit
3.3 to the Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1994 and
incorporated by reference herein)
3.4 Certificate of Amendment to Restated Certificate of Incorporation of the Registrant (filed as Exhibit
2.4 to the Registrant's registration statement on Form 8-A filed with the Securities and Exchange
Commission on July 20, 1998 and incorporated by reference herein)
3.5 Certificate of Amendment to Restated Certificate of Incorporation of the Registrant (filed as Exhibit
3.5 to the Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1998 and
incorporated by reference herein)
3.6 Amended and Restated By-Laws of the Registrant, as amended through February 5, 1992 (filed as Exhibit
3.2 to the Registrant's registration statement no. 33-45612 and incorporated by reference herein)
*3.7 Amendment No. 1 to the Amended and Restated By-Laws of the Registrant
4.1 Form of certificate representing shares of Registrant's common stock (filed as Exhibit 1 to the
Registrant's registration statement on Form 8-A filed with the Securities and Exchange Commission on
July 20, 1998 and incorporated by reference herein)
4.2 Credit Agreement, dated March 25, 1998 (the "Credit Agreement"), by and among the Registrant,
NationsBank, N.A. (as successor in interest to NationsBank of Texas, N.A.), as administrative agent
("NationsBank"), NationsBanc Montgomery Securities LLC, as arranger and syndication agent, UBS AG (as
successor in interest to Swiss Bank Corporation), as documentation agent ("UBS"), and the several
lenders named therein (filed as Exhibit 4.3 to the Registrant's Annual Report on Form 10-K for the
fiscal year ended October 31, 1998 and incorporated by reference herein)
4.3 First Amendment to Credit Agreement, dated May 1, 1998, among the Registrant, NationsBank, UBS and the
parties named therein (filed as Exhibit 4.4 to the Registrant's Annual Report on Form 10-K for the
fiscal year ended October 31, 1998 and incorporated by reference herein)
4.4 Second Amendment to Credit Agreement, dated May 5, 1998, among the Registrant, NationsBank, UBS and the
parties named therein (filed as Exhibit 4.5 to the Registrant's Annual Report on Form 10-K for the
fiscal year ended October 31, 1998 and incorporated by reference herein)
*4.5 Waiver, Consent and Third Amendment to Credit Agreement, dated May 5, 1999, among the Registrant,
NationsBank, UBS and the parties named therein
4.6 Master Assignment and Acceptance, dated as of May 6, 1998, among NationsBank, Swiss Bank and the several
lenders named therein (filed as Exhibit 4.6 to the Registrant's Annual Report on Form 10-K for the
fiscal year ended October 31, 1998 and incorporated by reference herein)
4.7 Facility A Notes (Revolving Credit), dated May 6, 1998, of the Registrant in favor of lenders named
therein (filed as Exhibit 4.7 to the Registrant's Annual Report on Form 10-K for the fiscal year ended
October 31, 1998 and incorporated by reference herein)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
4.8 Facility B Notes (Term Loan), dated May 6, 1998, of the Registrant in favor of lenders named therein
(filed as Exhibit 4.8 to the Registrant's Annual Report on Form 10-K for the fiscal year ended October
31, 1998 and incorporated by reference herein)
*4.9 Facility C Notes (364-day Revolving Facility), dated May 5, 1999, of the Registrant in favor of lenders
named therein
4.10 Guaranty, dated May 1, 1998, between NationsBank and A&S Building Systems, L.P.(filed as Exhibit 4.10 to
the Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1998 and incorporated
by reference herein)
4.11 Guaranty, dated May 1, 1998, between NationsBank and NCI Building Systems, L.P.(filed as Exhibit 4.11 to
the Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1998 and incorporated
by reference herein)
4.12 Guaranty, dated May 1, 1998, between NationsBank and NCI Holding Corp.(filed as Exhibit 4.12 to the
Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1998 and incorporated by
reference herein)
4.13 Guaranty, dated May 1, 1998, between NationsBank and NCI Operating Corp.(filed as Exhibit 4.13 to the
Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1998 and incorporated by
reference herein)
4.14 Guaranty, dated May 1, 1998, between NationsBank and Metal Building Components Holding, Inc.(filed as
Exhibit 4.14 to the Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1998
and incorporated by reference herein)
4.15 Guaranty, dated May 1, 1998, between NationsBank and Metal Coaters Holding, Inc.(filed as Exhibit 4.15
to the Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1998 and
incorporated by reference herein)
4.16 Guaranty, dated May 1, 1998, between NationsBank and Metal Building Components, L.P. (formerly MBCI
Operating, L.P.)(filed as Exhibit 4.16 to the Registrant's Annual Report on Form 10-K for the fiscal
year ended October 31, 1998 and incorporated by reference herein)
4.17 Guaranty, dated May 1, 1998, between NationsBank and Metal Coaters Operating, L.P.(filed as Exhibit 4.17
to the Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1998 and
incorporated by reference herein)
4.18 Guaranty, dated May 13, 1998, between NationsBank and Metal Coaters of California, Inc.(filed as Exhibit
4.18 to the Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1998 and
incorporated by reference herein)
4.19 Pledge Agreement, dated May 1, 1998, between the Registrant and NationsBank (filed as Exhibit 4.19 to
the Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1998 and incorporated
by reference herein)
4.20 Pledge Agreement, dated May 1, 1998, between NCI Holding Corp. and NationsBank (filed as Exhibit 4.20 to
the Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1998 and incorporated
by reference herein)
4.21 Pledge Agreement, dated May 13, 1998, between the Metal Coaters Holding, Inc. and NationsBank (filed as
Exhibit 4.21 to the Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1998
and incorporated by reference herein)
4.22 Assignment of Partnership Interests, dated May 1, 1998, between NCI Operating Corp. and NationsBank
(filed as Exhibit 4.22 to the Registrant's Annual Report on Form 10-K for the fiscal year ended October
31, 1998 and incorporated by reference herein)
4.23 Assignment of Partnership Interests, dated May 1, 1998, between NCI Holding Corp. and NationsBank (filed
as Exhibit 4.23 to the Registrant's Annual Report on Form 10-K for the fiscal year ended October 31,
1998 and incorporated by reference herein)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
4.24 Assignment of Partnership Interests, dated May 1, 1998, between Metal Building Components Holding, Inc.
and NationsBank (filed as Exhibit 4.24 to the Registrant's Annual Report on Form 10-K for the fiscal
year ended October 31, 1998 and incorporated by reference herein)
4.25 Assignment of Partnership Interests, dated May 1, 1998, between Metal Coaters Holding, Inc. and
NationsBank (filed as Exhibit 4.25 to the Registrant's Annual Report on Form 10-K for the fiscal year
ended October 31, 1998 and incorporated by reference herein)
4.26 Promissory Note, dated May 5, 1998, of NCI Holding Corp. in favor of the Registrant (filed as Exhibit
4.26 to the Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1998 and
incorporated by reference herein)
4.27 Note Pledge Agreement, dated May 5, 1998, between the Registrant and NationsBank (filed as Exhibit 4.27
to the Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1998 and
incorporated by reference herein)
4.28 Loan Agreement "A," dated September 1, 1991, between the City of Mattoon and the Registrant (filed as
Exhibit 4.11 to the Registrant's registration statement no. 33-45612 and incorporated by reference
herein)
4.29 $250,000 Promissory Note A, dated October 31, 1991, in favor of the City of Mattoon executed by the
Registrant (filed as Exhibit 4.12 to the Registrant's registration statement no. 33-45612 and
incorporated by reference herein)
4.30 Loan Agreement "B," dated September 1, 1991, between the City of Mattoon and the Registrant (filed as
Exhibit 4.13 to the Registrant's registration statement no. 33-45612 and incorporated by reference
herein)
4.31 $250,000 Promissory Note B, dated January 20, 1992, in favor of the City of Mattoon executed by the
Registrant (filed as Exhibit 4.14 to the Registrant's registration statement no. 33-45612 and
incorporated by reference herein)
4.32 Stock Retention and Registration Agreement, dated November 13, 1995, by and between the Registrant,
Doors & Building Components, Inc., and David B. Curtis (filed as Exhibit 4.14 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended October 31, 1995, and incorporated by reference herein)
4.33 7% Convertible Subordinated Debenture dated April 1, 1996, Due April 1, 2001, between NCI Building
Systems, Inc. and John T. Eubanks (filed as Exhibit 4.15 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended October 31, 1996, and incorporated by reference herein)
4.34 Rights Agreement, dated June 24, 1998, between the Registrant and Harris Trust and Savings Bank (filed
as Exhibit 2 to the Registrant's registration statement on Form 8-A and incorporated by reference
herein)
*5.1 Legal Opinion of Gardere & Wynne, L.L.P., regarding the legality of securities being registered
10.1 Employment Agreement, dated April 10, 1989, between the Registrant and Johnie Schulte, Jr. (filed as
Exhibit 10.1 to the Registrant's registration statement no. 33-45612 and incorporated by reference
herein)
10.2 Amendment to Employment Agreement, dated February 21, 1992, between the Registrant and Johnie Schulte,
Jr. (filed as Exhibit 10.1.1 to the Registrant's registration statement no. 33-45612 and incorporated by
reference herein)
10.3 Amended and Restated Bonus Program, as amended and restated on December 11, 1998 (filed as Exhibit 10.3
to the Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1998 and
incorporated by reference herein)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
10.4 Amended and Restated Nonqualified Stock Option Plan, as amended and restated on December 12, 1996 (filed
as Exhibit 10.4 to the Registrant's Annual Report on Form 10-K for the fiscal year ended October 31,
1998 and incorporated by reference herein)
10.5 Form of Employee Stock Option Agreement (filed as Exhibit 4.3 to the Registrant's registration statement
no. 33-52080 and incorporated by reference herein)
10.6 Form of Director Stock Option Agreement (filed as Exhibit 4.4 to the Registrant's registration statement
no. 33-52080 and incorporated by reference herein)
10.7 401(k) Profit Sharing Plan (filed as Exhibit 4.1 to the Registrant's registration statement no. 33-52078
and incorporated by reference herein)
10.8 Form of Metallic Builder Agreement (filed as Exhibit 10.10 to the Registrant's registration statement
no. 33-45612 and incorporated by reference herein)
10.9 Form of A&S Builder Agreement (filed as Exhibit 10.17 to the Registrant's Annual Report on Form 10-K for
the fiscal year ended October 31, 1992 and incorporated by reference herein)
10.10 Purchase Agreement, dated September 7, 1994, between NCI Building Systems, L.P., Ellis Building
Components, Inc., Tony Ellis and Ronald Ellis (filed as Exhibit 2.1 to the Registrant's Current Report
on Form 8-K dated October 14, 1994 and incorporated by reference herein)
10.11 Amendment to Purchase Agreement, dated October 14, 1994, between NCI Building Systems, L.P., Ellis
Building Components, Inc., Tony Ellis and Ronald Ellis (filed as Exhibit 2.2 to the Registrant's Current
Report on Form 8-K dated October 14, 1994 and incorporated by reference herein)
10.12 Form of Mesco Metal Buildings Agreement (filed as Exhibit 4.13 to the Registrant's Annual Report on Form
10-K for the fiscal year ended October 31, 1996 and incorporated by reference herein)
10.13 Asset Purchase Agreement, dated October 13, 1995, by and among Doors & Building Components, Inc., David
B. Curtis, DBCI Acquisition Corp. and the Registrant (filed as Exhibit 2 to the Registrant's Current
Report on Form 8-K dated November 13, 1995 and incorporated by reference herein)
10.14 Asset Purchase Agreement, dated April 1, 1996, by and among Anderson Industries, Inc., Charles W.
Anderson, Thomas L. Anderson, Jr., John T. Eubanks, Robert K. Landon, NCI Building Systems, L.P. and the
Registrant (filed as Exhibit 2 to the Registrant's Current Report on Form 8-K dated April 1, 1996 and
incorporated by reference herein)
10.15 Employment Agreement, dated April 1, 1996, between the Registrant and John T. Eubanks (filed as Exhibit
10.19 to the Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1997 and
incorporated by reference herein)
10.16 Stock Purchase Agreement, dated March 25, 1998, by and among BTR Australia Limited and the Registrant,
and joined therein for certain purposes by BTR plc (filed as Exhibit 2.1 to the Registrant's Current
Report on Form 8-K dated May 19, 1998 and incorporated by reference herein)
10.17 Letter Agreement, dated May 4, 1998, by and among the Registrant, BTR Australia Limited and BTR plc,
amending the Stock Purchase Agreement (filed as Exhibit 2.2 to the Registrant's Current Report on Form
8-K dated May 19, 1998 and incorporated by reference herein)
*10.18 Note Purchase Agreement, dated April 30, 1999, by and among the Registrant, the guarantors named
therein, Warburg Dillon Read LLC, Montgomery NationsBanc Securities LLC, First Union Capital Markets
Corp. and Bear, Stearns & Co. Inc.
*10.19 Registration Rights Agreement, dated May 5, 1999, by and among the Registrant, the guarantors named
therein, Warburg Dillon Read LLC, Montgomery NationsBanc Securities LLC, First Union Capital Markets
Corp. and Bear, Stearns & Co. Inc.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
*10.20 Indenture, dated May 5, 1999, by and among the Registrant, the guarantors named therein and Harris Trust
Company of New York
21.1 List of Subsidiaries (filed as Exhibit 21 to the Registrant's Annual Report on Form 10-K for the fiscal
year ended October 31, 1998 and incorporated by reference herein)
*23.1 Consent of Ernest & Young LLP
*23.2 Consent of Gardere & Wynne, L.L.P. (included in Exhibit 5.1)
*24.1 Power of Attorney (set forth on page II-7)
*99.1 Letter of Transmittal and Notice of Guaranteed Delivery
</TABLE>
- ------------------------
* Filed herewith.
<PAGE>
AMENDMENT NO. 1
TO THE
AMENDED AND RESTATED BY-LAWS OF
NCI BUILDING SYSTEMS, INC.
March 17, 1999
The Amended and Restated By-Laws, dated as of February 5, 1992 (the
"By-Laws"), of NCI Building Systems, Inc., a Delaware corporation (the
"Company") are hereby amended as follows:
1. The first sentence of Article V, Section 1 is hereby amended to
read in its entirety as follows:
"The elected officers of the corporation shall be a chief
executive officer, a chief operating officer, a president, one or more
vice presidents, with or without such descriptive titles as the board
of directors shall deem appropriate, a secretary and a treasurer and,
if the board of directors so elects a chairman of the board (who shall
be a director) and a controller."
and the following sentence is added at the end of Article V, Section 1:
"Unless otherwise provided in a resolution of the board of directors
or a written directive of the chief executive officer, each of the
officers of the corporation shall have general authority to agree upon
and execute all bonds, evidences of indebtedness, deeds, leases,
contracts, and other obligations in the name of the corporation and
affix the corporate seal thereto."
2. Article V, Section 5 of the By-Laws is hereby amended by replacing
the word "president" therein with the words "chief executive officer and
chief operating officer".
3. Article V, Section 6 of the By-Laws is hereby amended to read in
its entirety as follows:
"Section 6. DUTIES OF THE CHIEF EXECUTIVE OFFICER. The chief
executive officer shall have responsibility for and general
supervision of the affairs of the corporation and shall have general
and active executive charge, management, and control of all the
business, operations, and properties of the corporation with all such
powers as may be reasonably incident to such responsibilities, subject
to the provisions of these by-laws and the control of the board of
directors. Unless a chairman of the board shall have been elected,
the chief executive officer shall preside, when present, at all
meetings of stockholders and at all meetings of the board of
directors. The chief executive officer shall be the ranking officer
of the
<PAGE>
corporation, to whom all other officers shall be subordinate, and he
shall be responsible for and see that all orders and resolutions
of the stockholders and the board of directors are carried into effect.
The chief executive officer shall have the power and authority to sign
stock certificates; to cause the employment or appointment of such
employees and agents of the corporation as the proper conduct of
operations may require; to terminate, remove or suspend any employee
or agent who shall have been employed or appointed under his authority
or under authority of an officer subordinate to him; to suspend for cause
any officer subordinate to the chief executive officer, pending final
action by the board of directors or such other authority as shall have
elected or appointed such officer; to delegate any of the foregoing
powers and authority to any other officer or agent of the corporation;
and, in general, to exercise all the powers and authority usually
appertaining to the chief executive officer of a corporation (except
as otherwise provided in these by-laws or in resolutions or written
directives of the board of directors), as may be designated in accordance
with these by-laws, and as from time to time may be assigned to him by the
board of directors. In the absence of the chief executive officer, his
duties shall be performed and his powers may be exercised by the chief
operating officer, if different from the chief executive officer and
president, by the president in the absence of the chief operating
officer, or otherwise by such other officer as the chief executive
officer shall designate in writing or (failing such designation) by
the executive committee (if any has been appointed) or such officer as
it may designate in writing, subject, in either case, to review and
superseding action by the board of directors."
4. Article V of the By-Laws is hereby amended by adding new Section 6A
and new Section 6B, which shall read in their entirety as follows:
"Section 6A. DUTIES OF THE CHIEF OPERATING OFFICER. The chief
operating officer shall have general, active supervision of and
responsibility for the business operations of the corporation, subject
to the review and approval of the chief executive officer. The chief
operating officer shall have the same authority and powers with
respect to the conduct of the business operations of the corporation
as has the chief executive officer with respect to its affairs
generally. As such, he shall have all such powers and authority as
may be reasonably incident to such responsibilities and as usually
appertain to the chief operating officer of a corporation (except as
otherwise provided in these by-laws or in resolutions or written
directives of the board of directors or chief executive officer), as
well as other powers and authority as may be designated in accordance
with these by-laws and as from time to time may be assigned to him by
the board of directors or the chief executive officer. He shall
preside, in the absence of any other person designated by these
by-laws, at all meetings of the board of directors and shareholders.
He shall have the power and authority to sign stock certificates. The
chief operating officer shall report
2
<PAGE>
to the chief executive officer and otherwise shall be the ranking officer
of the corporation to whom all other officers shall be subordinate."
"Section 6B. DUTIES OF THE PRESIDENT. The president shall be
the chief executive officer and/or the chief operating officer of the
corporation, unless a chief executive officer or a chief operating
officer is otherwise elected. The president shall have all powers
and authority as usually appertain to the president of a corporation
(except as otherwise provided in these by-laws or in resolutions or
written directives of the board of directors or chief executive
officer), as well as other powers and authority as may be designated
in accordance with these by-laws and as from time to time may be
assigned to him by the board of directors or the chief executive
officer. He shall have the power and authority to sign stock
certificates."
5. Article V, Section 8 of the By-Laws is hereby amended by replacing
the word "president" therein with the words "chief executive officer or chief
operating officer".
6. Article V, Section 9 of the By-Laws is hereby amended by replacing
the word "president" therein with the words "chief executive officer".
7. The first sentence of Article VII, Section 1 of the By-Laws is
hereby amended by adding the phrase "the chief executive officer, the chief
operating officer," immediately before the words "the president".
8. Any reference to the "by-laws" in the By-Laws shall be deemed to be
a reference to the By-Laws, as amended by this Amendment No. 1.
3
<PAGE>
WAIVER, CONSENT AND THIRD AMENDMENT
THIS WAIVER, CONSENT AND THIRD AMENDMENT (this "WAIVER") is entered into
as of May 5, 1999, between NCI Building Systems, Inc., a Delaware corporation
("BORROWER"), NationsBank, N.A., as Administrative Agent ("AGENT"), UBS, AG,
Stamford Branch, as Documentation Agent ("DOCUMENTATION AGENT"), and the
financial institutions named as Lenders therein (collectively, "LENDERS").
Capitalized Terms not defined herein have the meaning giving such terms in
the Credit Agreement described below.
RECITALS
A. Borrower, Agent, Documentation Agent, NationsBanc Montgomery
Securities LLC, as Syndication Agent, and Lenders executed a credit agreement
dated as of March 25, 1998 (as previously amended by the First Amendment
dated May 1,1998 and the Second Amendment dated May 5, 1998, the "CREDIT
AGREEMENT").
B. Borrower intends to issue a minimum of $125,000,00 Senior
Subordinated Notes due 2009 (the "SENIOR NOTES").
C. The Senior Notes will constitute Funded Debt, and will be Permitted
Debt under the Credit Agreement in accordance with item (7) on SCHEDULE 7.15
thereto, PROVIDED THAT (i) such debt is contractually subordinated or junior
in right of payment to the Obligation on terms satisfactory to Determining
Lenders, and (ii) the Companies comply with SECTION 3.2(c)(iii) of the
Agreement with respect to mandatory prepayments of the Facilities.
D. Attached as EXHIBIT "A" to this Waiver are extracts to Section 1.01
(Definitions) and the entire Article Eleven (Subordination) of the April 28,
1999 draft of the Indenture covering the Senior Notes ("SENIOR NOTES
INDENTURE") as delivered by Borrower to Agent, which among other things, sets
forth the subordination terms of the Senior Notes ("SUBORDINATION TERMS").
E. Among other things, SECTION 3.2(c) of the Credit Agreement requires
Borrower to prepay the Principal Debt in the amount of 100% of any Funded
Debt incurred by any Company after the date of the Credit Agreement (net of
underwriting discounts and commissions and other costs associated therewith)
together with payment of any resulting Funding Loss PLUS all accrued and
unpaid interest on the principal amount prepaid.
F. SECTION 3.2(c) of the Credit Agreement also requires that, provided
no Default or Potential Default exists, mandatory prepayments required to be
made under SECTION 3.2(c) be applied in the following order: FIRST to the
Facility C Principal Debt (with a matching reduction of the Facility C
Commitment); SECOND to installments of principal due under Facility B in the
inverse order of maturity; and THIRD to the Facility A Principal Debt (with a
matching reduction of the Facility A Commitment).
G. SECTION 9.2 of the Credit Agreement prohibits any Company from
voluntarily prepaying principal of, or interest on, any Debt, OTHER THAN the
Obligation, if a Default or Potential Default exists.
H. Borrower has requested that Lenders (i) waiver the requirement in
SECTION 3.2(c) of the Credit Agreement that the Facility C Commitment be reduced
by the amount of the mandatory prepayment of the net proceeds of the Senior
Notes (the "SENIOR NOTES PROCEEDS") and (ii) consent to the Subordination
<PAGE>
Terms and Lenders are willing to do so if SECTION 9.2 of the Credit Agreement
is amended to prohibit a Company from repaying, repurchasing, redeeming or
defeasing Subordinated Debt without the prior written consent of Determining
Lenders.
NOW, THEREFORE, in consideration of the premises herein contained and
other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the undersigned agree as follows:
1. WAIVER AND CONSENT. Subject to the conditions set forth below,
each Lender that has executed this Waiver hereby (a) waivers any violation
of, or noncompliance with, any provision of any Loan Document caused solely
by the Facility C Commitment not being reduced by the amount of the Senior
Note Proceeds (including, without limitation, SECTION 3.2(c) of the Credit
Agreement), (b) agrees that upon application of the Senior Notes Proceeds
pursuant to this Waiver, the Facility C Commitment will be $40,000,000, which
will be split equally between UBS, AG and NationsBank, N.A. ("POST SENIOR
NOTES PROCEEDS FACILITY C AVAILABILITY"), (c) agrees not to exercise any of
its Rights available under the Loan Documents solely as a result of any such
violation or noncompliance described in clause (a) of this PARAGRAPH 1, and
(d) consents to the Subordination Terms. Except as set forth in the
immediately preceding sentence, Borrower hereby agrees that such waiver and
consent does not constitute a waiver of, or a consent to, any present or
future violation of or noncompliance with any provision of any Loan Document
or a waiver of each Lender's right to insist upon future compliance with each
term, covenant, condition, and provision of the Loan Documents.
2. THIRD AMENDMENT TO CREDIT AGREEMENT. The Credit Agreement is
hereby amended as follows:
(a) SECTION 1.1 of the Credit Agreement is hereby amended by
adding the following defined terms in their appropriate alphabetical order:
(i) "SENIOR NOTES means the 9 1/4% $125,000,000 Senior
Subordinated Notes of Borrower due 2009 issued pursuant to the Senior Notes
Indenture."
(ii) "SENIOR NOTES INDENTURE means, with respect to the Senior
Notes, the Indenture dated May 5, 1999 among Borrower, as issuer, the
Guarantors (as defined therein), and Harris Trust Company of New York, as
trustee."
(b) SECTION 9.2 of the Credit Agreement is hereby amended by
adding the following sentence at the end of SECTION 9.2:
"No Company may repay, repurchase, redeem or defease
Subordinated Debt without the prior written consent of
Determining Lenders; PROVIDED, HOWEVER, THAT if Borrower has
a ratio of Funded Debt to EBITDA for the 12-month period
ending on the last day of the immediately preceding month of
less than 3.50 to 1.00, then the Companies may use 50% of
the cash proceeds (net of underwriting discounts and
commissions and other costs associated therewith) received
by any Company from the issuance and sale of equity
securities (other than sales of Borrower's common stock to
employees as a result of the exercise of any options with
regard thereto)
2
<PAGE>
to repay, repurchase, redeem or defease Subordinated Debt,
including, without limitation, the Senior Notes in
accordance with the terms of the Senior Notes Indenture."
3. CONDITIONS. This Waiver shall not be effective until (a) it
has been duly executed and delivered by (i) Borrower, (ii) each Guarantor,
(iii) Agent, (iv) Documentation Agent, and (v) at least Determining Lenders,
and (b) Borrower has delivered to Agent for the benefit of Lenders a
certificate from a Responsible Officer of Borrower that (i) no Default or
Potential Default exists under the Credit Agreement, (ii) the Senior Notes
have been issued, (iii) no default or event of default exists under the
Senior Note Indenture, and (iv) contains a true and complete copy of the
Senior Notes Indenture and all material documents or instruments delivered in
connection therewith.
4. DEFAULT. Any breach of the foregoing covenants shall
constitute a "Default" under the Credit Agreement.
5. REPRESENTATIONS AND WARRANTIES. Borrower hereby represents
and warrants to Agent and each Lender that: (a) the execution and delivery of
this Waiver has been authorized by all requisite action on its part and will
not violate its organizational documents; (b) the representations and
warranties in each Loan Document to which it is a party are true and correct
in all material respects on and as of the date hereof as though made on and
as of the date hereof (EXCEPT to the extent that (i) such representations and
warranties speak to a specific date, or (ii) the facts on which such
representations and warranties are based have been changed by transactions
contemplated by the Credit Agreement or the Post Senior Notes Proceeds
Facility C Availability); and (c) it is in full compliance with all Loan
Documents to which it is a party (EXCEPT for noncompliance cause solely by
the Post Senior Note Proceeds Facility C Availability).
6. MISCELLANEOUS. This Waiver is a Loan Document, and,
therefore, this Waiver is subject to the applicable provisions of SECTION 14
of the Credit Agreement, all of which applicable provisions are incorporated
herein by reference the same as if set forth herein verbatim. Except as
affected by this Waiver, the Loan Documents are unchanged and continue to
full force and effect. Borrower agrees that all Loan Documents are unchanged
and continue in full force and effect. Borrower agrees that all Loan
Documents to which it is a party remain in full force and effect and continue
to evidence its legal, valid, and binding obligations enforceable in
accordance with their terms (as the same are affected by this Wavier).
Borrower hereby releases Agent and each Lender from any liability for actions
or failures to act in connection with the Loan Documents prior to the date
hereof. This Waiver shall be binding upon and inure to the benefit of each
of the undersigned and their respective successors and permitted assigns.
7. FEES AND EXPENSES. Borrower agrees to pay the reasonable fees
and expenses of counsel to Agent for services rendered in connection with the
preparation, negotiation and execution of this Waiver.
8. FORM. Each agreement, document, instrument or other writing
to be furnished Agent or Lenders under any provision of this instrument must
be in form and substance satisfactory to Agent and its counsel.
3
<PAGE>
9. COUNTERPARTS. This Waiver may be executed in more than one
counterpart, each of which when so executed shall be deemed to be an
original, but all of which when taken together shall constitute one and the
same instrument.
10. FINAL AGREEMENT. THE LOAN DOCUMENTS, AS AMENDED HEREBY,
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED
BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO ORAL AGREEMENTS BETWEEN THE PARTIES.
EXECUTED as of the date first written above.
NCI BUILDING SYSTEMS, INC., AS BORROWER
By: /s/ ROBERT J. MEDLOCK
------------------------------------
Robert J. Medlock
Executive Vice President
NATIONSBANK, N.A. AS ADMINISTRATIVE AGENT
AND A LENDER
By: /s/ Richard L. Nichols, Jr.
------------------------------------
Richard L. Nichols, Jr.
Vice President
4
<PAGE>
UBS AG, STAMFORD BRANCH,
AS DOCUMENTATION AGENT AND A LENDER
By: /s/ Richard T. Conway
----------------------------------------------
Name: Richard T. Conway
----------------------------------------------
Title: Associate Director, Loan Portfolio Support, US
----------------------------------------------
By: /s/ Wilfred Saint
----------------------------------------------
Name: Wilfred Saint
----------------------------------------------
Title: Associate Director, Loan Portfolio Support, US
----------------------------------------------
THE BANK OF NOVA SCOTIA, AS A LENDER
By:
----------------------------------------------
Name:
----------------------------------------------
Title:
----------------------------------------------
TYLER TRADING INC., AS A LENDER
By: /s/ David W. Nabors
----------------------------------------------
Name: David W. Nabors
----------------------------------------------
Title: Vice President
----------------------------------------------
UNION BANK OF CALIFORNIA, N.A., AS A LENDER
By: /s/ J. Scott Jessup
----------------------------------------------
Name: J. Scott Jessup
----------------------------------------------
Title: Vice President
----------------------------------------------
IMPERIAL BANK, AS A LENDER
By:
----------------------------------------------
Name:
----------------------------------------------
Title:
----------------------------------------------
5
<PAGE>
FIRST UNION CAPITAL MARKETS, INC.,
AS A LENDER
By: /s/ C. Jeffrey Seaton
----------------------------------------------
Name: C. Jeffrey Seaton
----------------------------------------------
Title: Senior Vice President
----------------------------------------------
COMPAGNIE FINANCIERE DE CIC ET DE
L'UNION EUROPEENNE, AS A LENDER
By: /s/ Anthony Rock /s/ Brian O'Leary
----------------------------------------------
Name: Anthony Rock Brian O'Leary
----------------------------------------------
Title: Vice President Vice President
----------------------------------------------
COMERICA BANK, AS A LENDER
By: /s/ Mark B. Grover
----------------------------------------------
Name: Mark B. Grover
----------------------------------------------
Title: Vice President
----------------------------------------------
CREDIT LYONNAIS NEW YORK BRANCH,
AS A LENDER
By:
----------------------------------------------
Name:
----------------------------------------------
Title:
----------------------------------------------
CREDITANSTALTCORPORATEFINANCE,
INC., AS A LENDER
By:
----------------------------------------------
Name:
----------------------------------------------
Title:
----------------------------------------------
By:
----------------------------------------------
Name:
----------------------------------------------
Title:
----------------------------------------------
6
<PAGE>
GENERAL ELECTRIC CAPITAL
CORPORATION, AS A LENDER
By: /s/ Robert M. Kadlick
----------------------------------------------
Name: Robert M. Kadlick
----------------------------------------------
Title: Duly Authorized Signatory
----------------------------------------------
SOCIETE GENERALE, AS A LENDER
By:
----------------------------------------------
Name:
----------------------------------------------
Title:
----------------------------------------------
WACHOVIA BANK, N.A., AS A LENDER
By: /s/ Paige D. Mesaros
----------------------------------------------
Name: Paige D. Mesaros
----------------------------------------------
Title: Vice President
----------------------------------------------
CIBC, INC., AS A LENDER
By:
----------------------------------------------
Name:
----------------------------------------------
Title:
----------------------------------------------
CREDIT AGRICOLE INDOSUEZ, AS A LENDER
By:
----------------------------------------------
Name:
----------------------------------------------
Title:
----------------------------------------------
7
<PAGE>
THE FUJI BANK, LIMITED, AS A LENDER
By:
----------------------------------------------
Name:
----------------------------------------------
Title:
----------------------------------------------
THE INDUSTRIAL BANK OF JAPAN,
LIMITED, AS A LENDER
By: /s/ Takuya Honjo
----------------------------------------------
Name: Takuya Honjo
----------------------------------------------
Title: Senior Vice President
----------------------------------------------
THE LONG-TERM CREDIT BANK OF JAPAN,
LIMITED, AS A LENDER
By: /s/ Sadao Muraoka
----------------------------------------------
Name: Sadao Muraoka
----------------------------------------------
Title: Head of Southwest Region
----------------------------------------------
SOUTHWEST BANK OF TEXAS, N.A., AS A LENDER
By:
----------------------------------------------
Name:
----------------------------------------------
Title:
----------------------------------------------
[CONSENT OF EACH GUARANTOR FOLLOWS ON NEXT PAGE.]
8
<PAGE>
GUARANTORS' CONSENT
Each of the undersigned:
(a) consents and agrees to this Waiver and agrees that the Loan Documents to
which it is a party shall remain in full force and effect and shall
continue to be the legal, valid, and binding obligations of the undersigned
enforceable in accordance with their terms;
(b) confirms that Borrower's obligations to each Lender in connection with the
Senior Note Proceeds are part of the debt guaranteed and secured by any
guaranty or security document to which it is a party;
(c) represents and warrants to each Lender that: (a) the execution and delivery
of this Waiver have been authorized by all requisite action on its part and
will not violate its organizational documents; (b) the representations and
warranties in each Loan Document to which it is a party are true and
correct in all material respects on and as of the date hereof as though
made on and as of the date hereof (EXCEPT to the extent that (i) such
representations and warranties speak to a specific date, or (ii) the facts
on which such representations and warranties are based have been changed by
transactions contemplated by the Credit Agreement or the Senior Note
Proceeds Application); and (c) it is in full compliance with all Loan
Documents to which it is a party (EXCEPT for noncompliance caused solely by
the Senior Note Proceeds Application).
(d) releases each Lender from any liability for actions or failures to act in
connection with the Loan Documents prior to the date hereof.
NCI HOLDING CORP.
NCI OPERATING CORP.
METAL BUILDING COMPONENTS HOLDINGS, INC.
METAL COATERS HOLDING, INC.
METAL COATERS OF CALIFORNIA, INC.
By: /s/ Robert J. Medlock
-------------------------------------
Robert J. Medlock
Vice President
A & S BUILDING SYSTEMS, L.P.
NCI BUILDING SYSTEMS, L.P.
MBCI OPERATING, L.P.
METAL COATERS OPERATING, L.P.
By: NCI OPERATING CORP.,
as General Partner
By: /s/ Robert J. Medlock
-------------------------------------
Robert J. Medlock
Vice President
9
<PAGE>
REPLACEMENT FACILITY C NOTE
(364-day Revolving Facility)
$20,000,000 Houston, Texas As of May 5, 1999
FOR VALUE RECEIVED, NCI BUILDING SYSTEMS, INC., a Delaware corporation
("MAKER"), hereby promises to pay to the order of NATIONSBANK, N.A. ("PAYEE")
on or before the Facility C Termination Date, the principal amount of TWENTY
MILLION DOLLARS or so much thereof as may be disbursed and outstanding as the
Facility C Principal Debt under this note, together with interest, as
described below.
This note has been executed and delivered under, and is subject to the
terms of, the Credit Agreement dated as of March 25, 1998 (as amended,
supplemented or restated, the "CREDIT AGREEMENT"), among Maker, NationsBank
of Texas, N.A., as Administrative Agent, and the Lenders and other parties
named in the Credit Agreement (including, without limitation, Payee) and is
one of the Facility C Notes referred to in the Credit Agreement. Unless
defined in this note, or the context requires otherwise, capitalized terms
used in this note have the meanings given to such terms in the Credit
Agreement. Reference is made to the Credit Agreement for provisions
affecting this note regarding applicable interest rates, principal and
interest payment dates, final maturity, voluntary and mandatory prepayments,
acceleration of maturity, exercise of Rights, payment of attorneys' fees,
court costs and other costs of collection, certain waivers by Maker and
others now or hereafter obligated for payment of any sums due under this
note, and security for the payment of this note. This note is a Loan
Document and, therefore, is subject to the applicable provisions of SECTION
14 of the Credit Agreement, all of which applicable provisions are
incorporated into this note by reference as if set forth in this note
verbatim. This note is issued as a replacement for, and as an extension of
(but not a novation of) the Facility C Note dated May 1, 1998, executed by
Maker and payable to the order of NationsBank of Texas, N.A. in the principal
amount of $140,000,000 and the Facility C Note dated July 31, 1998, executed
by Maker and payable to the order of Payee in the principal amount of
$129,500,000.
Specific reference is made to SECTION 3.8 of the Credit Agreement for
usury savings provisions. This note is being executed and delivered, and is
intended to be performed, in the State of Texas, and the Laws of such State
and of the United States of America shall govern the Rights and duties of
Maker and Payee and the validity, construction, enforcement and
interpretation of this note.
THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE DETERMINED
SOLELY FROM WRITTEN AGREEMENTS, DOCUMENTS, AND INSTRUMENTS, AND ANY PRIOR
ORAL AGREEMENTS BETWEEN THE PARTIES ARE SUPERSEDED BY AND MERGED INTO SUCH
WRITINGS. THIS NOTE, THE CREDIT AGREEMENT (AS AMENDED IN WRITING FROM TIME TO
TIME) AND THE OTHER WRITTEN LOAN DOCUMENTS EXECUTED BY THE MAKER AND THE
PAYEE (OR BY THE MAKER FOR THE BENEFIT OF THE PAYEE) REPRESENT THE FINAL
AGREEMENT BETWEEN THE MAKER AND THE PAYEE AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
NCI BUILDING SYSTEMS, INC.,
a Delaware corporation
By: /s/ Robert J. Medlock
-------------------------------------
Robert J. Medlock, Executive Vice
President and Chief Financial Officer
<PAGE>
REPLACEMENT FACILITY C NOTE
(364-day Revolving Facility)
$20,000,000 Houston, Texas As of May 5, 1999
FOR VALUE RECEIVED, NCI BUILDING SYSTEMS, INC., a Delaware corporation
("MAKER"), hereby promises to pay to the order of UBS AG, STAMFORD BRANCH
(successor to Swiss Bank Corporation, Stamford Branch) ("PAYEE") on or before
the Facility C Termination Date, the principal amount of TWENTY MILLION
DOLLARS or so much thereof as may be disbursed and outstanding as the
Facility C Principal Debt under this note, together with interest, as
described below.
This note has been executed and delivered under, and is subject to the
terms of, the Credit Agreement dated as of March 25, 1998 (as amended,
supplemented or restated, the "CREDIT AGREEMENT"), among Maker, NationsBank
of Texas, N.A., as Administrative Agent, and the Lenders and other parties
named in the Credit Agreement (including, without limitation, Payee) and is
one of the Facility C Notes referred to in the Credit Agreement. Unless
defined in this note, or the context requires otherwise, capitalized terms
used in this note have the meanings given to such terms in the Credit
Agreement. Reference is made to the Credit Agreement for provisions
affecting this note regarding applicable interest rates, principal and
interest payment dates, final maturity, voluntary and mandatory prepayments,
acceleration of maturity, exercise of Rights, payment of attorneys' fees,
court costs and other costs of collection, certain waivers by Maker and
others now or hereafter obligated for payment of any sums due under this
note, and security for the payment of this note. This note is a Loan
Document and, therefore, is subject to the applicable provisions of SECTION
14 of the Credit Agreement, all of which applicable provisions are
incorporated into this note by reference as if set forth in this note
verbatim. This note is issued as a replacement for, and as an extension (but
not a novation of) the Facility C Note dated May 1, 1998, executed by Maker
and payable to the order of Swiss Bank Corporation, Stamford Branch in the
principal amount of $60,000,000 and the Facility C Note dated July 31, 1998,
executed by Maker and payable to the order of Payee in the principal amount
of $55,500,000.
Specific reference is made to SECTION 3.8 of the Credit Agreement for
usury savings provisions. This note is being executed and delivered, and is
intended to be performed, in the State of Texas, and the Laws of such State
and of the United States of America shall govern the Rights and duties of
Maker and Payee and the validity, construction, enforcement and
interpretation of this note.
THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE DETERMINED
SOLELY FROM WRITTEN AGREEMENTS, DOCUMENTS, AND INSTRUMENTS, AND ANY PRIOR
ORAL AGREEMENTS BETWEEN THE PARTIES ARE SUPERSEDED BY AND MERGED INTO SUCH
WRITINGS. THIS NOTE, THE CREDIT AGREEMENT (AS AMENDED IN WRITING FROM TIME TO
TIME) AND THE OTHER WRITTEN LOAN DOCUMENTS EXECUTED BY THE MAKER AND THE
PAYEE (OR BY THE MAKER FOR THE BENEFIT OF THE PAYEE) REPRESENT THE FINAL
AGREEMENT BETWEEN THE MAKER AND THE PAYEE AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
NCI BUILDING SYSTEMS, INC.,
a Delaware corporation
By: /s/ Robert J. Medlock
-------------------------------------
Robert J. Medlock, Executive Vice
President And Chief Financial Officer
<PAGE>
EXHIBIT 5.1
June 4, 1999
NCI Building Systems, Inc.
7301 Fairview
Houston, Texas 77041
Ladies and Gentlemen:
We have served as counsel for NCI Building Systems, Inc., a Delaware
corporation (the "Company"), in connection with the Registration Statement on
Form S-4 (the "Registration Statement") filed with the Securities and
Exchange Commission with respect to the registration under the Securities Act
of 1933, as amended (the "Securities Act"), of $125,000,000 principal amount
of the Company's 91/4% Series B Senior Subordinated Notes due 2009 (the
"Notes") to be offered in exchange for the Company's outstanding $125,000,000
principal amount 91/4% Series A Senior Subordinated Notes due 2009.
We have examined the Registration Statement, the Indenture between the
Company and Harris Trust Company of New York, as Trustee, pursuant to which
the Notes are to be issued (the "Indenture"), the form of the Notes to be
issued and such other documents and such questions of law as we have deemed
necessary to render the opinion expressed below.
In our examination, we have assumed the genuineness of all signatures,
the legal capacity of all natural persons, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as copies and the authenticity of the originals of
such copied documents. We have also assumed, with respect to all persons and
entities other than the Company, the power (corporate or otherwise) of such
persons or entities to enter into and perform all of their obligations under
the Indenture, the due authorization by all requisite action (corporate or
otherwise) on the part of such persons or entities, the due execution and
delivery by such persons or entities of such document and the validity and
binding effect thereof. As to any facts material to the opinion expressed
herein that we did not independently establish or verify, we have relied upon
oral or written statements, certificates and representations of officers and
other representatives of the Company and others.
Based upon the foregoing, and subject to the qualifications set forth
below, we are of the opinion that when the Notes are executed and
authenticated in accordance with the terms of the Indenture and delivered in
the manner and for the consideration described in the Registration Statement,
the Notes will be binding and enforceable obligations of the Company.
The opinion expressed above is subject to the following qualifications:
A. The binding nature and enforceability of the Notes may be limited
by (i) bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or transfer and other similar laws affecting the enforcement of
creditors' rights generally and (ii) equitable principles of general
application and judicial discretion that may limit or affect the availability
or grant of certain equitable remedies in certain instances. In addition,
the binding nature and enforceability of certain of the remedial, waiver and
other provisions of the Notes, or of the Indenture, may be restricted by
applicable state law, but such restrictions will not, in our opinion, render
the Notes invalid as a whole or substantially
<PAGE>
interfere with the realization of the principal legal benefits purported to
be provided by the Notes or by the Indenture (except to the extent of any
procedural delay that may result therefrom). Further, the binding nature and
enforceability of the indemnification provisions of the Indenture may be
limited by public policies embodied in or reflected by various state and
federal securities laws.
B. The opinion expressed herein is limited to the laws of the United
States of America and the laws of the State of Texas, and we assume no
responsibility as to the applicability or the effect of any other laws. We
have assumed that the laws of the State of New York, which purport to govern
the Notes and the Indenture, are the same as the laws of the State of Texas
with respect to the binding nature and enforceability of the Notes.
We consent to the use of this opinion letter as an exhibit to the
Registration Statement and to the use of our name in the Registration
Statement under the heading "Legal Matters." Our consent, however, is not an
admission that we come within the category of persons whose consent is
required under Section 7 of the Securities Act or the rules and regulations
of the Securities and Exchange Commission.
Very truly yours,
GARDERE & WYNNE, L.L.P.
By: /s/ Randall G. Ray
-------------------------------------
Randall G. Ray, Partner
<PAGE>
Execution Copy
NCI BUILDING SYSTEMS, INC.
$125,000,000
9 1/4% Senior Subordinated Notes due 2009
NOTE PURCHASE AGREEMENT
April 30, 1999
New York, New York
Warburg Dillon Read LLC
299 Park Avenue
New York, New York 10171
NationsBanc Montgomery Securities LLC
301 South College Street, TW-5
Charlotte, North Carolina 28288-0604
First Union Capital Markets Corp.
One First Union Center
301 South College Street, TW-10
Charlotte, North Carolina 28288-0606
Bear, Stearns & Co. Inc.
300 Crescent Court, #200
Dallas, Texas 75201
Ladies and Gentlemen:
NCI Building Systems, Inc., a Delaware corporation (the "Company"),
and each of the Guarantors (as defined herein), agrees with you as follows:
1. ISSUANCE OF NOTES. The Company proposes to issue and sell to
Warburg Dillon Read LLC, NationsBanc Montgomery Securities LLC, First Union
Capital Markets Corp. and Bear, Stearns & Co. Inc.(the "Initial Purchasers")
$125,000,000 aggregate principal amount of 9 1/4% Senior Subordinated Notes
due 2009 (the "Original Notes"). The Original Notes will be issued pursuant
to an indenture (the "Indenture"), to be dated the Closing Date (as defined
herein), by and among the Company, the Guarantors and Harris Trust Company of
New York, as trustee (the
-1-
<PAGE>
"Trustee"). The Company's obligations under the Original Notes will be
unconditionally guaranteed, jointly and severally, (the "Guarantees") on an
unsecured senior subordinated basis by the subsidiary guarantors identified
on Schedule B hereto (collectively, the "Guarantors", and collectively with
the Company, the "Issuers"). All references herein to the Original Notes
include the related Guarantees, unless the context otherwise requires.
Capitalized terms used but not otherwise defined herein shall have the
meanings given to such terms in the Indenture or the Offering Memorandum (as
defined herein).
The Original Notes will be offered and sold to the Initial Purchasers
pursuant to an exemption from the registration requirements under the
Securities Act of 1933, as amended (the "Act"). The Issuers have prepared a
preliminary offering memorandum, dated April 15, 1999 (the "Preliminary
Offering Memorandum"), and a final offering memorandum dated as of the date
hereof (the "Offering Memorandum") relating to the Company, the Guarantors
and the Original Notes.
The Initial Purchasers have advised the Company that the Initial
Purchasers intend, as soon as they deem practicable after this Note Purchase
Agreement (this "Agreement") has been executed and delivered, to resell (the
"Exempt Resales") the Original Notes purchased by the Initial Purchasers
under this Agreement in private sales exempt from registration under the Act
on the terms set forth in the Offering Memorandum, as amended or
supplemented, solely to (i) persons whom the Initial Purchasers reasonably
believe to be "qualified institutional buyers," as defined in Rule 144A under
the Act ("QIBs"), and (ii) other eligible purchasers pursuant to offers and
sales that occur outside the United States within the meaning of Regulation S
under the Act; the persons specified in clauses (i) and (ii) are sometimes
collectively referred to herein as the "Eligible Purchasers."
Holders (including subsequent transferees) of the Original Notes will
have the registration rights set forth in the registration rights agreement
(the "Registration Rights Agreement") to be dated the Closing Date in form
and substance satisfactory to the Initial Purchasers and conforming to the
description thereof in the Offering Memorandum, for so long as such Original
Notes constitute "Registerable Securities" (as defined in the Registration
Rights Agreement). Pursuant to the Registration Rights Agreement, the Issuers
will agree to (i) file with the Securities and Exchange Commission (the
"Commission") under the circumstances set forth in the Registration Rights
Agreement, (a) a registration statement under the Act (the "Exchange Offer
Registration Statement") relating to a new issue of debt securities
(collectively with the Private Exchange Notes (as defined in the Registration
Rights Agreement) the "New Notes" and, together with the Original Notes, the
"Notes," which term includes the Guarantees related thereto) to be offered in
exchange for the Original Notes (the "Exchange Offer") and issued under the
Indenture or an indenture substantially identical to the Indenture and/or (b)
under certain circumstances set forth in the Registration Rights Agreement, a
shelf registration statement pursuant to Rule 415 under the Act (the "Shelf
Registration Statement" and, together with the Exchange Offer Registration
Statement, the "Registration Statements") relating to the resale by certain
holders of the Original Notes, and (ii) use their reasonable best efforts to
cause such Registration Statements to be declared effective. This Agreement,
the Notes, the Indenture and the
-2-
<PAGE>
Registration Rights Agreement are hereinafter sometimes referred to
collectively as the "Operative Documents."
Upon original issuance of the Original Notes and until such time as
the same is no longer required under the applicable requirements of the Act,
the Original Notes shall bear the legend relating thereto set forth under
"Transfer Restrictions" in the Offering Memorandum.
2. AGREEMENTS TO SELL AND PURCHASE. On the basis of the
representations, warranties and covenants contained in this Agreement, and
subject to the terms and conditions contained in this Agreement, the Company
agrees to issue and sell to the Initial Purchasers, severally and not
jointly, and each of the Initial Purchasers, severally and not jointly,
agrees to purchase from the Company the aggregate principal amount of
Original Notes as set forth in Schedule A hereto. The purchase price for the
Original Notes shall be 97.250% of their principal amount. The Guarantors
shall, jointly and severally, unconditionally guarantee on an unsecured
senior subordinated basis the Company's obligations under the Notes.
3. DELIVERY AND PAYMENT. Delivery of, and payment of the purchase
price for, the Original Notes shall be made at 10:00 a.m., New York City
time, on May 5, 1999 (such date and time, the "Closing Date") at the offices
of Gibson, Dunn & Crutcher LLP, 200 Park Avenue, New York, New York 10166.
The Closing Date and the location of delivery of and the form of payment for
the Original Notes may be varied by mutual agreement between the Initial
Purchasers and the Company.
One or more of the Original Notes in global form registered in such
names as the Initial Purchasers may request upon at least one business day's
notice prior to the Closing Date, having an aggregate principal amount
corresponding to the aggregate principal amount of the Original Notes, shall
be delivered by the Company to the Initial Purchasers (or as the Initial
Purchasers direct), against payment by the Initial Purchasers of the purchase
price therefor by means of wire transfer of immediately available 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 Original Notes in global form shall be made available to the
Initial Purchasers for inspection not later than 11:00 a.m. on the business
day immediately preceding the Closing Date.
4. AGREEMENTS OF THE ISSUERS. The Issuers, jointly and severally,
covenant and agree with the Initial Purchasers as follows:
(a) To furnish the Initial Purchasers and those persons identified by
the Initial Purchasers, without charge, with as many copies of the
Preliminary Offering Memorandum and the Offering Memorandum, and any
amendments or supplements thereto, as the Initial Purchasers may reasonably
request. The Issuers consent to the use of the Preliminary Offering
Memorandum and the Offering Memorandum, and any amendments and supplements
thereto required pursuant to this Agreement, by the Initial Purchasers in
connection with Exempt Resales.
-3-
<PAGE>
(b) Not to amend or supplement the Offering Memorandum prior to the
Closing Date unless the Initial Purchasers shall previously have been
advised of, and shall not have objected to, such amendment or supplement
within a reasonable time, but in any event not longer than two business
days after being furnished with a copy of such amendment or supplement.
The Company shall promptly prepare, upon the Initial Purchasers'
reasonable request, any amendment or supplement to the Offering
Memorandum that may be necessary or advisable in connection with Exempt
Resales.
(c) If, during the time that an Offering Memorandum is required to
be delivered in connection with any Exempt Resales or market-making
transactions after the date of this Agreement and prior to the
consummation of the Exchange Offer, any event shall occur that, in the
judgment of the Issuers or in the judgment of counsel to the Initial
Purchasers, makes any statement of a material fact in the Offering
Memorandum as then amended or supplemented untrue or that requires the
making of any additions to or changes in the Offering Memorandum in order
to make the statements in the Offering Memorandum as then amended or
supplemented, in the light of the circumstances under which they are
made, not misleading, or if it is necessary to amend or supplement the
Offering Memorandum to comply with all applicable laws, the Issuers shall
promptly notify the Initial Purchasers of such event and prepare an
appropriate amendment or supplement to the Offering Memorandum so that
(i) the statements in the Offering Memorandum as amended or supplemented
will, in the light of the circumstances at the time that the Offering
Memorandum is delivered to prospective Eligible Purchasers, not be
misleading and (ii) the Offering Memorandum will comply with applicable
law.
(d) To cooperate with the Initial Purchasers and counsel to the
Initial Purchasers in connection with the qualification or registration
of the Original Notes under the securities or Blue Sky laws of such
jurisdictions as the Initial Purchasers may request and to continue such
qualification in effect so long as required for the Exempt Resales.
Notwithstanding the foregoing, none of the Issuers shall be required to
qualify as a foreign corporation in any jurisdiction in which it is not
so qualified or to file a general consent to service of process in any
such jurisdiction or subject itself to taxation in excess of a nominal
dollar amount in any such jurisdiction where it is not then so subject
(except service of process with respect to the offering and sale of the
Notes).
(e) To advise the Initial Purchasers promptly and, if requested by
the Initial Purchasers, to confirm such advice in writing, of the
issuance by any state securities commission of any stop order suspending
the qualification or exemption from qualification of any of the Original
Notes for offering or sale in any jurisdiction, or the initiation of any
proceeding for such purpose by any state securities commission or other
regulatory authority. The Issuers shall use their reasonable best efforts
to prevent the issuance of any stop order or order suspending the
qualification or exemption of any of the Original Notes under any state
securities or Blue Sky laws, and if at any time any state securities
-4-
<PAGE>
commission or other regulatory authority shall issue an order suspending
the qualification or exemption of any of the Original Notes under any
state securities or Blue Sky laws, the Issuers shall use their reasonable
best efforts to obtain the withdrawal or lifting of such order at the
earliest possible time.
(f) Whether or not the transactions contemplated by this Agreement
are consummated or this Agreement becomes effective or is terminated, to
pay all costs, expenses, fees, disbursements (including fees, expenses
and disbursements of counsel to the Issuers, but not of counsel to the
Initial Purchasers (except pursuant to clause (iv) herein) or expenses of
the Initial Purchasers) and stamp, documentary or similar taxes incident
to and in connection with: (i) the preparation, printing and distribution
of the Preliminary Offering Memorandum and the Offering Memorandum
(including financial statements) and all amendments and supplements
thereto, (ii) the preparation and delivery of the Operative Documents and
all other agreements, memoranda, correspondence and documents prepared
and delivered in connection with this Agreement and with the Exempt
Resales, (iii) the issuance, transfer and delivery by the Company and the
Guarantors of the Original Notes and the Guarantees, respectively, to the
Initial Purchasers, (iv) the qualification or registration of the Notes
for offer and sale under the securities or Blue Sky laws of the several
states of the United States or provinces of Canada (including the cost of
printing and mailing a preliminary and final Blue Sky memorandum and the
reasonable fees and disbursements of counsel to the Initial Purchasers
relating thereto), (v) the furnishing of such copies of the Preliminary
Offering Memorandum and the Offering Memorandum, and all amendments and
supplements thereto, as may be reasonably requested for use in connection
with Exempt Resales, (vi) the preparation of certificates for the Notes,
(vii) the application for quotation of the Notes in the Private
Offerings, Resales and Trading through Automated Linkages market
("PORTAL") of the National Association of Securities Dealers, Inc.
("NASD"), including all listing fees and expenses, (viii) the approval of
the Notes by The Depository Trust Company ("DTC") for "book-entry"
transfer, (ix) the rating of the Notes by rating agencies, (x) the fees
and expenses of the Trustee and its counsel and (xi) the performance by
the Issuers of their other obligations under the Operative Documents,
including the fees, disbursements and expenses of the Issuers' counsel
and accountants.
(g) To use the proceeds from the sale of the Original Notes in the
manner described in the Offering Memorandum under the caption "Use of
Proceeds."
(h) To do and perform all things required to be done and performed
under this Agreement by them prior to or after the Closing Date and to
satisfy all conditions precedent on their part to deliver the Original
Notes.
(i) Not to, and not to permit any Subsidiary (as defined herein) to,
sell, offer for sale or solicit offers to buy or otherwise negotiate in
respect of any security (as defined in the Act) that would be integrated
with the sale of the
-5-
<PAGE>
Original Notes in a manner that would require the registration under the
Act of the sale of the Original Notes to the Initial Purchasers or any
Eligible Purchasers.
(j) Until consummation of the Exchange Offer, without the prior
written consent of the Initial Purchasers, not to permit any Issuer to,
and to use their reasonable best efforts to cause their other affiliates
(as defined in Rule 144 under the Act) not to, resell any of the Original
Notes that have been reacquired by any of them.
(k) Not to engage, not to allow any Subsidiary to engage, and to use
their reasonable best efforts to cause their other affiliates and any
person acting on their behalf (other than in any case the Initial
Purchasers, as to whom the Issuers make no covenant) not to engage, in
any form of general solicitation or general advertising (within the
meaning of Regulation D under the Act) in connection with any offer or
sale of the Original Notes in the United States.
(l) Not to engage, not to allow any Subsidiary to engage, and to use
their reasonable best efforts to cause their other affiliates and any
person acting on their behalf (other than in any case the Initial
Purchasers, as to whom the Issuers make no covenant) not to engage in any
directed selling effort with respect to the Original Notes, and agrees to
comply with the offering restrictions requirement of Regulation S under
the Act. Terms used in this paragraph have the meanings given to them by
Regulation S.
(m) From and after the Closing Date, for so long as any of the Notes
remain outstanding and are "restricted securities" within the meaning of
Rule 144(a)(3) under the Act and during any period in which the Company
is not subject to Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), to make available upon request the
information required by Rule 144A(d)(4) under the Act to (i) any Holder
or beneficial owner or Notes in connection with any sale of such Notes
and (ii) any prospective purchaser of such Notes from any such Holder or
beneficial owner designated by the Holder or beneficial owner. The
Issuers will pay the expenses of printing and distributing such documents.
(n) To comply with all of their agreements set forth in the
Registration Rights Agreement and all agreements set forth in the
representations letter of the Issuers to DTC relating to the approval of
the Notes by DTC for "book-entry" transfer and to obtain approval of the
Notes by DTC for "book-entry" transfer.
(o) To use their reasonable best efforts to effect the inclusion of
the Original Notes in PORTAL.
(p) Prior to the Closing Date, to furnish to the Initial Purchasers,
(i) as soon as it has been prepared by the Company or the Subsidiaries, a
copy of any regularly prepared final internal financial statements of the
Company and its subsidiaries for any period subsequent to the period
covered by the financial
-6-
<PAGE>
statements appearing in the Offering Memorandum, (ii) all other reports
and other communications (financial or otherwise) that the Issuers mail
or otherwise make available to security holders and (iii) such other
information as the Initial Purchasers shall reasonably request.
(q) Not to distribute prior to the Closing Date any offering
material in connection with the offer and sale of the Original Notes
other than the Preliminary Offering Memorandum and the Offering
Memorandum.
5. REPRESENTATIONS AND WARRANTIES. (a) The Issuers, jointly and
severally, represent and warrant to the Initial Purchasers that:
(i) Each of the Preliminary Offering Memorandum and the Offering
Memorandum has been prepared in connection with the Exempt Resales. None
of the Preliminary Offering Memorandum, the Offering Memorandum or any
supplement or amendment thereto contains any untrue statement of a
material fact or omits to state any material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading; PROVIDED, HOWEVER, that the Issuers
make no representation or warranty with respect to information contained
in or omitted from the Preliminary Offering Memorandum or the Offering
Memorandum, as supplemented or amended, in reliance upon and in
conformity with the information furnished to the Company in writing by or
on behalf of the Initial Purchasers relating to the Initial Purchasers
expressly for inclusion in the Preliminary Offering Memorandum, the
Offering Memorandum or any supplement or amendment thereto. No order
preventing the use of the Preliminary Offering Memorandum or the Offering
Memorandum, or any order asserting that any of the transactions
contemplated by this Agreement are subject to the registration
requirements of the Act, has been issued or to the knowledge of Issuers
has been threatened.
(ii) Except for the common stock, $.01 par value per share, of the
Company (the "Common Stock") and the preferred stock purchase rights that
trade with the Common Stock there are no securities of the Issuers that
are listed on a national securities exchange registered under Section 6
of the Exchange Act or that are quoted in a United States automated
interdealer quotation system.
(iii) As of the Closing Date, the Company shall have an authorized
capitalization as set forth under the heading entitled "As Adjusted" in
the section of the Offering Memorandum entitled "Capitalization".
Attached as Schedule B is a true and complete list of all subsidiaries
(including entities which the Company owns at least 50% of the
outstanding equity interests) of the Company, their jurisdictions of
incorporation or formation, type of entity and equity ownership (all such
entities excluding the "Excluded Entities" listed on Schedule C hereto
the "Subsidiaries"). All of the issued and outstanding shares of capital
stock or other equity interests of each Subsidiary have been duly
authorized and validly issued, are fully paid and, except for general
partnership interests, nonassessable. Except as set forth in the Offering
Memorandum, all shares of
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capital stock or other equity interests of the Subsidiaries that
are owned of record directly by the Company or indirectly by a
wholly-owned Subsidiary of the Company and are owned free and clear of
any lien, security interest, pledge, charge, encumbrance, equity or
claim; none of the outstanding shares of capital stock or other equity
interests of any Subsidiary was issued in violation of any preemptive or
similar rights or the charter or by-laws or other organizational
documents of the Company or such Subsidiary or any agreement to which the
Company or such Subsidiary is a party. Upon the closing of the
transactions contemplated by the Offering Memorandum, there will not be
any outstanding rights, warrants or options to acquire, or instruments
convertible into or exchangeable for, any shares of capital stock or
other equity interest of the Subsidiaries.
(iv) The Company and each Subsidiary has been duly organized, is
validly existing and in good standing (or the functional equivalent to
the concept of good standing for non-corporate entities) under the laws
of its respective jurisdiction of organization and has all requisite
power and authority, and all necessary authorizations, approvals, orders,
licenses, certificates and permits of and from regulatory or governmental
officials, bodies and tribunals, except where the failure to obtain such
authorizations, approvals, orders, licenses, certificates and permits
would not reasonably be expected to have a Material Adverse Effect (as
defined herein), to (A) carry on its business as it is currently being
conducted and as described in the Offering Memorandum and (B) own, lease,
license and operate its respective properties in accordance with its
business as currently conducted. The Company and each of the Subsidiaries
is duly qualified and in good standing (or the functional equivalent to
the concept of good standing for non-corporate entities) as a foreign
organization authorized to do business in each jurisdiction in which the
nature of its business or its ownership or leasing of property requires
such qualification, except where the failure to be so qualified would
not, either individually or in the aggregate, result in a Material
Adverse Effect. A "Material Adverse Effect" means any material adverse
effect on the business, condition (financial or other), properties,
results of operations or prospects of the Company and the Subsidiaries
taken as a whole.
(v) Each of the Issuers has all requisite power and authority to
execute, deliver and perform all of its obligations under the Operative
Documents to which it is a party and to consummate the transactions
contemplated by the Operative Documents to be consummated on its part and
the Company has all requisite corporate power and authority to issue,
sell and deliver the Notes and each Guarantor has all requisite
organizational power and authority to execute, deliver and perform all
its obligations under its Guarantee.
(vi) This Agreement has been duly and validly authorized, executed
and delivered by each Issuer.
(vii) The Indenture has been duly and validly authorized by each
Issuer and, when duly executed and delivered by each Issuer (assuming the
due
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<PAGE>
authorization, execution and delivery thereof by the Trustee), will be
a legal, valid and binding obligation of each of the Issuers, enforceable
against each of them in accordance with its terms, except as enforcement
thereof may be limited by bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium or similar laws affecting the enforcement
of creditors' rights generally and by general principles of equity and the
discretion of the court before which any proceedings therefor may be
brought. The Indenture, when executed and delivered, will conform in all
material respects to the description thereof in the Offering Memorandum.
(viii) The Original Notes have been duly and validly authorized for
issuance and sale to the Initial Purchasers by the Company and, when
issued and delivered by the Company against payment by the Initial
Purchasers and duly authenticated by the Trustee in accordance with the
terms of this Agreement and the Indenture, the Original Notes will be
legal, valid and binding obligations of the Company, entitled to the
benefits of the Indenture and enforceable against the Company in
accordance with their terms, except as enforcement thereof may be limited
by bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or similar laws affecting the enforcement of creditors' rights
generally and by general principles of equity and the discretion of the
court before which any proceedings therefor may be brought. The Original
Notes, when issued, authenticated and delivered, will conform in all
material respects to the description thereof in the Offering Memorandum.
(ix) The New Notes have been duly and validly authorized for
issuance by the Company and, when issued and delivered by the Company and
duly authenticated by the Trustee in accordance with the terms of the
Registration Rights Agreement, the Exchange Offer and the Indenture, the
New Notes will be legal, valid and binding obligations of the Company,
entitled to the benefits of the Indenture and enforceable against of the
Company in accordance with their terms, except as enforcement thereof may
be limited by bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity and the
discretion of the court before which any proceedings therefor may be
brought. The New Notes, when issued, authenticated and delivered, will
conform in all material respects to the description thereof in the
Offering Memorandum.
(x) The Guarantees have been duly and validly authorized by the
Guarantors and, when the Original Notes are issued and delivered by the
Company against payment by the Initial Purchasers and authenticated by
the Trustee in accordance with the terms of this Agreement and the
Indenture, will be legal, valid and binding obligations of the
Guarantors, enforceable against each of them in accordance with their
terms, except as enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium or similar
laws affecting the enforcement of creditors' rights generally and by
general principles of equity and the discretion of the court before which
any proceedings therefor may be brought. The Guarantees, when executed
and
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<PAGE>
delivered, will conform in all material respects to the description thereof
in the Offering Memorandum.
(xi) The guarantees to be endorsed on the New Notes have been duly
and validly authorized by the Guarantors and, when the New Notes are
issued, and delivered and authenticated in accordance with the terms of
the Registration Rights Agreement, the Exchange Offer and the Indenture,
will be legal, valid and binding obligations of the Guarantors,
enforceable against each of them in accordance with their terms, except
as enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by general
principles of equity and the discretion of the court before which any
proceedings therefor may be brought. The guarantees to be endorsed on the
New Notes, when executed and delivered, will conform in all material
respects to the description thereof in the Offering Memorandum.
(xii) The Registration Rights Agreement has been duly and validly
authorized by each of the Issuers and, when duly executed and delivered
by each of the Issuers (assuming the due authorization, execution and
delivery thereof by the Initial Purchasers), will constitute a legal,
valid and binding obligation of each of the Issuers, enforceable against
them in accordance with its terms, except that (A) enforceability of the
Registration Rights Agreement may be limited by bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by general
principles of equity and the discretion of the court before which any
proceedings therefor may be brought and (B) any rights to indemnity or
contribution thereunder may be limited by federal and state securities
laws and public policy considerations. The Registration Rights Agreement
will conform in all material respects to the description thereof in the
Offering Memorandum.
(xiii) All taxes, fees and other governmental charges that are due
and payable on or prior to the Closing Date in connection with the
execution, delivery and performance of the Operative Documents and the
execution, delivery and sale of the Original Notes shall have been paid
by or on behalf of the Company at or prior to the Closing Date.
(xiv) Neither the Company nor any Subsidiary is (A) in violation of
its charter, bylaws or other constituent documents or (B) in default (or,
with notice or lapse of time or both, would be in default) in the
performance or observance of any obligation, agreement, covenant or
condition contained in any bond, debenture, note, indenture, mortgage,
deed of trust, loan or credit agreement, lease, license, franchise
agreement, authorization, permit, certificate or other agreement or
instrument to which any of them is a party or by which any of them is
bound or to which any of their assets or properties is subject
(collectively, "Agreements and Instruments"), or (C) in violation of any
law, statute, rule, regulation, judgment, order or decree of any domestic
or foreign court applicable to or with jurisdiction over any of them or
any of their assets or properties or other
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<PAGE>
governmental or regulatory authority, agency or other body, that, in
the case of clauses (B) and (C) herein, would reasonably be expected
to have a Material Adverse Effect. There exists no condition that, with
notice, the passage of time or otherwise, would constitute a default by
the Company or any Subsidiary under any such document or instrument or
result in the imposition of any penalty or the acceleration of any
indebtedness, other than penalties, defaults or conditions that would
not have a Material Adverse Effect.
(xv) The execution, delivery and performance by each of the Issuers
of the Operative Documents to which they are a party including the
consummation of the offer and sale of the Original Notes, does not or
will not violate, conflict with or constitute a breach of any of the
terms or provisions of, or a default under (or an event that with notice
or the lapse of time, or both, would constitute a default), or require
consent under, or result in the creation or imposition of a lien, charge
or encumbrance on any property or assets of the Company or any Subsidiary
or an acceleration of any indebtedness of the Company or any Subsidiary
pursuant to, (i) the charter, bylaws or other constituent documents of
the Company or any Subsidiary, (ii) assuming the consummation of the
transactions contemplated thereby, any Agreements and Instruments, (iii)
any law, statute, rule or regulation applicable to the Company or any
Subsidiary or their respective assets or properties or (iv) any judgment,
order or decree of any domestic or foreign court or governmental agency
or authority being applicable to or having jurisdiction over the Company
or any Subsidiary or their respective assets or properties. Assuming the
accuracy of the representations and warranties of the Initial Purchasers
in Section 5(b) of this Agreement, no consent, approval, authorization or
order of, or filing, registration, qualification, license or permit of or
with, any court or governmental agency, body or administrative agency,
domestic or foreign, is required to be obtained or made by any of the
Issuers for the execution, delivery and performance by each of the
Issuers of the Operative Documents to which they are a party including
the consummation of any of the transactions contemplated thereby, except
(w) such as have been or will be obtained or made on or prior to the
Closing Date, (x) registration of the Exchange Offer or resale of the
Notes under the Act pursuant to the Registration Rights Agreement, (y)
qualification of the Indenture under the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act"), in connection with the issuance of
the New Notes or (z) such as may be required under state securities laws
or by the NASD. No consents or waivers from any other person or entity
are required for the execution, delivery and performance of this
Agreement or any of the other Operative Documents or the consummation of
any of the transactions contemplated thereby, other than such consents
and waivers as have been obtained.
(xvi) Except as set forth in the Offering Memorandum, there is (A)
no action, suit or proceeding before or by any court, arbitrator or
governmental agency, body or official, domestic or foreign, now pending
or, to the knowledge of the Issuers threatened or contemplated, to which
the Company or any Subsidiary is or may be a party or to which the
business, assets or property of
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<PAGE>
such person is or may be subject, (B) no statute, rule, regulation or order
that has been enacted, adopted or issued or, to the knowledge of the
Issuers, that has been proposed by any governmental body or agency,
domestic or foreign, (C) no injunction, restraining order or order of any
nature by a federal or state court or foreign court of competent
jurisdiction to which the Company or any Subsidiary is or may be subject
that (x) in the case of clause (A) above, if determined adversely to the
Company or any Subsidiary, would reasonably be expected, either
individually or in the aggregate, (1) to have a Material Adverse Effect
or (2) to interfere with or adversely affect the issuance of the Notes or
the Guarantees in any jurisdiction or adversely affect the consummation
of the transactions contemplated by any of the Operative Documents and
(y) in the case of clauses (B) and (C) above, would reasonably be
expected , either individually or in the aggregate, (1) to have a
Material Adverse Effect or (2) to interfere with or adversely affect the
issuance of the Notes or the Guarantees in any jurisdiction or adversely
affect the consummation of the transactions contemplated by any of the
Operative Documents. Every request of any securities authority or agency
of any jurisdiction for additional information with respect to the Notes
that has been received by the Issuers or their counsel prior to the date
hereof has been complied with in all material respects.
(xvii) Except as would not reasonably be expected to have a Material
Adverse Effect, (a) no labor disturbance by the employees of the Company
or any Subsidiary exists or, to the knowledge of the Issuers, is
imminent; (b) each of the Company and each Subsidiary is in compliance in
all respects with, as applicable, all presently applicable provisions of
the Employee Retirement Income Security Act of 1974, as amended,
including the regulations and published interpretations thereunder
("ERISA"); (c) no "reportable event" (as defined in ERISA) has occurred
with respect to any "pension plan" (as defined in ERISA) for which the
Company or any Subsidiary would have any liability; (d) neither the
Company nor any Subsidiary has incurred or expects to incur liability
under (A) Title IV of ERISA with respect to termination of, or withdrawal
from, any "pension plan" or (B) Section 412 or 4971 of the Internal
Revenue Code of 1986, as amended, including the regulations and published
interpretations thereunder (the "Code"); and (e) each "pension plan" that
is maintained or contributed to by the Company or any Subsidiary that is
intended to be qualified under Section 401(a) of the Code has received a
determination letter from the Internal Revenue Service as to the tax
qualified status of the form of such plan and nothing has occurred,
whether by action or by failure to act, that would reasonably be expected
to result in the loss of such qualification.
(xviii) Except as set forth in the Offering Memorandum, the Company
and each Subsidiary: (A) is in compliance with, or not subject to costs
or liabilities under, all local, state, provincial, federal and foreign
laws, regulations, rules of common law, orders and decrees, as in effect
as of the date hereof, and any present judgments and injunctions issued
or promulgated thereunder relating to pollution or protection of public
and employee health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or
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<PAGE>
contaminants applicable to it or its business or operations or ownership or
use of its property ("Environmental Laws"), except where non-compliance
or such costs or liabilities individually or in the aggregate would not
reasonably be expected to have a Material Adverse Effect; and (B)
possesses all permits, licenses or other approvals required under
applicable Environmental Laws, except where the failure to possess any
such permit, license, or other approval individually or in the aggregate
would not reasonably be expected to have a Material Adverse Effect. All
currently pending and, to the knowledge of the Issuers, threatened
proceedings, notices of violation, demands, notices of potential
responsibility or liability, suits and existing environmental conditions
by any governmental authority which the Company or the Subsidiaries could
reasonably expect to result in a Material Adverse Effect are fully and
accurately described in all material respects in the Offering Memorandum.
(xix) The Company and each Subsidiary has (A) good and marketable
title to all of the properties and assets described in the Offering
Memorandum as owned by it and good and marketable title to the leasehold
estates in the real and personal property described in the Offering
Memorandum as leased by them, free and clear of all Liens (as defined in
the Indenture), except for Liens described in the Offering Memorandum and
Liens permitted under the Indenture, (B) all licenses, certificates,
permits, authorizations, approvals, franchises and other rights from, and
has made all declarations and filings with, all federal, state, local and
foreign authorities, all self-regulatory authorities and all courts and
other tribunals (each, an "Authorization") necessary to engage in the
business conducted by it in the manner described in the Offering
Memorandum except for any Authorization of which the failure to have
would not reasonably be expected to have a Material Adverse Effect, and
(C) no reason to believe that any governmental body or agency, domestic
or foreign, is considering limiting, suspending or revoking any such
Authorization. All such Authorizations are valid and in full force and
effect and the Company and each Subsidiary is in compliance in all
material respects with the terms and conditions of all such
Authorizations and with the rules and regulations of the regulatory
authorities having jurisdiction with respect to such Authorizations,
except for any invalidity, failure to be in full force and effect or
noncompliance with any Authorization that would not reasonably be
expected to have a Material Adverse Effect.
(xx) The Company and each Subsidiary owns, possesses or has the
right to employ all patents, patent rights, licenses, inventions,
copyrights, know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or
procedures), trademarks, service marks and trade names (collectively, the
"Intellectual Property") necessary to conduct the businesses operated by
it as described in the Offering Memorandum, except where the failure to
own, possess or have the right to employ such Intellectual Property would
not reasonably be expected to have a Material Adverse Effect. Neither the
Company nor any Subsidiary has received any notice of infringement of or
conflict with (and neither knows of any such infringement or a conflict
with) asserted rights of others with respect to any of the foregoing
that, if such assertion
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<PAGE>
of infringement or conflict were sustained, would reasonably be expected to
have a Material Adverse Effect. The use of the Intellectual Property in
connection with the business and operations of the Company and the
Subsidiaries does not infringe on the rights of any person, except for
such infringement as would not reasonably be expected to have a Material
Adverse Effect.
(xxi) All tax returns required to be filed by the Company and each
Subsidiary have been filed in all jurisdictions where such returns are
required to be filed; and all taxes, including withholding taxes,
penalties and interest, assessments, fees and other charges due or
claimed to be due from such entities or that are due and payable have
been paid, other than those being contested in good faith and for which
reserves have been provided in accordance with generally accepted
accounting principles or those currently payable without penalty or
interest and except where the failure to make such required filings or
payment would not reasonably be expected to have a Material Adverse
Effect. To the knowledge of the Issuers, there are no material proposed
additional tax assessments against any of the Company and the
Subsidiaries or their assets or property.
(xxiii) There are no holders of securities of the Company or any
Subsidiary who have the right to request or demand that the Company or
any Subsidiary register under the Act or analogous foreign laws and
regulations any of such securities held by any such holders except under
the Registration Rights Agreement and the Stock Registration Agreement
dated April 10, 1989 between the Company and Equus II Incorporated.
(xxiv) The Company and each Subsidiary maintains a system of
internal accounting controls sufficient to 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 in conformity
with United States generally accepted accounting principles and to
maintain accountability for assets; (C) access to assets is permitted
only in accordance with management's general or specific authorization;
and (D) the recorded accountability for its assets is compared with the
existing assets at reasonable intervals and appropriate action is taken
with respect to any differences.
(xxv) The Company and each Subsidiary maintains insurance covering
its properties, assets, operations, personnel and businesses, and such
insurance is of such type and in such amounts as is customary industry
practice. Neither the Company nor any Subsidiary has received notice from
any insurer or agent of such insurer that any material capital
improvements or other material expenditures will have to be made in order
to continue any insurance maintained by any of
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them other than capital improvements and other expenditures that have been
budgeted by the Company or the Subsidiaries, as the case may be.
(xxvi) Neither the Company nor any of its affiliates (as defined in
Rule 501(b) of Regulation D under the Act) has (A) taken, directly or
indirectly, any action designed to, or that might reasonably be expected
to, cause or result in stabilization or manipulation of the price of any
security of the Issuers to facilitate the sale or resale of the Original
Notes or (B) sold, bid for, purchased or paid any person any compensation
for soliciting purchases of the Original Notes in a manner that would
require registration of the Original Notes under the Act or paid or
agreed to pay to any person any compensation for soliciting another to
purchase any other securities of any Issuer in a manner that would
require registration of the Original Notes under the Act.
(xxvii) Neither the Company nor any of its affiliates (as defined in
Regulation D under the Act) has, directly or through any agent, sold,
offered for sale, contracted to sell, pledged, solicited offers to buy or
otherwise disposed of or negotiated in respect of, any security (as
defined in the Act) that is currently or will be integrated with the sale
of the Original Notes in a manner that would require the registration of
the Original Notes under the Act.
(xxviii) Neither the Company nor any of its affiliates, nor any
person acting on its or their behalf (other than the Initial Purchasers,
as to whom the Issuers make no representation), is engaged in any
directed selling effort with respect to the Original Notes, and each of
them has complied with the offering restrictions requirement of
Regulation S under the Act. Terms used in this paragraph have the meaning
given to them by Regulation S.
(xxix) No registration under the Act of the Original Notes nor
qualification of the Indenture under the Trust Indenture Act is required
for the sale of the Original Notes to the Initial Purchasers as
contemplated by this Agreement or for the Exempt Resales, assuming in
each case that (A) the purchasers who buy the Original Notes in the
Exempt Resales are Eligible Purchasers and (B) the accuracy of and
compliance with the Initial Purchaser's representations, warranties and
covenants contained in Section 5(b) of this Agreement. No form of general
solicitation or general advertising (as those terms are defined by the
Act in connection with offers or sales such as the Exempt Resales) was
used by the Company or any of their representatives (other than the
Initial Purchasers, as to whom the Issuers make no representation) in
connection with the offer and sale of any of the Original Notes or in
connection with Exempt Resales, including articles, notices or other
communications published in any newspaper, magazine or similar medium or
broadcast over television or radio or displayed on any computer terminal,
or any seminar or meeting whose attendees have been invited by any
general solicitation or general advertising. Neither the Company nor any
of its affiliates has entered into, and neither the Company nor any of
its affiliates will enter into, any contractual arrangement with respect
to the distribution of the Original Notes except for this Agreement.
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<PAGE>
(xxx) Each of the Preliminary Offering Memorandum and the Offering
Memorandum, as of its date, and each amendment or supplement thereto, as
of its date, contains the information specified in, and meets the
requirements of, Rule 144A(d)(4) under the Act.
(xxxi) As of October 31, 1998, neither the Company nor any
Subsidiary had any material liabilities or obligations, direct or
contingent, that were not set forth in the Company's consolidated balance
sheet as of such date or in the notes thereto set forth in the Offering
Memorandum. Since October 31, 1998, except as set forth or contemplated
in the Offering Memorandum, (a) neither the Company nor any Subsidiary
has (1) incurred any liabilities or obligations, direct or contingent,
that would reasonably be expected to have a Material Adverse Effect, or
(2) entered into any material transaction not in the ordinary course of
business, (b) there has not been any event or development in respect of
the business or condition (financial or other) of the Company and the
Subsidiaries that, either individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect and (c) there
has been no dividend or distribution of any kind declared, paid or made
by the Company on any class of its capital stock.
(xxxii) Neither the Company nor any Subsidiary (or any agent thereof
acting on their behalf) has taken, and none of them will take, any action
that might cause this Agreement or the issuance or sale of the Notes to
violate Regulations T, U or X of the Board of Governors of the Federal
Reserve System or analogous foreign laws and regulations, in each case as
in effect, or as the same may hereafter be in effect, on the Closing Date.
(xxxiii) Each firm of accountants that has certified or shall
certify the financial statements included or to be included as part of
the Offering Memorandum is an independent accountant within the meaning
of the Act. The historical financial statements and the notes thereto
included in the Offering Memorandum comply as to form in all material
respects with the requirements applicable to registration statements on
Form S-1 under the Act and present fairly in all material respects the
consolidated financial position and results of operations of (A) the
Company and its subsidiaries and (B) Amatek Holdings, Inc. and its
subsidiaries in each case at the respective dates and for the respective
periods indicated. Such financial statements have been prepared in
accordance with United States generally accepted accounting principles
applied on a consistent basis throughout the periods presented (except as
disclosed in the Offering Memorandum). The pro forma financial statements
included in the Offering Memorandum have been prepared on a basis
consistent with such historical statements, except for the pro forma
adjustments specified therein, and give effect to assumptions made on a
reasonable basis and present fairly in all material respects the
historical and proposed transactions contemplated by the Offering
Memorandum, this Agreement and the other Operative Documents. The other
financial and statistical information and data included in the Offering
Memorandum are accurately presented in all material respects and prepared
on a
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<PAGE>
basis consistent with the financial statements and the books and
records of the Company and the Subsidiaries.
(xxxiv) Except as described in the section entitled "Transactions
With Directors, Officers and Affiliates" in the Offering Memorandum,
there are no contracts, agreements or understandings between the Company
or any Subsidiary and any other person other than the Initial Purchasers
that would give rise to a valid claim against the Company, any Subsidiary
or the Initial Purchasers for a brokerage commission, finder's fee or
like payment in connection with the issuance, purchase and sale of the
Notes.
(xxxv) The statistical and market-related data and forward-looking
statements (within the meaning of Section 27A of the Act and Section 21E
of the Exchange Act) included in the Offering Memorandum are based on or
derived from sources that the Issuers believe to be reliable and accurate
in all material respects and represent their good faith estimates that
are made on the basis of data derived from such sources.
(xxxvi) Neither the Company nor any of the Subsidiaries does
business with the government of Cuba or with any person or affiliate
located in Cuba within the meaning of Florida Statutes Section 517.075.
(xxxvii) Each certificate signed by any officer of any of the
Issuers and delivered to the Initial Purchasers or counsel for the
Initial Purchasers pursuant to, or in connection with, this Agreement
shall be deemed to be a representation and warranty by the Issuers to the
Initial Purchasers as to the matters covered by such certificate.
(xxxviii) The Excluded Entities, individually and in the aggregate,
do not have assets, earnings or revenues that comprise more than ten
percent (10%) of the assets, earnings or revenues, respectively of the
Company and the Subsidiaries, taken as a whole.
The Issuers acknowledge that the Initial Purchasers and, for
purposes of the opinions to be delivered to the Initial Purchasers pursuant to
Section 8 of this Agreement, counsel to the Issuers and counsel to the Initial
Purchasers will rely upon the accuracy and truth of the foregoing
representations and the Issuers hereby consent to such reliance.
(b) Each Initial Purchaser, severally and not jointly, represents,
warrants and covenants to the Issuers that:
(i) Each Initial Purchaser is a QIB with such knowledge and
experience in financial and business matters as are necessary in order to
evaluate t he merits and risks of an investment in the Notes.
(ii) (A) Each Initial Purchaser has not and will not solicit offers
for, or offer or sell, the Original Notes by any form of general
solicitation or general
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<PAGE>
advertising (as those terms are defined under the Act) or in any manner
involving a public offering within the meaning of Section 4(2) of the Act
and (B) it has and will solicit offers for the Original Notes only from,
and will offer and sell the Original Notes only to (1) persons whom the
Initial Purchasers reasonably believe 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 Purchasers 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 reliance on the exemption from the
registration requirements of the Act pursuant to Rule 144A, or (2)
persons other than U.S. persons outside the United States in reliance on
the exemption from the registration requirements of the Act provided by
Regulation S.
(iii) With respect to offers and sales outside the United States:
(A) the Initial Purchasers will comply with all applicable laws
and regulations in each jurisdiction in which they acquire, offer, sell
or deliver Notes or have in their possession or distribute either any
Offering Memorandum or any such other material, in all cases at their
own expense; and
(B) the Initial Purchasers have offered the Original Notes and
will offer and sell the Original Notes (1) as part of their distribution
at any time and (2) otherwise until 40 days after the later of the
commencement of the offering of the Original Notes and the Closing Date,
only in accordance with Rule 903 of Regulation S or another exemption
from the registration requirements of the Act. Accordingly, neither the
Initial Purchasers nor any persons acting on their behalf have engaged
or will engage in any directed selling efforts (within the meaning of
Regulation S) with respect to the Original Notes, and any such persons
have complied and will comply with the offering restrictions
requirements of Regulation S.
Terms used in this Section 5(b)(iii) have the meanings given to
them by Regulation S.
(iv) The source of funds being used by the Initial Purchasers to
acquire the Original Notes does not include the assets of any "employee
benefit plan" (within the meaning of Section 3 of ERISA) or any "plan"
(within the meaning of Section 4975 of the Code).
The Initial Purchasers understand that the Issuers and, for purposes of
the opinions to be delivered to them pursuant to Section 8 hereof, counsel to
the Issuers and counsel to the Initial Purchasers will rely upon the accuracy
and truth of the foregoing representations, and the Initial Purchasers hereby
consent to such reliance.
-18-
<PAGE>
6. INDEMNIFICATION. (a) Each of the Issuers, on a joint and several
basis, agrees to indemnify and hold harmless each Initial Purchaser, each
person, if any, who controls any Initial Purchaser within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act, the agents,
employees, officers and directors of each Initial Purchaser and the agents,
employees, officers and directors of any such controlling person from and
against any and all losses, liabilities, claims, damages and expenses
whatsoever (including reasonable attorneys' fees and any and all reasonable
expenses whatsoever incurred in investigating, preparing or defending against
any litigation, commenced or threatened, or any claim whatsoever, and any and
all reasonable amounts paid in settlement of any claim or litigation)
(collectively, "Losses") to which they or any of them may become subject
under the Act, the Exchange Act or otherwise insofar as such Losses (or
actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in the
Preliminary Offering Memorandum or the Offering Memorandum, or in any
supplement thereto or amendment thereof, or arise out of or are based upon
the omission or alleged omission to state therein a material fact necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading; PROVIDED, HOWEVER, that the Issuers will not
be liable in any such case to the extent, but only to the extent, that any
such Loss arises out of or is based upon any such untrue statement or alleged
untrue statement or omission or alleged omission made therein in reliance
upon and in conformity with written information relating to the Initial
Purchasers furnished to the Company by or on behalf of the Initial Purchasers
expressly for use therein. This indemnity agreement will be in addition to
any liability that the Issuers may otherwise have, including liability under
this Agreement.
(b) Each Initial Purchaser, severally and not jointly, agrees to
indemnify and hold harmless the Issuers, each person, if any, who controls
the Issuers within the meaning of Section 15 of the Act or Section 20(a) of
the Exchange Act, and each of their respective agents, employees, officers
and directors and the agents, employees, officers and directors of any such
controlling person from and against any Losses to which they or either of
them may become subject under the Act, the Exchange Act or otherwise insofar
as such Losses (or actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of a material fact contained
in the Preliminary Offering Memorandum or the Offering Memorandum, or in any
amendment thereof or supplement thereto, or arise out of or are based upon
the omission or alleged omission to state therein a material fact necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading, in each case to the extent, but only to the
extent, that any such Loss arises out of or is based upon any untrue
statement or alleged untrue statement or omission or alleged omission made
therein in reliance upon and in conformity with information relating to such
Initial Purchaser furnished in writing to the Company by such Initial
Purchaser expressly for use therein. The Issuers and the Initial Purchasers
acknowledge that the information set forth in Section 9 hereof is the only
information furnished in writing by the Initial Purchasers to the Company
expressly for use in the Preliminary Offering or the Offering Memorandum.
-19-
<PAGE>
(c) Promptly after receipt by an indemnified party under subsection
6(a) or 6(b) above of notice of the commencement of any action, suit or
proceeding (collectively, an "action"), such indemnified party shall, if a
claim in respect thereof is to be made against the indemnifying party under
such subsection, notify each party against whom indemnification is to be
sought in writing of the commencement of such action (but the failure so to
notify an indemnifying party shall not relieve such indemnifying party from
any liability that it may have under this Section 6 except to the extent that
it has been prejudiced in any material respect by such failure or from any
liability which it may otherwise have). In case any such action is brought
against any indemnified party, and it notifies an indemnifying party of the
commencement of such action, the indemnifying party will be entitled to
participate in such action, and to the extent it may elect by written notice
delivered to the indemnified party promptly after receiving the aforesaid
notice from such indemnified party, to assume the defense of such action with
counsel satisfactory to such indemnified party. Notwithstanding the
foregoing, the indemnified party or parties shall have the right to employ
its or their own counsel in any such action, but the fees and expenses of
such counsel shall be at the expense of such indemnified party or parties
unless (i) the employment of such counsel shall have been authorized in
writing by the indemnifying parties in connection with the defense of such
action, (ii) the indemnifying parties shall not have employed counsel to take
charge of the defense of such action within a reasonable time after notice of
commencement of the action, or (iii) the named parties to such action
(including any impleaded parties) include such indemnified party and the
indemnifying parties (or such indemnifying parties have assumed the defense
of such action), and such indemnified party or parties shall have reasonably
concluded that there may be defenses available to it or them that are
different from or additional to those available to one or all of the
indemnifying parties (in which case the indemnifying parties shall not have
the right to direct the defense of such action on behalf of the indemnified
party or parties), in any of which events such reasonable fees and expenses
of counsel shall be borne by the indemnifying parties. In no event shall the
indemnifying party be liable for the fees and expenses of more than one
counsel (together with appropriate local counsel) at any time for all
indemnified parties in connection with any one action or separate but
substantially similar or related actions arising in the same jurisdiction out
of the same general allegations or circumstances. An indemnifying party shall
not be liable for any settlement of any claim or action effected without its
written consent; PROVIDED, HOWEVER, that such consent was not unreasonably
withheld. Notwithstanding the foregoing sentence, if at any time an
indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel as contemplated by
paragraph (a) or (b) of this Section 6, then the indemnifying party agrees
that it shall be liable for any settlement of any proceeding effected without
its written consent if (i) such settlement is entered into more than 30
business days after receipt by such indemnifying party of the aforesaid
request, (ii) such indemnifying party shall not have reimbursed the
indemnified party in accordance with such request prior to the date of such
settlement and (iii) such indemnified party shall have given the indemnifying
party at least 30 days prior notice of its intention to settle. No
indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened
proceeding in respect of which any indemnified party is or could have been a
party and indemnity could have been sought
-20-
<PAGE>
hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding.
7. CONTRIBUTION. In order to provide for contribution in
circumstances in which the indemnification provided for in Section 6 of this
Agreement is for any reason held to be unavailable from the indemnifying
party, or is insufficient to hold harmless a party indemnified under Section
6 of this Agreement, the Issuers and the Initial Purchasers shall contribute
to the amount paid or payable by such indemnified party as a result of such
aggregate Losses of the nature contemplated by such indemnification provision
(but after deducting in the case of Losses suffered by the indemnifying
party, any contribution received by the indemnifying party from persons other
than the indemnified party who may also be liable for contribution, including
persons who control the indemnified party within the meaning of Section 15 of
the Act or Section 20(a) of the Exchange Act) to which the Issuers and the
Initial Purchasers may be subject in such proportion as is appropriate to
reflect the relative benefits received by the Issuers, on the one hand, and
the Initial Purchasers, on the other hand, from the offering of the Original
Notes or, if such allocation is not permitted by applicable law or
indemnification is not available as a result of the indemnifying party not
having received notice as provided in paragraph (c) of Section 6 and having
been prejudiced in any material respect by the absence of such notice, in
such proportion as is appropriate to reflect not only the relative benefits
referred to above but also the relative fault of the Issuers, on the one
hand, and the Initial Purchasers, on the other hand, in connection with the
statements or omissions that resulted in such Losses, as well as any other
relevant equitable considerations. The relative benefits received by the
Issuers, on the one hand, and the Initial Purchasers, on the other hand,
shall be deemed to be in the same proportion as (x) the total proceeds from
the offering of Original Notes (net of discounts and commissions but before
deducting expenses) received by the Issuers, and (y) the total discounts and
commissions received by the Initial Purchasers as set forth in the table on
the cover page of the Offering Memorandum. The relative fault of the Issuers,
on the one hand, and the Initial Purchasers, on the other hand, shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to
state a material fact relates to information supplied by the Issuers or the
Initial Purchasers and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission
or alleged statement or omission.
The Issuers and the Initial Purchasers agree that it would
not be just and equitable if contribution pursuant to this Section 7 were
determined by pro rata allocation or by any other method of allocation that
does not take into account the equitable considerations referred to above.
Notwithstanding the provisions of this Section 7, (i) in no case shall the
Initial Purchasers be required to contribute any amount in excess of the
amount by which the total discount and commissions applicable to the Original
Notes pursuant to this Agreement exceeds the amount of any damages that the
Initial Purchasers have otherwise been required to pay by reason of any
untrue or alleged untrue statement or omission or alleged omission and (ii)
no person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to contribution from any
-21-
<PAGE>
person who was not guilty of such fraudulent misrepresentation. For purposes
of this Section 7, each person, if any, who controls the Initial Purchasers
within the meaning of Section 15 of the Act or Section 20(a) of the Exchange
Act shall have the same rights to contribution as the Initial Purchasers, and
each person, if any, who controls the Issuers within the meaning of Section
15 of the Act or Section 20(a) of the Exchange Act shall have the same rights
to contribution as the Issuers. Any party entitled to contribution will,
promptly after receipt of notice of commencement of any action against such
party in respect of which a claim for contribution may be made against
another party or parties under this Section 7, notify such party or parties
from whom contribution may be sought, but the omission to so notify such
party or parties shall not relieve the party or parties from whom
contribution may be sought from any obligation it or they may have under this
Section 7 or otherwise, except to the extent that it has been prejudiced in
any material respect by such failure; PROVIDED, HOWEVER, that no additional
notice shall be required with respect to any action for which notice has been
given under Section 6 for purposes of indemnification. Anything in this
section to the contrary notwithstanding, no party shall be liable for
contribution with respect to any action or claim settled without its written
consent, PROVIDED, HOWEVER, that such written consent was not unreasonably
withheld.
8. CONDITIONS OF INITIAL PURCHASERS' OBLIGATIONS. The obligations of
the Initial Purchasers to purchase and pay for the Original Notes, as
provided for in this Agreement, shall be subject to satisfaction of the
following conditions prior to or concurrently with such purchase:
(a) All of the representations and warranties of the Issuers
contained in this Agreement shall be true and correct, on the date of
this Agreement and, in each case after giving effect to the transactions
contemplated hereby, on the Closing Date, except that if a representation
and warranty is made as of a specific date, and such date is expressly
referred to therein, such representation and warranty shall be true and
correct (or true and correct in all material respects, as applicable) as
of such date. The Issuers shall have performed or complied with all of
the agreements and covenants contained in this Agreement and required to
be performed or complied with by them at or prior to the Closing Date.
(b) The Offering Memorandum shall have been printed and copies
distributed to the Initial Purchasers not later than 5:00 p.m., New York
City time, on the business day following the date of this Agreement or at
such later date and time as the Initial Purchasers may determine. No stop
order suspending the qualification or exemption from qualification of the
Original Notes in any jurisdiction shall have been issued and no
proceeding for that purpose shall have been commenced or shall be pending
or threatened.
(c) No action shall have been taken and no statute, rule,
regulation or order shall have been enacted, adopted or issued by any
governmental agency that would, as of the Closing Date, prevent the
issuance of the Original Notes or consummation of the Exchange Offer; no
action, suit or proceeding shall have been commenced and be pending
against or affecting or, to the best knowledge of
-22-
<PAGE>
the Issuers, threatened against the Company and/or any Subsidiary before
any court or arbitrator or any governmental body, agency or official that,
if adversely determined, would reasonably be expected to have a Material
Adverse Effect; and no stop order preventing the use of the Preliminary
Offering Memorandum or the Offering Memorandum, or any amendment or
supplement thereto, or any order asserting that any of the transactions
contemplated by this Agreement are subject to the registration requirements
of the Act shall have been issued.
(d) Since October 31, 1998, except as set forth or contemplated in
the Offering Memorandum, (a) neither the Company nor any Subsidiary has
(1) incurred any liabilities or obligations, direct or contingent, that
would reasonably be expected to have a Material Adverse Effect, or (2)
entered into any material transaction not in the ordinary course of
business, (b) there has not been any event or development in respect of
the business or condition (financial or other) of the Company and the
Subsidiaries that, either individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect and (c) there
has been no dividend or distribution of any kind declared, paid or made
by the Company on any class of its capital stock.
(e) The Initial Purchasers shall have received certificates, dated
the Closing Date, signed by two authorized officers of each of the
Issuers confirming, as of the Closing Date, the matters set forth in
paragraphs (a), (b), (c) and (d) of this Section 8.
(f) The Initial Purchasers shall have received on the Closing Date
an opinion dated the Closing Date, addressed to the Initial Purchasers,
of Gardere & Wynne, L.L.P., counsel to the Issuers, substantially in the
form of Exhibit A hereto and in form and substance reasonably
satisfactory to the Initial Purchasers and counsel to the Initial
Purchasers.
In addition, such counsel shall state that they have participated
in discussions with your representatives, representatives of the Issuers
and their counsel and independent public accountants concerning the
preparation of the Offering Memorandum. Such counsel shall state that,
although they are not passing upon and do not assume any responsibility
for the accuracy, completeness or fairness of any of the statements in
the Offering Memorandum, and has not made any independent check or
verification thereof, on the basis of the foregoing, no facts have come
to such counsel's attention that lead such counsel to believe that the
Offering Memorandum (other than the financial statements and other
financial and statistical data contained therein as to which such
counsel need express no statement), on the date of such Offering
Memorandum and as of the date of the time of purchase, contained or
contains an 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.
-23-
<PAGE>
(g) The Initial Purchasers shall have received a "comfort letter"
from Ernst & Young, LLP, independent public accountants for the Company,
dated the date of this Agreement, addressed to the Initial Purchasers and
in form and substance satisfactory to the Initial Purchasers and counsel
to the Initial Purchasers. In addition, the Initial Purchasers shall have
received a "bring-down comfort letter" from Ernst & Young, LLP, dated as
of the Closing Date, addressed to the Initial Purchasers and in form and
substance satisfactory to the Initial Purchasers and counsel to the
Initial Purchasers.
(h) Each of the Issuers shall have entered into the Indenture and
the Initial Purchasers shall have received copies, conformed as executed,
thereof.
(i) Each of the Issuers shall have entered into the Registration
Rights Agreement and the Initial Purchasers shall have received
counterparts, conformed as executed, thereof.
(j) The Initial Purchasers shall have been furnished with copies of
such documents as they may reasonably request and all closing documents
from the closings of the transactions contemplated hereby.
(k) The Initial Purchasers shall have received from Gibson, Dunn &
Crutcher LLP, counsel for the Initial Purchasers, such opinion or
opinions, dated the Closing Date, with respect to such matters as the
Initial Purchasers may reasonably require, and the Issuers shall have
furnished to such counsel such documents and information as they may
reasonably request for the purpose of enabling them to pass upon such
matters and in order to evidence the accuracy, completeness or
satisfaction in all material respects of any of the representations,
warranties or conditions contained in this Agreement.
(l) The Original Notes shall be eligible for trading in the PORTAL
market upon issuance.
(m) The Notes shall have initially been assigned ratings of "B" and
B2 by Standard & Poor's Rating Services and Moody's Investors Service,
Inc., respectively, and no such rating shall have been downgraded or
placed on any "watch list" for possible downgrading as of or prior to the
Closing Date.
(n) All agreements set forth in the representation letter of the
Issuers to DTC relating to the approval of the Notes by DTC for
"book-entry" transfer shall have been complied with.
If any of the conditions specified in this Section 8 shall not have
been fulfilled in all material respects when and as required by this
Agreement to be fulfilled, this Agreement may be terminated by the Initial
Purchasers on notice to the Company at any time at or prior to the Closing
Date, and such termination shall be without liability of any party to any
other party. Notwithstanding any such termination, the provisions of
Sections 4(f), 6, 7, 9, 10, 11(d) and 15 shall remain in effect.
-24-
<PAGE>
The Issuers' obligations under this Agreement to sell the Original
Notes to the Initial Purchasers on the Closing Date is subject to the Initial
Purchasers purchasing and paying for all of the Original Notes and the
accuracy of, and compliance with, the representations and warranties and
agreements in Section 5(b).
9. INITIAL PURCHASER'S INFORMATION. The Issuers and the Initial
Purchasers severally acknowledge that the statements with respect to the
offer and sale of the Original Notes set forth in (i) the last paragraph of
the cover page, (ii) the first paragraph of page 3 and (iii) in the second,
fourth and fifth paragraphs under the caption "Plan of Distribution", all in
the Preliminary Offering Memorandum and the Offering Memorandum constitute
the only information furnished in writing by the Initial Purchasers expressly
for use in the Preliminary Offering Memorandum or the Offering Memorandum.
10. SURVIVAL OF REPRESENTATIONS AND AGREEMENTS. All representations
and warranties, covenants and agreements contained in this Agreement,
including the agreements contained in Sections 4(f) and 11(d), the indemnity
agreements contained in Section 6 and the contribution agreements contained
in Section 7 shall remain operative and in full force and effect regardless
of any investigation made by or on behalf of the Initial Purchasers or any
controlling person thereof or by or on behalf of the Issuers or any
controlling person thereof, and shall survive delivery of and payment for the
Original Notes to and by the Initial Purchasers. The agreements contained in
this Section 10 and in Sections 4(f), 6, 7, 9, 11(d) and 15 shall survive the
termination of this Agreement, including pursuant to Section 11 or Section 12.
11. EFFECTIVE DATE OF AGREEMENT; TERMINATION. (a) This Agreement
shall become effective upon execution and delivery of a counterpart hereof by
each of the parties hereto.
(b) The Initial Purchasers shall have the right to terminate this
Agreement at any time prior to the Closing Date by notice to the Company from
the Initial Purchasers, without liability (other than with respect to
Sections 6 and 7) on the Initial Purchasers' part to the Issuers if, on or
prior to such date, (i) the Issuers shall have failed, refused or been unable
to perform in any material respect any agreement on its part to be performed
under this Agreement when and as required, (ii) any other condition to the
obligations of the Initial Purchasers under this Agreement to be fulfilled by
the Issuers pursuant to Section 8 is not fulfilled when and as required in
any material respect, (iii) trading in securities generally on the New York
Stock Exchange, the American Stock Exchange or the Nasdaq National Market
shall have been suspended or materially limited, or minimum prices shall have
been established thereon by the Commission, or by such exchange or other
regulatory body or governmental authority having jurisdiction, (iv) a general
banking moratorium shall have been declared by federal or New York
authorities or (v) there is an outbreak or escalation of armed hostilities
involving the United States on or after the date of this Agreement, or if
there has been a declaration by the United States of a national emergency or
war or other national or international calamity or crisis (economic,
political, financial or otherwise) which affects the U.S. and international
markets, making it, in the Initial Purchasers' judgment, impracticable to
-25-
<PAGE>
proceed with the offering or delivery of the Original Notes on the terms and
in the manner contemplated in the Offering Memorandum.
(c) Any notice of termination pursuant to this Section 11 shall be
given at the address specified in Section 13 below by telephone, telex,
telephonic facsimile or telegraph, confirmed in writing by letter.
(d) If this Agreement shall be terminated pursuant to clause (i) or
(ii) of Section 11(b), or if the sale of the Notes provided for in this
Agreement is not consummated because of any refusal, inability or failure on
the part of the Issuers to satisfy any condition to the obligations of the
Initial Purchasers set forth in this Agreement to be satisfied on its part or
because of any refusal, inability or failure on the part of the Issuers to
perform any agreement in this Agreement or comply with any provision of this
Agreement, the Issuers will, subject to demand by the Initial Purchasers,
reimburse the Initial Purchasers for all of its reasonable out-of-pocket
expenses (including the fees and expenses of the Initial Purchasers' counsel)
incurred in connection with this Agreement.
12. DEFAULTING INITIAL PURCHASERS. (a) If, on the Closing Date, any
Initial Purchaser defaults in the performance of its obligations under this
Agreement, the non-defaulting Initial Purchasers may make arrangements for
the purchase of the Original Notes which such defaulting Initial Purchaser
agreed but failed to purchase by other persons satisfactory to the Company
and the non-defaulting Initial Purchasers, but if no such arrangements are
made within 36 hours after such default, this Agreement shall terminate
without liability on the part of the non-defaulting Initial Purchasers or the
Company except that the Company will continue to be liable for the payment of
expenses to the extent set forth in Sections 4(f) and Section 11(d) and
except that the provisions of Sections 6, 7 and 9 shall not terminate and
shall remain in effect. As used in this Agreement, the term "Initial
Purchasers" includes, for all purposes of this Agreement unless the context
otherwise requires, any party not listed in Schedule I hereto that, pursuant
to this Section 12, purchases Securities which a defaulting Initial Purchaser
agreed but failed to purchase.
(b) Nothing contained herein shall relieve a defaulting Initial
Purchaser of any liability it may have to the Issuers or any non-defaulting
Initial Purchaser for damages caused by its default. If other persons are
obligated or agree to purchase the Original Notes of a defaulting Initial
Purchaser, either the non-defaulting Initial Purchasers or the Company may
postpone the Closing Date for up to seven full business days in order to
effect any changes that in the opinion of counsel for the Company or counsel
for the Initial Purchasers may be necessary in the Offering Memorandum or in
any other document or arrangement, and the Company agrees to promptly prepare
any amendment or supplement to the Offering Memorandum that effects any such
changes.
13. NOTICE. All communications with respect to or under this
Agreement, except as may be otherwise specifically provided in this
Agreement, shall be in writing and, if sent to the Initial Purchasers, shall
be mailed, delivered, or telexed,
-26-
<PAGE>
telegraphed or telecopied and confirmed in writing to Warburg Dillon Read
LLC, 299 Park Avenue, New York, New York 10171 (telephone: (212) 821-3000),
Attention: Syndicate Department, telecopy number: (203) 719-1075; and if sent
to the Issuers, shall be mailed, delivered or telexed, telegraphed or
telecopied and confirmed in writing to 7301 Fairview, Houston, Texas 77041
(telephone: (713) 466-7788, Telecopy: (713) 856-8109, Attention: Chief
Financial Officer).
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; when answered
back, if telexed; when receipt acknowledged by telecopier machine, if
telecopied; and one business day after being timely delivered to a next-day
air courier.
14. PARTIES. This Agreement shall inure solely to the benefit of, and
shall be binding upon, the Initial Purchasers, the Issuers and the
controlling persons and agents referred to in Sections 6 and 7, and their
respective successors and assigns, and no other person shall have or be
construed to have any legal or equitable right, remedy or claim under or in
respect of or by virtue of this Agreement or any provision herein contained.
The term "successors and assigns" shall not include a purchaser, in its
capacity as such, of Notes from the Initial Purchasers.
15. CONSTRUCTION. This Agreement shall be construed in accordance
with the internal laws of the State of New York (without giving effect to any
provisions thereof relating to conflicts of law) and each of the parties
hereto consent to the jurisdiction of the courts of the State of New York.
Each of the parties hereto agrees to submit to the jurisdiction of the courts
of the State of New York and the U.S. federal courts sitting in the City of
New York for the purposes of any suit, action or proceeding arising out of or
relating to this Agreement. Nothing herein shall affect the right to serve
process in any other manner permitted by law or shall limit the right of the
Initial Purchasers to bring proceedings against the Issuers in the courts of
any other jurisdiction.
16. CAPTIONS. The captions included in this Agreement are included
solely for convenience of reference and are not to be considered a part of
this Agreement.
17. COUNTERPARTS. This Agreement may be executed in various
counterparts that together shall constitute one and the same instrument.
-27-
<PAGE>
If the foregoing Note Purchase Agreement correctly sets forth the
understanding among the Issuers and the Initial Purchasers, please so
indicate in the space provided below for the purpose, whereupon this letter
and your acceptance shall constitute a binding agreement among the Issuers
and the Initial Purchasers.
NCI BUILDING SYSTEMS, INC.
By: /s/ Robert J. Medlock
---------------------------------
Name: Robert J. Medlock
Title: Executive Vice President
NCI BUILDING SYSTEMS, INC.
By: /s/ Robert J. Medlock
---------------------------------
Name: Robert J. Medlock
Title: Executive Vice President
NCI OPERATING CORP.
By: /s/ Robert J. Medlock
---------------------------------
Name: Robert J. Medlock
Title: Executive Vice President
NCI HOLDING CORP.
By: /s/ Robert J. Medlock
---------------------------------
Name: Robert J. Medlock
Title: Executive Vice President
A&S BUILDING SYSTEMS, L.P.
By: /s/ Robert J. Medlock
---------------------------------
Name: Robert J. Medlock
Title: Executive Vice President
<PAGE>
NCI BUILDING SYSTEMS, L.P.
By: /s/ Robert J. Medlock
---------------------------------
Name: Robert J. Medlock
Title: Executive Vice President
METAL BUILDING COMPONENTS, L.P.
By: /s/ Robert J. Medlock
---------------------------------
Name: Robert J. Medlock
Title: Executive Vice President
METAL COATERS OPERATING, L.P.
By: /s/ Robert J. Medlock
---------------------------------
Name: Robert J. Medlock
Title: Executive Vice President
METAL BUILDING COMPONENTS HOLDING, INC.
By: /s/ Robert J. Medlock
---------------------------------
Name: Robert J. Medlock
Title: Executive Vice President
METAL COATERS HOLDING, INC.
By: /s/ Robert J. Medlock
---------------------------------
Name: Robert J. Medlock
Title: Executive Vice President
METAL COATERS OF CALIFORNIA, INC.
By: /s/ Robert J. Medlock
---------------------------------
Name: Robert J. Medlock
Title: Vice President
<PAGE>
Confirmed and accepted as of
the date first above written:
WARBURG DILLON READ LLC
By: /s/ James Stone By: /s/ P. Whitridge Williams, Jr.
--------------------------------- ---------------------------------
Name: James Stone P. Whitridge Williams, Jr.
Title: Director Associate Director
NATIONSBANC MONTGOMERY SECURITIES LLC
By: /s/ J. G. Weinmann, Jr.
---------------------------------
Name: J. G. Weinmann, Jr.
Title: Managing Director
FIRST UNION CAPITAL MARKETS CORP.
By: /s/ Douglas J. Fink
---------------------------------
Name: Douglas J. Fink
Title: Managing Director
BEAR, STEARNS & CO. INC.
By: /s/ J. C. Diao
---------------------------------
Name: J. C. Diao
Title: Senior Managing Director
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
Initial Purchaser Aggregate Principal Amount of Notes
- ----------------- -----------------------------------
<S> <C>
Warburg Dillon Read LLC..................... $48,750,000
NationsBanc Montgomery Securities LLC....... $32,500,000
First Union Capital Markets Corp............ $21,875,000
Bear, Stearns & Co. Inc..................... $21,875,000
</TABLE>
A-1
<PAGE>
SCHEDULE B
<TABLE>
<CAPTION>
Subsidiary Jurisdiction of Organization
---------- ----------------------------
<S> <C>
1. NCI Operating Corp., corporation wholly owned by NCI Nevada
Building Systems, Inc.
2. NCI Holding Corp., corporation wholly owned by NCI Delaware
Building Systems, Inc.
3. Metal Building Components Holding, Inc., corporation Delaware
wholly owned by NCI Holding Corp.
4. Metal Coaters Holding, Inc., corporation wholly Delaware
owned by NCI Holding Corp.
5. Metal Coaters of California, Inc., corporation Texas
wholly owned by Metal Coaters Holdings, Inc.
6. NCI Building Systems, L.P. Texas
1% g.p. - NCI Operating Corp.
99% l.p. - NCI Holding Corp.
7. A&S Building Systems, L.P. Texas
1% g.p. - NCI Operating Corp.
99% l.p. - NCI Holding Corp.
8. Metal Building Components, L.P. Texas
1% g.p. - NCI Operating Corp.
49.5% - NCI Holding Corp.
49.5 - Metal Building Components Holding, Inc.
9. Metal Coaters Operating, L.P. Texas
1% g.p. - NCI Operating Corp.
49.5% l.p. - NCI Holding Corp.
49.5% l.p. - Metal Coaters Holding, Inc.
10. DOUBLECOTE, L.L.C. Delaware
50% interest - Metal Coaters Operating, L.P.
11. Metallic de Mexico, S.A. de C.V. Mexico
50% interest - NCI Building Systems, Inc.
12. Building Systems de Mexico, S.A. de C.V. Mexico
51% interest - NCI Building Systems, Inc.
13. Midwest Metal Coatings, LLC Delaware
B-1
<PAGE>
50% interest - NCI Building Systems, Inc.
</TABLE>
B-2
<PAGE>
SCHEDULE C
EXCLUDED ENTITIES
DOUBLECOTE, L.L.C.
METALLIC DE MEXICO, S.A. DE C.V.
BUILDING SYSTEMS DE MEXICO, S.A. DE C.V.
MIDWEST METAL COATINGS, LLC
C-1
<PAGE>
EXHIBIT A
[Opinion of Gardere & Wynne, L.L.P.]
Gardere & Wynne, L.L.P. shall have furnished to the Initial
Purchasers their written opinion, as counsel to the Issuers, addressed to the
Initial Purchasers and dated the Closing Date, in form and substance
reasonably satisfactory to the Initial Purchasers, substantially to the
effect set forth below:
(i) As of the Closing Date, the Company shall have an
authorized equity capitalization as set forth under the heading
entitled "As Adjusted" in the section of the Offering Memorandum
entitled "Capitalization". Attached as Schedule A is a true and
complete list of all subsidiaries (including entities which the
Company owns at least 50% of the outstanding equity interests) of
the Company, their jurisdictions of incorporation or formation, type
of entity and equity ownership (all such entities excluding the
Excluded Entities, the "Subsidiaries"). All of the issued and
outstanding shares of capital stock or other equity interests of
each Subsidiary have been duly authorized and validly issued, are
fully paid and, except for any general partner interest in a
Subsidiary, nonassessable. Except as set forth in the Offering
Memorandum, all shares of capital stock or other equity interests of
the Subsidiaries that are owned of record directly by the Company or
indirectly by a wholly-owned Subsidiary of the Company are owned
free and clear of any perfected lien, security interest, pledge,
charge, encumbrance, equity or claim; none of the outstanding shares
of capital stock or other equity interests of any Subsidiary was
issued in violation of any preemptive or similar rights or the
charter or by-laws or other organizational documents of the Company
or such Subsidiary or any agreement to which the Company or such
Subsidiary is a party. Upon the closing of the transactions
contemplated by the Offering Memorandum, there will not be any
outstanding rights, warrants or options to acquire, or instruments
convertible into or exchangeable for, any shares of capital stock or
other equity interest of the Subsidiaries.
(ii) The Company and each Subsidiary has been duly organized,
is validly existing and under the laws of its respective
jurisdiction of organization and has all requisite corporate or
partnership power and authority, and all necessary authorizations,
approvals, orders, licenses, certificates and permits of and from
regulatory or governmental officials, bodies and tribunals, except
where the failure to obtain such authorizations, approvals, orders,
licenses, certificates and permits would not reasonably be expected
to have a Material Adverse Effect (as defined herein), to (A) carry
on its business as it is currently being conducted and as described
in the Offering Memorandum and (B) own, lease, license and operate
its respective properties in accordance with its business as
currently conducted. Each Subsidiary that is a corporation is in
good standing under the laws of its respective jurisdiction of
organization. The Company and each of the Subsidiaries is duly
qualified and in good standing (or the functional equivalent to the
concept of good standing) as a foreign organization authorized to do
business in each jurisdiction in which the nature of its
a-1
<PAGE>
business or its ownership or leasing of property requires such
qualification, except where the failure to be so qualified would,
either individually or in the aggregate, not result in a Material
Adverse Effect. A "Material Adverse Effect" means any material
adverse effect on the business, condition (financial or other)
properties, results of operations or prospects of the Company and
the Subsidiaries taken as a whole.
(iii) the descriptions in the Offering Memorandum (including
under the heading "U.S. Federal Income Tax Considerations") of
statutes, regulations, legal and governmental proceedings and
contracts and other documents; to the extent that they constitute
summaries of matters of law or regulation or legal conclusions, have
been reviewed by such counsel and fairly summarize the matters
described therein in all material respects and such counsel does not
have actual knowledge of any current or pending legal or
governmental actions, suits or proceedings which would be required
to be described in the Offering Memorandum if the Offering
Memorandum were a prospectus included in a registration statement on
Form S-1 which are not so described;
(iv) Each of the Issuers has all requisite corporate or
partnership power and authority to execute, deliver and perform all
of its obligations under the Operative Documents to which it is a
party and to consummate the transactions contemplated by the
Operative Documents to be consummated on its part and the Company
has all requisite corporate power and authority to issue, sell and
deliver the Notes and each Guarantor has all requisite corporate or
partnership power and authority to execute, deliver and perform all
its obligations under its Guarantee.
(v) This Agreement has been duly and validly authorized,
executed and delivered by each Issuer.
(vi) The Indenture has been duly and validly authorized by
each Issuer and, when duly executed and delivered by each Issuer
(assuming the due authorization, execution and delivery thereof by
the Trustee), will be a legal, valid and binding obligation of each
of the Issuers, enforceable against each of them in accordance with
its terms, except as enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or similar laws affecting the enforcement of creditors'
rights generally and by general principles of equity and the
discretion of the court before which any proceedings therefor may be
brought. The description of the Indenture in the Offering Memorandum
will conform in all material respects to the Indenture when executed
and delivered.
(vii) The Original Notes have been duly and validly authorized
for issuance and sale to the Initial Purchasers by the Company and,
when issued and delivered by the Company against payment by the
Initial Purchasers and duly authenticated by the Trustee in
accordance with the terms of this Agreement and the Indenture, the
Original Notes will be legal, valid and binding obligations of the
Company, entitled to the benefits of the Indenture and enforceable
against the Company in accordance with their terms, except as
enforcement thereof may be limited by bankruptcy, insolvency,
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<PAGE>
reorganization, fraudulent conveyance, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by
general principles of equity and the discretion of the court before
which any proceedings therefor may be brought. The description of
the Original Notes in the Offering Memorandum will conform in all
material respects to the Original Notes when issued, authenticated
and delivered.
(viii) The New Notes when duly and validly authorized for
issuance by the Company and, when issued and delivered by the
Company and duly authenticated by the Trustee in accordance with the
terms of the Registration Rights Agreement, the Exchange Offer and
the Indenture, the New Notes will be legal, valid and binding
obligations of the Company, entitled to the benefits of the
Indenture and enforceable against the Company in accordance with
their terms, except as enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or similar laws affecting the enforcement of creditors'
rights generally and by general principles of equity and the
discretion of the court before which any proceedings therefor may be
brought. The description of the New Notes in the Offering Memorandum
will conform in all material respects to the form of New Notes.
(ix) The Guarantees have been duly and validly authorized by
the Guarantors and, when executed and delivered and when the
Original Notes are issued and delivered by the Company against
payment by the Initial Purchasers and authenticated by the Trustee
in accordance with the terms of this Agreement and the Indenture,
will be legal, valid and binding obligations of the Guarantors,
enforceable against each of them in accordance with their terms,
except as enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium or
similar laws affecting the enforcement of creditors' rights
generally and by general principles of equity and the discretion of
the court before which any proceedings therefor may be brought. The
description of the Guarantees in the Offering Memorandum will
conform in all material respects to the Guarantees when executed and
delivered.
(x) The guarantees to be endorsed on the New Notes when duly
and validly authorized by the Guarantors and, when executed and
delivered and when the New Notes are issued and delivered and
authenticated in accordance with the terms of the Registration
Rights Agreement, the Exchange Offer and the Indenture, will be
legal, valid and binding obligations of the Guarantors, enforceable
against each of them in accordance with their terms, except as
enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by
general principles of equity and the discretion of the court before
which any proceedings therefor may be brought. The description of
the New Guarantees in the Offering Memorandum will conform in all
material respects to the form of New Guarantees.
(xi) The Registration Rights Agreement has been duly and
validly authorized by each of the Issuers and, when duly executed
and delivered by each of
a-3
<PAGE>
the Issuers (assuming the due authorization, execution and
delivery thereof by the Initial Purchaser), will constitute a legal,
valid and binding obligation of each of the Issuers, enforceable
against them in accordance with its terms, except that (A)
enforceability of the Registration Rights Agreement may be limited
by bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or similar laws affecting the enforcement of creditors'
rights generally and by general principles of equity and the
discretion of the court before which any proceedings therefor may be
brought and (B) any rights to indemnity or contribution thereunder
may be limited by federal and state securities laws and public
policy considerations. The description of the Registration Rights
Agreement in the Offering Memorandum will conform in all material
respects to the Registration Rights Agreement when executed and
delivered.
(xii) All taxes, fees and other governmental charges that are
due and payable on or prior to the Closing Date in connection with
the execution, delivery and performance of the Operative Documents
and the execution, delivery and sale of the Original Notes shall
have been paid by or on behalf of the Company at or prior to the
Closing Date.
(xiii) Neither the Company nor any Subsidiary is (A) in
violation of its charter, bylaws or other constituent documents or
(B) in default (or, with notice or lapse of time or both, would be
in default) in the performance or observance of any agreement filed
with the Securities and Exchange Commission to which any of them is
a party or by which any of them is bound or to which any of their
assets or properties is subject (collectively, "Agreements and
Instruments"), that, in the case of clause (B) herein, would
reasonably be expected to have a Material Adverse Effect.
(xiv) The execution, delivery and performance by each of the
Issuers or of the Operative Documents to which they are a party
including the consummation of the offer and sale of the Original
Notes, does not or will not violate, conflict with or constitute a
breach of any of the terms or provisions of, or a default under, as
applicable, (or an event that with notice or the lapse of time, or
both, would constitute a default), or require consent under, or
result in the creation or imposition of a lien, charge or
encumbrance on any property or assets of the Company or any
Subsidiary or an acceleration of any indebtedness of the Company or
any Subsidiary pursuant to, (i) the charter, bylaws or other
constituent documents of the Company or any Subsidiary, (ii)
assuming the consummation of the transactions contemplated thereby,
any Agreements and Instruments, (iii) to such counsel's knowledge,
any law, statute, rule or regulation applicable to the Company or
any Subsidiary or their respective assets or properties or (iv) to
such counsel's knowledge, any judgment, order or decree of any
domestic or foreign court or governmental agency or authority having
jurisdiction over the Company or any Subsidiary or their respective
assets or properties that is addressed to or binding upon the
Company or any Subsidiary or their respective assets or properties.
Assuming the accuracy of the representations and warranties of the
Initial Purchasers in Section 5(b) of this Agreement, no consent,
approval, authorization or order of, or filing, registration,
qualification, license or permit of or with, any court or
governmental agency, body or administrative agency, domestic or
a-4
<PAGE>
foreign, is required to be obtained or made by any of the Issuers
for the execution, delivery and performance by each of the Issuers
of the Operative Documents to which they are a party including the
consummation of any of the transactions contemplated thereby, except
(w) such as have been or will be obtained or made on or prior to the
Closing Date, (x) registration of the Exchange Offer or resale of
the Notes under the Act pursuant to the Registration Rights
Agreement, (y) qualification of the Indenture under the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"), in
connection with the issuance of the New Notes or (z) such as may be
required under state securities laws or by the NASD. To such
counsel's knowledge, no consents or waivers from any other person or
entity are required for the execution, delivery and performance of
this Agreement or any of the other Operative Documents or the
consummation of any of the transactions contemplated thereby, other
than such consents and waivers as have been obtained.
(xv) Except as set forth in the Offering Memorandum to such
counsel's knowledge, there is no action, suit or proceeding before
or by any court, arbitrator or governmental agency, body or
official, domestic or foreign, now pending or, to the knowledge of
the Issuers threatened or contemplated, to which the Company or any
Subsidiary is or may be a party or to which the business, assets or
property of such person is or may be subject.
(xvi) Neither the Company nor any Subsidiary is an "investment
company" or a company "controlled" by an "investment company"
incorporated in the United States within the meaning of the
Investment Company Act.
(xvii) To such counsel's knowledge there are no holders of
securities of the Company or any Subsidiary who have the right to
request or demand that the Company or any Subsidiary register under
the Act or analogous foreign laws and regulations any of such
securities held by any such holders, other than pursuant to the
Registration Rights Agreement or the Stock Registration Agreement
dated April 10, 1989 between the Company and Equus II Incorporated.
(xviii) No registration under the Act of the Original Notes
nor qualification of the Indenture under the Trust Indenture Act is
required for the sale of the Original Notes to the Initial
Purchasers as contemplated by this Agreement or for the Exempt
Resales, assuming in each case that (A) the purchasers who buy the
Original Notes in the Exempt Resales are Eligible Purchasers and (B)
the accuracy of and compliance with the Initial Purchaser's
representations, warranties and covenants contained in Section 5(b)
of this Agreement.
(xix) Each of the Preliminary Offering Memorandum and the
Offering Memorandum, as of its date, and each amendment or
supplement thereto, as of its date, complies in all material
respects with the requirements of, Rule 144A(d)(4) under the Act.
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<PAGE>
(xx) To the best of such counsel's knowledge, neither the
Company nor any Subsidiary (or any agent thereof acting on their
behalf) has taken any action that might cause this Agreement or the
issuance or sale of the Notes to violate Regulations T, U or X of
the Board of Governors of the Federal Reserve System or analogous
foreign laws and regulations, in each case as in effect, or as the
same may hereafter be in effect, on the Closing Date.
a-6
<PAGE>
==============================================================================
REGISTRATION RIGHTS AGREEMENT
AMONG
NCI BUILDING SYSTEMS, INC.,
THE GUARANTORS
NAMED HEREIN
AND
THE INITIAL PURCHASERS
NAMED HEREIN
==============================================================================
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "AGREEMENT") is dated as of
May 5, 1999, by and among NCI Building Systems, Inc., a Delaware corporation
(the "COMPANY"), the guarantors identified on the signature pages attached
hereto (the "GUARANTORS"), and Warburg Dillon Read LLC, NationsBanc Montgomery
Securities LLC, Bear, Stearns & Co. Inc., and First Union Capital Markets (each
an "INITIAL PURCHASER" and collectively, the "INITIAL PURCHASERS").
The execution and delivery of this Agreement is a condition to the
obligations of the Initial Purchasers to purchase $125,000,000 aggregate
principal amount of the Company's Notes (as defined herein) under the Purchase
Agreement (as defined herein). The Notes will be guaranteed on an unsecured
senior subordinated basis by the Guarantors and will be issued pursuant to the
Indenture (as defined herein).
The parties hereby agree as follows:
1. DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
ACTION: See Section 7(c).
ADVICE: See Section 5(c).
AFFILIATED ACCREDITED INVESTOR: A natural person who is a director or
executive officer of the Company that at the time has an individual net worth or
joint net worth with his or her spouse that exceeds $1,000,000 or had individual
income in excess of $200,000 in each of the two most recent years or joint
income with his or her spouse in excess of $300,000 in each of those years and
has a reasonable expectation of reaching the same income level in the current
year.
AGREEMENT: See the introductory paragraph to this Agreement.
APPLICABLE PERIOD: See Section 2(b).
COMPANY: See the introductory paragraph to this Agreement.
CONTROLLING PERSON: See Section 7.
EFFECTIVENESS DATE: See Section 2(a).
EFFECTIVENESS PERIOD: See Section 3(a).
EQUUS SECURITIES: Certain securities of the Company issued to Equus II
Incorporated that the Company has granted certain registration rights as set
forth in the Stock Registration Agreement dated April 10, 1989 between the
Company and Equus II Incorporated.
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<PAGE>
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended, and
the rules and regulations of the SEC promulgated thereunder.
EXCHANGE OFFER: See Section 2(a).
EXCHANGE OFFER REGISTRATION STATEMENT: See Section 2(a).
EXCHANGE SECURITIES: See Section 2(a).
EXPIRATION DATE: See Section 2(a).
FILING DATE: The date that is 60 days after the Issue Date.
GUARANTORS: See the introductory paragraph to this Agreement.
HOLDER: Any record holder of Registrable Securities.
INDEMNIFIED PERSONS: See Section 7(a).
INDENTURE: The Indenture, dated as of May 5, 1999, between the Company,
the Guarantors party thereto and Harris Trust Company of New York, as Trustee,
pursuant to which the Notes are being issued as contemplated by the terms of the
Purchase Agreement, as amended or supplemented from time to time in accordance
with the terms thereof.
INITIAL PURCHASERS: See the introductory paragraph to this Agreement.
INITIAL SHELF REGISTRATION STATEMENT: See Section 3(a).
INSPECTORS: See Section 5(o).
ISSUE DATE: The date that the Notes are issued pursuant to the
Indenture.
LOSSES: See Section 7(a).
NASD: See Section 5(t).
NOTES: The 9 1/4% Senior Subordinated Notes due 2009 to be issued by
the Company pursuant to the Indenture on the date hereof, including the related
guarantees by the Guarantors.
PARTICIPATING BROKER-DEALER: See Section 2(b).
PERSON: An individual, corporation, limited or general partnership,
limited liability company, joint venture, association, joint stock company,
trust, unincorporated organization or government or any agency or political
subdivision thereof.
PRIVATE EXCHANGE: See Section 2(b).
PRIVATE EXCHANGE NOTES: See Section 2(b).
3
<PAGE>
PROSPECTUS: The prospectus included in any Registration Statement
(including, without limitation, a prospectus that includes any information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Registrable Securities covered by such
Registration Statement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such Prospectus.
PURCHASE AGREEMENT: The Notes Purchase Agreement dated as of
April 30, 1999 among the Company, the Guarantors and the Initial Purchasers.
REASONABLE BEST EFFORTS: When used herein as the applicable standard of
conduct of the Company or the Guarantors to keep the Exchange Offer Registration
Statement or any Shelf Registration Statement effective during a defined period,
it shall not be deemed to require the Company or the Guarantors to forego or
delay the taking of any action, including acquisition or divestiture of
businesses or assets, that any of them believe in good faith and for valid
business reasons (other than avoidance of their obligations hereunder) to be in
the best interests of the Company and the Guarantors.
RECORDS: See Section 5(o).
REGISTRABLE SECURITIES: The Notes upon original issuance thereof and at
all times subsequent thereto, each Exchange Security as to which Section
2(c)(iii) hereof is applicable upon original issuance and at all times
subsequent thereto, any Transfer Restricted Securities and any Private Exchange
Notes upon original issuance and at all times subsequent thereto, until in the
case of any such Notes, Exchange Securities, Transfer Restricted Securities and
Private Exchange Notes, as the case may be, (i) a Registration Statement
covering such Notes, Exchange Securities, Transfer Restricted Securities or
Private Exchange Notes has been declared effective by the SEC and such Notes,
Exchange Securities, Transfer Restricted Securities or Private Exchange Notes,
as the case may be, have been disposed of in accordance with such effective
Registration Statement, (ii) such Notes, Exchange Securities, Transfer
Restricted Securities or Private Exchange Notes, as the case may be, have been
sold in compliance with Rule 144 or are salable pursuant to Rule 144(k), (iii)
such Notes have been exchanged for Exchange Securities pursuant to the Exchange
Offer and Section 2(c)(iii) is not applicable thereto, or (iv) such Notes,
Exchange Securities, Transfer Restricted Securities or Private Exchange Notes,
as the case may be, cease to be outstanding.
REGISTRATION DEFAULT: See Section 4.
REGISTRATION DEFAULT DATE: See Section 4.
REGISTRATION STATEMENT: Any registration statement of the Company,
including, but not limited to, the Exchange Offer Registration Statement, that
covers any of the Registrable Securities pursuant to the provisions of this
Agreement, including the Prospectus, amendments and supplements to such
registration statement, including post-effective amendments, all
4
<PAGE>
exhibits, and all material incorporated by reference or deemed to be
incorporated by reference in such registration statement.
RULE 144: Rule 144 promulgated under the Securities Act, as such Rule
may be amended from time to time, or any similar rule (other than Rule 144A) or
regulation hereafter adopted by the SEC providing for offers and sales of
securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of an issuer of such securities being
free of the registration and prospectus delivery requirements of the Securities
Act.
RULE 144A: Rule 144A promulgated under the Securities Act, as such Rule
may be amended from time to time, or any similar rule (other than Rule 144) or
regulation hereafter adopted by the SEC.
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).
SHELF REGISTRATION STATEMENT: See Section 3(b).
SHELF REGISTRATION EVENT: See Section 2(c).
SPECIAL INTEREST: See Section 4.
SPECIAL INTEREST PAYMENT DATE: With respect to the Notes, each
interest payment date as provided in the Indenture.
SUBSEQUENT SHELF REGISTRATION STATEMENT: See Section 3(b).
SUBSIDIARY GUARANTORS: See Section 10(d).
TIA: The Trust Indenture Act of 1939, as amended, as in effect on the
date of the Indenture.
TRANSFER RESTRICTED SECURITIES: Each Note or Exchange Security until
(i) the date on which such Note has been exchanged by a person other than a
broker-dealer for an Exchange Security in the Exchange Offer, (ii) following the
exchange by a broker-dealer in the Exchange Offer of a Note for an Exchange
Security, the date on which such Exchange Security is sold to a purchaser who
receives from such broker-dealer on or prior to the date of such sale a copy of
the Prospectus, (iii) the date on which such Note has been effectively
registered under the Securities Act and disposed of in accordance with the Shelf
Registration Statement or (iv) the date on which such Note is distributed to the
public pursuant to Rule 144 under the Act.
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<PAGE>
TRUSTEE: The trustee under the Indenture and, if applicable, the
trustee under any indenture governing the Exchange Securities 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 and the Guarantors agree to file with the SEC on or
before the Filing Date, an offer to exchange (each, an "EXCHANGE OFFER") any and
all of the Registrable Securities (other than Private Exchange Notes, if any)
for a like aggregate principal amount of 9 1/4% Senior Subordinated Notes due
2009 of the Company (guaranteed by the Guarantors) that are identical to the
Notes (the "EXCHANGE SECURITIES") (and that are entitled to the benefits of a
trust indenture that is identical to the Indenture (other than such changes as
are necessary to comply with any requirements of the SEC to effect or maintain
the qualification of such trust indenture under the TIA) and that has been
qualified under the TIA), except that the Exchange Securities (and each
Guarantor's guarantee thereof) shall have been registered pursuant to an
effective Registration Statement under the Securities Act and shall contain no
restrictive legend thereon. The Exchange Offer will be registered under the
Securities Act on the appropriate form (an "EXCHANGE OFFER REGISTRATION
STATEMENT") and will comply with all applicable tender offer rules and
regulations under the Exchange Act and other applicable law. The Company and the
Guarantors agree to use their reasonable best efforts (i) to cause the Exchange
Offer Registration Statement to become effective on or prior to the 135th day
after the Issue Date (such date, the "EFFECTIVENESS DATE"); (ii) unless
prohibited by the SEC, to commence the Exchange Offer with respect to (A) the
Notes and (B) all Transfer Restricted Securities and to issue Exchange
Securities on or prior to 45 days after the date that the Exchange Offer
Registration Statement is declared effective by the SEC (or longer, if required
by applicable law) (the last day of any such period, an "EXPIRATION DATE") and
(iii) to exchange Exchange Securities for all Registrable Securities validly
tendered and not withdrawn pursuant to the Exchange Offer on or prior to the
fifth day following the Expiration Date.
Each Holder that participates in the Exchange Offer will be required to
represent to the Company in writing (which may be contained in the applicable
letter of transmittal) that (i) any Exchange Notes to be received by it will be
acquired in the ordinary course of its business, (ii) such Holder will have no
arrangement or understanding with any Person to participate in the distribution
of the Exchange Notes in violation of the provisions of the Securities Act,
(iii) that such Holder is not an affiliate of the Company within the meaning of
the Securities Act, (iv) if such Holder is not a broker-dealer, that it is not
engaged in, and does not intend to engage in, a distribution (within the meaning
of the Securities Act) of Exchange Notes and (v) if such Holder 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 or other trading
activities, that it will deliver a prospectus in connection with any resale of
such Exchange Notes.
Upon consummation of an Exchange Offer in accordance with this Section
2, the provisions of this Agreement shall continue to apply, MUTATIS MUTANDIS,
solely with respect to Registrable Securities that are Private Exchange Notes,
Exchange Securities to which Section 2(c)(iii) is applicable and Exchange
Securities held by Participating Broker-Dealers, and
6
<PAGE>
the Company shall have no further obligation to register those Registrable
Securities subject to such a valid Exchange Offer (other than Private
Exchange Notes and other than Exchange Securities as to which Section
2(c)(iii) hereof applies) pursuant to Section 3 of this Agreement. No
securities other than the Exchange Securities shall be included in any
Exchange Offer Registration Statement.
(b) To the extent required by applicable law or SEC policy, the Company
and the Guarantors shall include within the Prospectus contained in each
Exchange Offer Registration Statement a section entitled "Plan of Distribution"
reasonably acceptable to the Holders, which shall contain a summary statement of
the positions taken or policies made by the Staff of the SEC (and publicly
disseminated) with respect to the potential "underwriter" status of any
broker-dealer that is the beneficial owner (as defined in Rule 13d-3 under the
Exchange Act) of Exchange Securities received by such broker-dealer in the
Exchange Offer (a "PARTICIPATING BROKER-DEALER"). Subject to the next paragraph,
such "Plan of Distribution" section shall also allow the use of the Prospectus
by all persons subject to the prospectus delivery requirements of the Securities
Act, including all Participating Broker-Dealers, and include a statement
describing the means by which Participating Broker-Dealers may resell the
Exchange Securities.
The Company and the Guarantors shall use their reasonable best efforts
to keep each Exchange Offer Registration Statement effective and to amend and
supplement the Prospectus contained therein in order to permit such Prospectus
to be lawfully delivered by all persons subject to the prospectus delivery
requirements of the Securities Act for at least 180 days following commencement
of the Exchange Offer under such Registration Statement (or such shorter time as
such persons must comply with such requirements in order to resell the Exchange
Securities) (each, an "APPLICABLE PERIOD").
If, prior to consummation of an Exchange Offer, any Holder holds any
Notes acquired by it and having, or which are reasonably likely to be determined
to have, the status of an unsold allotment in the initial distribution or any
Holder is not entitled to participate in the Registered Exchange Offer, the
Company upon the request of such Holder shall, simultaneously with the delivery
of the Exchange Securities in such Exchange Offer, issue and deliver to such
Holder, in exchange (each, a "PRIVATE EXCHANGE") for the Notes held by such
Holder, a like principal amount of debt securities of the Company (guaranteed by
the Guarantors) that are identical to the Exchange Securities (the "PRIVATE
EXCHANGE NOTES") (and which are issued pursuant to the same indenture as the
Exchange Securities) (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 Securities. Interest on the Exchange Securities and
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 Closing Date.
The indenture under which the Exchange Securities or the Private
Exchange Notes will be issued shall provide that the holders of any of the
Exchange Securities and the Private Exchange Notes will vote and consent
together on all matters to which such holders are entitled to vote or consent as
one class and that none of the holders of the Exchange Securities and the
Private Exchange Notes will have the right to vote or consent as a separate
class on any matter.
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(c) If, (i) the Company and the Guarantors are not required to file the
Exchange Offer Registration Statement because the Exchange Offer is not
permitted by applicable law or SEC policy or (ii) any holder of Transfer
Restricted Securities (other than an Affiliated Accredited Investor) notifies
the Company that (A) it is prohibited by law or SEC policy from participating in
the Exchange Offer or (B) it may not resell the Exchange Securities acquired by
it in the Exchange Offer to the public without delivering a prospectus and the
Prospectus is not appropriate or available for such resales or (c) it is a
broker-dealer and holds Notes acquired directly from the Company or an affiliate
of the Company; or (iii) in the case of any Holder that participates in an
Exchange Offer, the Company receives within 10 business days after the
consummation of the Exchange Offer an opinion of counsel addressed to such
Holder to the effect that such Holder did not receive Exchange Securities on the
date of the exchange that may be sold to the public without delivering a
prospectus and that the Prospectus contained in the Exchange Offer Registration
Statement is not legally available for such resales by such Holder (the
occurrence of any such event, a "SHELF REGISTRATION EVENT"), then, in the case
of each of clauses (i), (ii) and (iii) of this sentence, the Company and the
Guarantors shall promptly deliver to the Holders and the Trustee notice thereof
(the "SHELF NOTICE") and shall thereafter file an Initial Shelf Registration
Statement pursuant to Section 3 of this Agreement.
3. SHELF REGISTRATION
If, at any time, Shelf Notice is delivered as contemplated by Section
2(c) hereof then:
(a) The Company and the Guarantors shall promptly prepare and file with
the SEC a Registration Statement for an offering to be made on a continuous
basis pursuant to Rule 415 covering all of the Registrable Securities not
subject to a valid Exchange Offer (each, an "INITIAL SHELF REGISTRATION
Statement"). The Company and the Guarantors shall use their reasonable best
efforts to file with the SEC an Initial Shelf Registration Statement no later
than 45 days after receipt of the Shelf Notice. The Initial Shelf Registration
Statement shall be on Form S-3 or another appropriate form if available,
permitting registration of such Registrable Securities for resale by such
holders in the manner designated by them (including, without limitation, in one
or more underwritten offerings). Except for the Equus Securities that the
Company is required to include, the Company and the Guarantors shall not permit
any securities other than the Registrable Securities to be included in any
Initial Shelf Registration Statement or any Subsequent Shelf Registration
Statement. The Company and the Guarantors shall use their reasonable best
efforts to cause each Initial Shelf Registration Statement to be declared
effective under the Securities Act as promptly as possible no later than 120
days after the occurrence of the Shelf Registration Event, and to keep such
Initial Shelf Registration Statement continuously effective under the Securities
Act until the date which is 24 months from the Issue Date, or such shorter
period ending when (i) all Registrable Securities covered by such Initial Shelf
Registration Statement have been sold in the manner set forth and as
contemplated in such Initial Shelf Registration Statement or (ii) a Subsequent
Shelf Registration Statement covering all of the Registrable Securities has been
declared effective under the Securities Act (such 24 month or shorter period,
the "EFFECTIVENESS PERIOD").
(b) If any Initial Shelf Registration Statement or any Subsequent Shelf
Registration Statement 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 and the
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Guarantors shall use their reasonable best efforts to obtain the prompt
withdrawal of any order suspending the effectiveness thereof, and in any
event the Company and the Guarantors shall use their reasonable best efforts
to amend such Initial Shelf Registration Statement within 30 days of such
cessation of effectiveness in a manner expected to obtain the withdrawal of
the order suspending the effectiveness thereof, or file an additional "shelf"
Registration Statement pursuant to Rule 415 covering all of the Registrable
Securities (each, a "SUBSEQUENT SHELF REGISTRATION STATEMENT"). If a
Subsequent Shelf Registration Statement is filed, the Company and the
Guarantors shall use their reasonable best efforts to cause the Subsequent
Shelf Registration Statement to be declared effective as soon as practicable
after such filing and to keep such Registration Statement continuously
effective until the end of the Effectiveness Period relating thereto. As used
herein the term "SHELF REGISTRATION STATEMENT" means the Initial Shelf
Registration Statement and any Subsequent Shelf Registration Statement.
(c) As set forth in Section 5 hereof, the Company and the Guarantors
shall promptly supplement and amend any Shelf Registration Statement if required
by the rules, regulations or instructions applicable to the registration form
used for such Shelf Registration Statement, if required by the Securities Act,
or if reasonably requested by the Holders of a majority in aggregate principal
amount of the Registrable Securities covered by such Registration Statement or
by any underwriter of such Registrable Securities.
(d) No holder of Registrable Securities may include any of its
Registrable Securities in any Shelf Registration Statement, and will not be
entitled to Special Interest under Section 4, unless such Holder furnishes to
the Company in writing within 20 business days after receipt of a request
therefor, such information as regarding such Holder required by the Securities
Act to be included in any Shelf Registration Statement or Prospectus or
preliminary Prospectus included therein. Each Holder of Registrable Securities
as to which a Shelf Registrable Statement is being effected, by its
participation in the Shelf Registration Statement, shall be deemed to agree to
furnish the Company all information required to be described in order to make
the information previously furnished to the Company by such Holder not
materially misleading.
4. SPECIAL INTEREST
If (i) the Company and the Guarantors fail to file within 60 days, or
cause to become effective within 135 days, the Exchange Offer Registration
Statement or (ii) the Company and the Guarantors are obligated to file the Shelf
Registration Statement and such Shelf Registration Statement is not filed within
45 days, or declared effective within 120 days of the Shelf Notice or (iii) the
Company and the Guarantors fail to consummate the Exchange Offer within 45 days
of the Effectiveness Date or (iv) the Shelf Registration Statement or the
Exchange Offer Registration Statement is declared effective but thereafter
ceases to be effective or usable in connection with resales of Registrable
Securities during the periods required by this Agreement for a period in excess
of 30 days (each such event referred to in clauses (i) through (iv), a
"REGISTRATION DEFAULT" and the date of such event, the "REGISTRATION DEFAULT
DATE"), the Company and the Guarantors hereby agree to pay interest ("SPECIAL
INTEREST") to each Holder of Registrable Securities (in the case of a
Registration Default described in clause (i) or (iii) above) or to each Holder
of Registrable Securities the resale of which is covered or intended to be
required by this Agreement to be covered by such Registration Statement (in the
case of a Registration Default described in clause (ii) or (iv) above) with
respect to the first 90-day period
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(or portion thereof) commencing on the Registration Default Date, in an
amount equal to 0.5% per annum (in addition to the stated interest on the
Notes) while the Registration Default continues. The amount of the Special
Interest shall increase by an additional 0.5% per annum during each
additional 90-day period (or a portion thereof) up to a maximum amount of
Special Interest of 1.5% per annum. All accrued Special Interest shall be
paid by the Company and the Guarantors on each Special Interest Payment Date
to the Holders in the same manner that regular interest on the Notes is paid
pursuant to the Indenture. The accrual of Special Interest with respect to
such Registrable Securities will cease on the date that the Registration
Default is cured relating to such Registrable Securities.
The amount of Special Interest will be determined by multiplying the
applicable Special Interest rate by the principal amount of such Registrable
Securities, multiplied by a fraction, the numerator of which is the number of
days such Special Interest rate was applicable during such period (determined on
the basis of a 360-day year comprised of twelve 30-day months), and the
denominator of which is 360.
All obligations of the Company and the Guarantors set forth in the
preceding paragraph that are outstanding with respect to any such Registrable
Security at the time such security ceases to be a Registrable Security shall
survive until such time as all such obligations with respect to such Registrable
Security shall have been satisfied in full.
The parties hereto agree that the Special Interest provided in this
Section 4 constitutes a reasonable estimate of the damages that may be incurred
by Holders by reason of the failure of the Exchange Offer Registration Statement
or Shelf Registration Statement to be filed, declared effective or to remain
effective, as the case may be.
5. REGISTRATION PROCEDURES
In connection with the registration of any Registrable Securities
pursuant to Sections 2 or 3, the Company and the Guarantors shall use their
reasonable best efforts to effect such registrations to permit the sale of such
Registrable Securities in accordance with the intended method or methods of
disposition thereof, and pursuant thereto the Company and the Guarantors shall:
(a) prepare and file with the SEC on or before the date specified in
this Agreement, a Registration Statement or Registration Statements as
prescribed by Section 2 or 3, and use its reasonable best efforts to cause
each such Registration Statement to become effective and remain effective as
provided herein; PROVIDED, HOWEVER, that, if (1) such filing is pursuant to
Section 3, or (2) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Securities during the Applicable Period relating thereto, before filing any
Registration Statement or Prospectus or any amendments or supplements
thereto, the Company and the Guarantors shall furnish to and afford the
Initial Purchasers, the Holders of the Registrable Securities and each such
Participating Broker-Dealer, as the case may be, covered by such Registration
Statement, 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
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least five days prior to such filing); the Company and the Guarantors shall
not file any Registration Statement or Prospectus or any amendments or
supplements thereto in respect of which the Holders must be afforded a
reasonable opportunity to review prior to the filing of such document, if the
Initial Purchasers, the Holders of a majority in aggregate principal amount
of the Registrable Securities covered by such Registration Statement or such
Participating Broker-Dealer, as the case may be, their counsel, or the
managing underwriters, if any, shall reasonably object on a timely basis;
(b) use its reasonable best efforts to prepare and file with the SEC
such amendments and post-effective amendments to each Shelf Registration
Statement or Exchange Offer Registration Statement, as the case may be, as may
be necessary to keep such Registration Statement continuously effective for the
Effectiveness Period relating thereto, in the case of a Shelf Registration
Statement, or until the later of the Expiration Date and the Applicable Period
relating thereto (if applicable), in the case of the Exchange Offer Registration
Statement; cause the related Prospectus to be supplemented by any required
Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424
(or any similar provisions then in force) under the Securities Act; and comply
with the provisions of the Securities Act, the Exchange Act and the rules and
regulations of the SEC promulgated thereunder applicable to it with respect to
such Registration Statement as so amended or such Prospectus as so supplemented;
(c) if (l) a Shelf Registration Statement is filed pursuant to Section
3, or (2) a Prospectus contained in an Exchange Offer Registration Statement
filed pursuant to Section 2 is required to be delivered under the Securities Act
by any Participating Broker-Dealer who seeks to sell Exchange Securities during
the Applicable Period relating thereto, notify each of the Initial Purchasers,
each of the selling Holders of Registrable Securities 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
(including in such notice a written statement that any Holder may, upon request,
obtain, without charge, one conformed copy of such Registration Statement or
post-effective amendment 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 Securities the
representations and warranties of the Company contained in any agreement
(including any underwriting agreement) contemplated by Section 5(n) below cease
to be true and correct; (iv) of the receipt by the Company of any notification
with respect to the suspension of the qualification or exemption from
qualification of a Registration Statement or any of the Registrable Securities
or the Exchange Securities to be sold by any Participating Broker-Dealer for
offer or sale in any jurisdiction, or the initiation or threatening of any
proceeding for such purpose; (v) of the happening of any event or any
information becoming known that makes any statement made in such Registration
Statement or related Prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that
requires the making of any changes in such Registration Statement, Prospectus or
documents so that, in the case of such Registration
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<PAGE>
Statement, it will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading, and that in the case of the
Prospectus, it will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading; PROVIDED, HOWEVER, that such notification
need not specifically identify such event if notification of the occurrence
thereof would, in the reasonable judgment of the Company, involve the
disclosure of confidential non-public information; and (vi) of the Company's
reasonable determination that a post-effective amendment to the Registration
Statement would be appropriate; PROVIDED, FURTHER, upon complying with
complying with the procedures described above in this Section 5(c) following
the occurrence of an event of the type described in clause (v) of this
Section 5(c), the Company may suspend the use of any Prospectus until such
holder's receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 5(k), or until it is advised in writing (the
"ADVICE") by the Company that the use of the applicable Prospectus may be
resumed, and has received copies of any amendments or supplements thereto.
(d) if (1) a Shelf Registration Statement is filed pursuant to Section
3, or (2) a Prospectus contained in an Exchange Offer Registration Statement
filed pursuant to Section 2 is required to be delivered under the Securities Act
by any Participating Broker-Dealer who seeks to sell Exchange Securities during
the Applicable Period relating thereto, use its reasonable 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 Securities or the Exchange Securities to be sold by any
Participating Broker-Dealer, for sale in any jurisdiction, and, if any such
order is issued, to use its reasonable best efforts to obtain the withdrawal of
any such order at the earliest possible moment;
(e) if a Shelf Registration Statement is filed pursuant to Section 3
and if requested by the managing underwriters, if any, or the Holders of a
majority in aggregate principal amount of the Registrable Securities being sold
in connection with an underwritten offering, (i) promptly incorporate in a
prospectus supplement or post-effective amendment such information as the
managing underwriters, if any, or such Holders or their respective counsel
reasonably request to be included therein; and (ii) make all required filings of
such prospectus supplement or such post-effective amendment as soon as
reasonably practicable after the Company has received notification of the
matters to be incorporated in such prospectus supplement or post-effective
amendment, PROVIDED that the Company shall not be required to take any action
pursuant to this paragraph (e) that would, in the opinion of counsel to the
Company, violate applicable law or any agreement to which the Company and its
subsidiaries are then subject;
(f) if (1) a Shelf Registration Statement is filed pursuant to Section
3, or (2) a Prospectus contained in an Exchange Offer Registration Statement
filed pursuant to Section 2 is required to be delivered under the Securities Act
by any Participating Broker-Dealer who seeks to sell Exchange Securities during
the Applicable Period relating thereto, furnish to each Initial Purchaser, each
selling Holder of Registrable Securities and to each such Participating
Broker-Dealer who so requests and upon request to their respective counsel and
each managing underwriter, if any, without charge, one conformed copy of the
Registration Statement or Statements and each post-effective amendment thereto,
including financial statements and
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<PAGE>
schedules, all documents incorporated or deemed to be incorporated therein by
reference and all exhibits;
(g) if (1) a Shelf Registration Statement is filed pursuant to Section
3, or (2) a Prospectus contained in an Exchange Offer Registration Statement
filed pursuant to Section 2 is required to be delivered under the Securities Act
by any Participating Broker-Dealer who seeks to sell Exchange Securities during
the Applicable Period relating thereto, deliver to each Initial Purchaser, each
selling Holder of Registrable Securities or each such Participating
Broker-Dealer, as the case may be, their counsel, and the underwriters, if any,
without charge, as many copies of the Prospectus or Prospectuses (including each
form of preliminary prospectus) and each amendment or supplement thereto and any
documents incorporated by reference therein as such Persons may reasonably
request; and, subject to the last paragraph of this Section 5, the Company
hereby consents to the use of such Prospectus and each amendment or supplement
thereto by all of the Initial Purchasers, each of the selling Holders of
Registrable Securities or each such Participating Broker-Dealer, as the case may
be, and the underwriters or agents, if any, and dealers (if any), in connection
with the offering and sale of the Registrable Securities covered by or the sale
by Participating Broker-Dealers of the Exchange Securities pursuant to such
Prospectus and any amendment or supplement thereto provided such use complies
with all applicable laws and regulations;
(h) prior to any public offering of Registrable Securities or any
delivery of a Prospectus contained in an Exchange Offer Registration Statement
by any Participating Broker-Dealer who seeks to sell Exchange Securities during
the Applicable Period relating thereto, use its reasonable best efforts to
register or qualify, and to cooperate with the Initial Purchasers, the selling
Holders of Registrable Securities or each such Participating Broker-Dealer, as
the case may be, the underwriters, if any, and their respective counsel in
connection with the registration or qualification (or exemption from such
registration or qualification) of such Registrable Securities for offer and sale
under the securities or Blue Sky laws of such jurisdictions within the United
States as the Initial Purchasers, any selling Holder, Participating
Broker-Dealer, or the managing underwriters reasonably request; PROVIDED,
HOWEVER, that where Exchange Securities held by Participating Broker-Dealers or
Registrable Securities are offered other than through an underwritten offering,
the Company shall cause its counsel to (i) perform Blue Sky investigations and
file registrations and qualifications required to be filed pursuant to this
Section 5(h); (ii) use its reasonable 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; and (iii)
do any and all other acts or things necessary or advisable to enable the
disposition in such jurisdictions of the Exchange Securities held by
Participating Broker-Dealers or the Registrable Securities covered by the
applicable Registration Statement; PROVIDED FURTHER that the Company shall not
in any case 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 any taxation in any such
jurisdiction where it is not so subject;
(i) if a Shelf Registration Statement is filed pursuant to Section 3,
cooperate with the selling Holders of Registrable Securities and the managing
underwriters, if any, to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be sold, which certificates
shall not bear any restrictive legends and shall be in a form eligible for
deposit
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with The Depository Trust Company; and enable such Registrable Securities to
be in such denominations and registered in such names as the managing
underwriter or underwriters, if any, or Holders may reasonably request;
(j) use its reasonable best efforts to cause the Registrable Securities
covered by any Registration Statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary to enable the
seller or sellers thereof or the underwriters, if any, to consummate the
disposition of such Registrable Securities, except as may be required solely as
a consequence of the nature of such selling Holder's business, in which case the
Company and the Guarantors will cooperate in all reasonable respects with the
filing of such Registration Statement and the granting of such approvals;
(k) if (1) a Shelf Registration Statement is filed pursuant to Section
3, or (2) a Prospectus contained in an Exchange Offer Registration Statement
filed pursuant to Section 2 is required to be delivered under the Securities Act
by any Participating Broker-Dealer who seeks to sell Exchange Securities during
the Applicable Period relating thereto, upon the occurrence of any event
contemplated by paragraph 5(c)(v) or 5(c)(vi) above, as promptly as practicable
(but not earlier than such time as the Company otherwise determines it
appropriate, in good faith, to publicly disclose the event or information
requiring preparation and filing of such amendment or supplement) prepare and
(subject to Section 5(a) above) file with the SEC, solely at the expense of the
Company, a supplement or post-effective amendment to the Registration Statement
or a supplement to the related Prospectus or any document incorporated or deemed
to be incorporated therein by reference, or file any other required document so
that, as thereafter delivered to the purchasers of the Registrable Securities
being sold thereunder or to the purchasers of the Exchange Securities 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 the light of the circumstances under which they were
made, not misleading;
(l) unless previously rated, use its reasonable best efforts to cause
the Registrable Securities covered by a Registration Statement or the Exchange
Securities, as the case may be, to be rated with the appropriate rating
agencies, if so requested by the Holders of a majority in aggregate principal
amount of Registrable Securities covered by such Registration Statement or the
Exchange Securities, as the case may be, or the managing underwriters, if any;
(m) prior to the effective date of the first Registration Statement
relating to the Registrable Securities, (i) provide the Trustee with printed
certificates for the Registrable Securities in a form eligible for deposit with
The Depository Trust Company; and (ii) a CUSIP number for the Registrable
Securities;
(n) in connection with an underwritten offering of Registrable
Securities pursuant to a Shelf Registration Statement, enter into an
underwriting agreement as is customary in underwritten offerings and take all
such other actions as are reasonably requested by the managing underwriters in
order to expedite or facilitate the registration or the disposition of such
Registrable Securities, and in such connection if reasonably requested, (i) make
such representations and warranties to the underwriters, with respect to the
business of the Company and its subsidiaries and the Registration Statement,
Prospectus and documents, if any,
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incorporated or deemed to be incorporated by reference therein, in each case,
as are customarily made by issuers to underwriters in underwritten offerings,
and confirm the same if and when reasonably requested; (ii) use its
reasonable best efforts to obtain opinions of counsel to the Company and
updates thereof in form and substance reasonably satisfactory to the managing
underwriters, addressed to the underwriters covering the matters customarily
covered in opinions requested in underwritten offerings and such other
matters as may be reasonably requested by underwriters; (iii) use its
reasonable best efforts to obtain "cold comfort" letters and updates thereof
in form and substance reasonably satisfactory to the managing underwriters
from the independent certified public accountants of the Company (and, if
necessary, any other independent certified public accountants of any
subsidiary of the Company or of any business acquired by the Company or any
of its subsidiaries for which financial statements and financial data are, or
are required to be, included in the Registration Statement), addressed to
each of the underwriters, such letters to be in customary form and covering
matters of the type customarily covered in "cold comfort" letters in
connection with underwritten offerings and such other matters as reasonably
requested by underwriters; and (iv) if an underwriting agreement is entered
into, the same shall contain indemnification provisions and procedures
comparable to those set forth in Section 7 hereof (or such other provisions
and procedures reasonably acceptable to the Company and the Holders of a
majority in aggregate principal amount of Registrable Securities covered by
such Registration Statement and the managing underwriters or agents) with
respect to all parties to be indemnified pursuant to said Section, all of
which shall be done at each closing under such underwriting agreement, or as
and to the extent required thereunder;
(o) if (1) a Shelf Registration Statement is filed pursuant to Section
3, or (2) a Prospectus contained in an Exchange Offer Registration Statement
filed pursuant to Section 2 is required to be delivered under the Securities Act
by any Participating Broker-Dealer who seeks to sell Exchange Securities during
the Applicable Period relating thereto, make available for inspection by any
selling Holder of such Registrable Securities being sold pursuant to such Shelf
Registration Statement, or each such Participating Broker-Dealer, as the case
may be, any underwriter participating in any such disposition of Registrable
Securities, if any, and any attorney, accountant or other agent retained by any
such selling holder or each such Participating Broker-Dealer, as the case may
be, or underwriter (collectively, the "INSPECTORS"), at the offices where
normally kept, during reasonable business hours, all relevant financial and
other records, pertinent corporate documents and properties of the Company and
its subsidiaries (collectively, the "RECORDS") as shall be necessary to enable
them to exercise any applicable due diligence responsibilities, and cause the
officers, directors and employees of the Company and its subsidiaries to supply
all information in each case requested by any such Inspector in connection with
such Registration Statement; however, Records which the Company determines, in
good faith, to be confidential and which the Company notifies the Inspectors in
writing are confidential shall not be disclosed by the Inspectors unless (i) the
disclosure of such Records is necessary to avoid or correct a misstatement or
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; PROVIDED that to the extent practicable the Company shall be
provided the right to challenge the subpoena or order before providing such
records; or (iii) the information in such Records has been made otherwise
generally available to the public;
(p) provide for an indenture trustee for the Registrable Securities or
the Exchange Securities, as the case may be, and cause the Indenture or the
trust indenture provided for in
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Section 2(a), 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 Securities; and in connection
therewith, cooperate with the trustee under any such indenture and the
holders of the Registrable Securities, 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 reasonable
best efforts to cause such trustee to execute, all documents as may be
required to effect such changes, and all other forms and documents required
to be filed with the SEC to enable such indenture to be so qualified in a
timely manner;
(q) comply with all applicable rules and regulations of the SEC to the
extent and so long as they are applicable to any Exchange Offer Registration
Statement or Shelf Registration Statement and make generally available to its
securityholders earning statements satisfying the provisions of Section 11(a) of
the Securities Act and Rule 158 thereunder (or any similar rule promulgated
under the Securities Act) no later than 45 days after the end of any 12-month
period (or 90 days after the end of any 12-month period if such period is a
fiscal year) (i) commencing at the end of any fiscal quarter of the Company in
which Registrable Securities 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 commencing after the effective date of a Registration Statement, which
statements shall cover said 12-month periods;
(r) upon consummation of an Exchange Offer or a Private Exchange,
obtain an opinion of counsel to the Company in customary form, relating to the
Exchange Securities or the Private Exchange Notes, as the case may be, addressed
to the Trustee for the benefit of all Holders of Registrable Securities
participating in the Exchange Offer or the Private Exchange, as the case may be,
and which includes an opinion that (i) the Company has duly authorized, executed
and delivered the Exchange Securities and Private Exchange Notes and the related
indenture; (ii) each of the Exchange Securities or the Private Exchange Notes,
as the case may be, and related indenture constitute legal, valid and binding
obligations of the Company and the Guarantors, enforceable against each of the
Company and the Guarantors in accordance with their respective terms (with
customary exceptions); and (iii) the Guarantors have duly authorized, executed
and delivered the guarantees endorsed on the Exchange Securities and the Private
Exchange Notes and the related indentures;
(s) if an Exchange Offer or a Private Exchange is to be consummated,
upon delivery of the Registrable Securities by Holders to the Company (or to
such other Person as directed by the Company) in exchange for the Exchange
Securities or the Private Exchange Notes, as the case may be, mark, or caused to
be marked, on such Registrable Securities that such Registrable Securities are
being canceled in exchange for the Exchange Securities or the Private Exchange
Notes, as the case may be; in no event shall such Registrable Securities be
marked as paid or otherwise satisfied;
(t) cooperate with each seller of Registrable Securities covered by any
Registration Statement and each underwriter, if any, participating in the
disposition of such Registrable Securities and their respective counsel in
connection with any filings required to be made with the National Association of
Securities Dealers, Inc. (the "NASD"); and
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<PAGE>
(u) use its reasonable best efforts to take all other steps necessary
to effect the registration of the Registrable Securities covered by a
Registration Statement contemplated hereby.
The Company may require each seller of Registrable Securities 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 Securities or Exchange
Securities to be sold by such Participating Broker-Dealer, as the case may be,
as required by the Securities Act to be included in the applicable Registration
Statement. The Company may exclude from such registration the Registrable
Securities of any seller or Participating Broker-Dealer who fails to furnish
such information within a reasonable time after receiving such request.
Each Holder of Registrable Securities and each Participating
Broker-Dealer agrees by acquisition of such Registrable Securities or Exchange
Securities to be sold by such Participating Broker-Dealer, as the case may be,
that, upon receipt of any notice from the Company of the happening of any event
of the kind described in Section 5(c)(ii), 5(c)(iv), or 5(c)(vi), such Holder
will forthwith discontinue disposition of such Registrable Securities covered by
such Registration Statement or Prospectus or Exchange Securities to be sold by
such Participating Broker-Dealer, as the case may be, until such holder's
receipt of the copies of the supplemented or amended Prospectus contemplated by
Section 5(k), or until it has received 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.
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
any Exchange Offer Registration Statement or Shelf Registration Statement 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
such jurisdictions (x) where the holders of Registrable Securities are located,
in the case of the Exchange Securities, or (y) as provided in Section 5(h), in
the case of Registrable Securities to be sold in a public offering or Exchange
Securities to be sold by a Participating Broker-Dealer during the Applicable
Period)); (ii) printing expenses (including, without limitation, expenses of
printing certificates for Registrable Securities or Exchange Securities in a
form eligible for deposit with The Depository Trust Company and of printing
prospectuses if the printing of prospectuses is requested by the managing
underwriters, if any, or, in respect of Registrable Securities or Exchange
Securities to be sold by any Participating Broker-Dealer during the Applicable
Period, by the Holders of a majority in aggregate principal amount of the
Registrable Securities included in any Registration Statement or of such
Exchange Securities, as the case may be); (iii) messenger, telephone and
delivery expenses incurred by the Company; (iv) fees and disbursements of
counsel for the Company and (subject to the provisions of Section 6(b))
reasonable fees and disbursements of special counsel for the sellers of
Registrable Securities; (v) fees and disbursements of all independent certified
public accountants referred to in
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<PAGE>
Section 5(n)(iii) (including, without limitation, the expenses of any special
audit and "cold comfort" letters required by or incident to such
performance); (vi) the reasonable fees and expenses of any "qualified
independent underwriter" or other independent appraiser participating in an
offering pursuant to Rule 2710 of the Conduct Rules of the NASD; (vii) rating
agency fees; (viii) Securities Act liability insurance, if the Company
desires such insurance; (ix) fees and expenses of all other Persons retained
by the Company; (x) internal expenses of the Company (including, without
limitation, all salaries and expenses of officers and employees of the
Company performing legal or accounting duties); (xi) the expense of any
annual audit of the Company; (xii) the fees and expenses incurred by the
Company in connection with the listing of the Registrable Securities on any
securities exchange; and (xiii) the expenses relating to printing, word
processing and distributing all Registration Statements, underwriting
agreements, securities sales agreements, indentures and any other documents
necessary in order to comply with this Agreement. Anything contained herein
to the contrary notwithstanding, the Company shall not have any obligation
whatsoever in respect of any underwriters' discounts or commissions,
brokerage commissions, dealers' selling concessions or transfer taxes
incurred in connection with the underwriting, offering or sale of Registrable
Securities or Exchange Securities by or on behalf of any Person.
(b) In connection with any Shelf Registration Statement or Exchange
Offer Registration Statement hereunder, the Company shall reimburse the Initial
Purchasers and Holders of the Registrable Securities being registered in such
registration for the reasonable fees and disbursements of not more than one
counsel (in addition to appropriate local counsel) chosen by the Holders of a
majority in aggregate principal amount of the Registrable Securities to be
included in such Registration Statement.
7. INDEMNIFICATION
(a) The Company, and each of the Guarantors, on a joint and several
basis, agrees to indemnify and hold harmless (i) each Initial Purchaser, each
Holder of Registrable Securities and each Participating Broker Dealer, (ii) each
person, if any, who controls any of the foregoing within the meaning of Section
15 of the Securities Act or Section 20(a) of the Exchange Act (any of the
persons referred to in this clause (ii) being hereinafter referred to as a
"CONTROLLING PERSON") and (iii) its agents, employees, officers and directors
and the agents, employees, officers and directors of any such controlling person
(collectively, the "INDEMNIFIED PERSONS") from and against any and all losses,
liabilities, claims, damages and expenses whatsoever (including but not limited
to reasonable attorneys' fees and any and all reasonable expenses whatsoever
incurred in investigating, preparing or defending against any litigation,
commenced or threatened, or any claim whatsoever, and any and all amounts paid
in settlement of any claim or litigation) (collectively, "LOSSES") to which they
or any of them may become subject under the Securities Act, the Exchange Act or
otherwise, insofar as such Losses (or actions in respect thereof) arise out of
or are based upon any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement or Prospectus, or in any amendment
thereof or supplement thereto, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; PROVIDED, HOWEVER, that the Company
and the Guarantors will not be liable in any such case to the extent, but only
to the extent, that any such Loss arises out of or is based upon any such untrue
statement
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<PAGE>
or alleged untrue statement or omission or alleged omission made therein in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of any Indemnified Person relating to such
Indemnified Person expressly for use therein; and PROVIDED, FURTHER, that
with respect to any such untrue statement in or omission from any related
preliminary prospectus, the indemnification provided in this Section 7(a)
shall not inure to the benefit of any Indemnified Person from whom the
Indemnified Person asserting any Loss received Notes or Exchange Securities
to the extent that the Loss of or with respect to such Indemnified Person
results from the fact that both (A) a copy of the final prospectus was not
sent or given to such Indemnified Person at or prior to the written
confirmation of the sale of such Notes, or Exchange Securities to such
Indemnified Person and (B) the untrue statement in or omission from the
related preliminary prospectus was corrected in the final prospectus unless,
in either case, such failure to deliver the final prospectus was a result of
the non-compliance by the Company with Section 5(g). This indemnity agreement
will be in addition to any liability that the Company and the Guarantors may
otherwise have, including, but not limited to, liability under this Agreement.
(b) In connection with any Registration Statement pursuant to which a
Holder of Registrable Securities offers or sells Registrable Securities, such
Holder agrees, severally and not jointly, to indemnify and hold harmless the
Company, the Guarantors, and each person controlling the Company or the
Guarantors within the meaning of Section 15 of the Securities Act or Section
20(a) of the Exchange Act, and each of their respective agents, employees,
officers and directors and the agents, employees, officers and directors of such
controlling person from and against any Losses to which they or any of them may
become subject under the Securities Act, the Exchange Act or otherwise insofar
as such Losses (or actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement or Prospectus, or in any amendment thereof or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, in each case to the extent, but only
to the extent, that any such Loss arises out of or is based upon any untrue
statement or alleged untrue statement or omission or alleged omission made
therein in reliance upon and in conformity with written information relating to
such Holder furnished to the Company by or on behalf of such Holder expressly
for use therein. This indemnity agreement will be in addition to any liability
that such Holder may otherwise have, including, but not limited to, liability
under this Agreement.
(c) Promptly after receipt by an indemnified party under subsection
7(a) or 7(b) above of notice of the commencement of any action, suit or
proceeding (collectively, an "action"), such indemnified party shall, if a claim
in respect thereof is to be made against the indemnifying party under such
subsection, notify each party against whom indemnification is to be sought in
writing of the commencement of such action (but the failure so to notify an
indemnifying party shall not relieve such indemnifying party from any liability
that it may have under this Section 7 except to the extent that it has been
prejudiced in any material respect by such failure or from any liability which
it may otherwise have). In case any such action is brought against any
indemnified party, and it notifies an indemnifying party of the commencement of
such action, the indemnifying party will be entitled to participate in such
action, and to the extent it may elect by written notice delivered to the
indemnified party
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<PAGE>
promptly after receiving the aforesaid notice from such indemnified party, to
assume the defense of such action with counsel satisfactory to such
indemnified party. Notwithstanding the foregoing, the indemnified party or
parties shall have the right to employ its or their own counsel in any such
action, but the fees and expenses of such counsel shall be at the expense of
such indemnified party or parties unless (i) the employment of such counsel
shall have been authorized in writing by the indemnifying parties in
connection with the defense of such action, (ii) the indemnifying parties
shall not have employed counsel to take charge of the defense of such action
within a reasonable time after notice of commencement of the action, or (iii)
the named parties to such action (including any impleaded parties) include
such indemnified party and the indemnifying parties (or such indemnifying
parties have assumed the defense of such action), and such indemnified party
or parties shall have reasonably concluded that there may be defenses
available to it or them that are different from or additional to those
available to one or all of the indemnifying parties (in which case the
indemnifying parties shall not have the right to direct the defense of such
action on behalf of the indemnified party or parties), in any of which events
such reasonable fees and expenses of counsel shall be borne by the
indemnifying parties. In no event shall the indemnifying party be liable for
the fees and expenses of more than one counsel (together with appropriate
local counsel) at any time for all indemnified parties in connection with any
one action or separate but substantially similar or related actions arising
in the same jurisdiction out of the same general allegations or
circumstances. An indemnifying party shall not be liable for any settlement
of any claim or action effected without its written consent; PROVIDED,
HOWEVER, that such consent was not unreasonably withheld. Notwithstanding the
foregoing sentence, if at any time an indemnified party shall have requested
an indemnifying party to reimburse the indemnified party for fees and
expenses of counsel as contemplated by paragraph (a) or (b) of this Section
7, then the indemnifying party agrees that it shall be liable for any
settlement of any proceeding effected without its written consent if (i) such
settlement is entered into more than 30 business days after receipt by such
indemnifying party of the aforesaid request, (ii) such indemnifying party
shall not have reimbursed the indemnified party in accordance with such
request prior to the date of such settlement and (iii) such indemnified party
shall have given the indemnifying party at least 30 days prior notice of its
intention to settle. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending or
threatened proceeding in respect of which any indemnified party is or could
have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release
of such indemnified party from all liability on claims that are the subject
matter of such proceeding.
(d) In order to provide for contribution in circumstances in which the
indemnification provided for in Section 7 of this Agreement is for any reason
held to be unavailable from the indemnifying party, or is insufficient to hold
harmless a party indemnified under Section 7 of this Agreement, the indemnifying
party shall contribute to the amount paid or payable by such indemnified party
as a result of such aggregate Losses of the nature contemplated by such
indemnification provision (but after deducting in the case of aggregate Losses
suffered by the indemnifying party, any contribution received by the
indemnifying party from persons other than the indemnified party who may also be
liable for contribution, including persons who control the indemnified party
within the meaning of Section 15 of the Securities Act or Section 20(a) of the
Exchange Act) to which the Company, the Guarantors and the Indemnified Persons
may be subject in such proportion as is appropriate to reflect the relative
benefits received by the indemnifying party on the one hand and the indemnified
party, on the other hand, in connection
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<PAGE>
with the statements or omissions that resulted in such losses, liabilities,
claims damages and expenses, as well as any other relevant equitable
considerations. The relative benefits received by the Company and the
Guarantors, on the one hand, and a Holder, on the other hand, shall be deemed
to be in the same proportion as (A) the total net proceeding from the
offering and sale (before deducting expenses) received by or on behalf of the
Company and the Guarantors and (B) the total proceeds received by such Holder
with respect to the sale of Notes, Exchange Securities, or Private Exchange
Securities. The relative fault of the Company and the Guarantors, on the one
hand, and the Indemnified Persons, on the other hand, shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company, the Guarantors
or the Indemnified Persons and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission.
The Company, the Guarantors and the Initial Purchasers agree that it
would not be just and equitable if contribution pursuant to this paragraph (d)
of this Section 7 were determined by pro rata allocation or by any other method
of allocation that does not take into account the equitable considerations
referred to above. Notwithstanding the provisions of paragraph (d) of this
Section 7, (i) in no case shall an Indemnified Person be required to contribute
any amount in excess of the amount by which the total received by such
Indemnified Person with respect to its sale of its Registrable Securities
exceeds the amount of any damages that such Indemnified Person has otherwise
been required to pay by reason of any untrue or alleged untrue statement or
omission or alleged omission and (ii) 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) of this
Section 7, each person, if any, who controls an Indemnified Person within the
meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange
Act shall have the same rights to contribution as such Indemnified Person,
and each person, if any, who controls the Company and the Guarantors within
the meaning of Section 15 of the Securities Act or Section 20(a) of the
Exchange Act shall have the same rights to contribution as the Company and
the Guarantors. Any party entitled to contribution will, promptly after
receipt of notice of commencement of any action against such party in respect
of which a claim for contribution may be made against another party or
parties under this paragraph 7(d), notify such party or parties from whom
contribution may be sought, but, except to the extent that the indemnifying
party shall be materially prejudiced thereby, the omission to so notify such
party or parties shall not relieve the party or parties from whom
contribution may be sought from any obligation it or they may have under this
paragraph (d) or otherwise; PROVIDED, HOWEVER, that no additional notice
shall be required with respect to any action for which notice has been given
under Section 7 for purposes of indemnification. Anything in this section to
the contrary notwithstanding, no party shall be liable for contribution with
respect to any action or claim settled without its written consent, PROVIDED,
HOWEVER, that such written consent was not unreasonably withheld.
8. RULE 144 AND RULE 144A
The Company covenants that it will file the reports required to be
filed by it under the Securities Act and the Exchange Act and the rules and
regulations adopted by the SEC thereunder in a timely manner and, if at any time
the Company is not required to file such
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<PAGE>
reports, it will, upon the request of any Holder of Registrable Securities,
make publicly available other information so long as necessary to permit
sales pursuant to Rule 144 and Rule 144A under the Securities Act. The
Company further covenants that it will take such further action as any Holder
of Registrable Securities may reasonably request, to the extent required from
time to time to enable such Holder to sell Registrable Securities without
registration under the Securities Act within the limitation of the exemptions
provided by Rule 144 and Rule 144A under the Securities Act.
9. UNDERWRITTEN REGISTRATIONS
If any of the Registrable Securities covered by any Shelf Registration
Statement are to be sold in an underwritten offering, the investment banker or
investment bankers and manager or managers that will manage the offering will be
selected by the Holders of a majority in aggregate principal amount of such
Registrable Securities included in such offering and reasonably acceptable to
the Company.
No Holder of Registrable Securities may participate in any underwritten
registration hereunder unless such Holder (a) agrees to sell such Holder's
Registrable Securities on the basis provided in any underwriting arrangements
approved by the Persons entitled hereunder to approve such arrangements (however
the terms applicable to each Holder shall be identical in all respects) and (b)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements, lock-up letters and other documents required under the
terms of such underwriting arrangements applicable to all Holders.
10. MISCELLANEOUS
(a) REMEDIES. In the event of a breach by the Company or any Guarantor
of any of their obligations under this Agreement, each Holder of Registrable
Securities, in addition to being entitled to exercise all rights provided in
this Agreement, in the Indenture, in the Purchase Agreement or granted by law,
including recovery of damages, will be entitled to specific performance of its
rights under this Agreement. The Company and the Guarantors agree that monetary
damages would not be adequate compensation for any loss incurred by reason of a
breach by them of any of the provisions of this Agreement and hereby further
agree that, in the event of any action for specific performance in respect of
such breach, they shall waive the defense that a remedy at law would be
adequate.
(b) NO INCONSISTENT AGREEMENTS. The Company and the Guarantors have
not, as of the date hereof, entered into and shall not, after the date of this
Agreement, enter into any agreement with respect to any of their securities that
is inconsistent with the rights granted to the Holders of Registrable Securities
in this Agreement or otherwise conflicts with the provisions hereof. Except
under the Stock Registration Agreement dated April 10, 1989 between the Company
and Equus II Incorporated, the Company will not have previously entered into any
agreement granting any registration rights with respect to its securities to any
person. The rights granted to the Holders under this Agreement do not in any way
conflict with and are not inconsistent with the rights granted to the holders of
the Company's securities under any agreement in effect on the date of this
Agreement.
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<PAGE>
(c) ADJUSTMENTS AFFECTING REGISTRABLE SECURITIES. Without the written
consent of the Holders of a majority in principal amount of outstanding
Registrable Securities, the Company shall not, directly or indirectly, take any
action with respect to the Registrable Securities as a class that would
adversely affect the ability of the Holders of Registrable Securities to include
such Registrable Securities in a registration undertaken pursuant to this
Agreement.
(d) SUBSIDIARY GUARANTORS. So long as any Registrable Securities remain
outstanding, the Company shall cause each of its subsidiaries that becomes a
guarantor of the Notes under the Indenture to execute and deliver a counterpart
to this Agreement which subjects such subsidiary to the provisions of this
agreement as a guarantor (all such subsidiaries, the "SUBSIDIARY GUARANTORS").
Each of the Subsidiary Guarantors agrees to join the Company in all of its
undertakings hereunder to effect the Exchange Offer for the Exchange Securities
(which will be guaranteed by each of the Subsidiary Guarantors with terms
identical to such Subsidiary Guarantors' guaranties of the Notes) and the filing
of any Shelf Registration Statement required hereunder (including, without
limitation, the undertakings in Section 5 hereof).
(e) AMENDMENTS AND WAIVERS. Except as provided in paragraph (d) above,
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 Holders of not less
than a majority in aggregate principal amount of the then outstanding
Registrable Securities as to which the provisions of this Agreement set forth in
Sections 2 or 3 remain applicable. 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 Securities 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 Securities may be given by Holders of at least a majority
in aggregate principal amount of the Registrable Securities being sold by such
Holders pursuant to such Registration Statement.
(f) NOTICES. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, air courier guaranteeing overnight delivery or telecopier:
(i) if to a Holder of Registrable Securities, at the address
set forth on the records of the Registrar under the Indenture, with a
copy to the Registrar under the Indenture; and
(ii) if to the Company, at 7301 Fairview, Houston, Texas
77041, telephone: (713) 466-7788, telecopy: (713) 856-8109), Attention:
Chief Financial Officer.
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 an air courier guaranteeing overnight delivery; and
when receipt is acknowledged by the addressee, if telecopied.
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<PAGE>
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
(g) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties,
including without limitation and without the need for an express assignment,
subsequent Holders of Registrable Securities.
(h) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(i) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(j) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAW.
(k) SUBMISSION TO JURISDICTION. The Company and the Guarantors
irrevocably submit to the nonexclusive jurisdiction of any State or Federal
court sitting in New York over any suit, action or proceeding arising out of or
relating to this Agreement. The Company and the Guarantors irrevocably waive, to
the fullest extent permitted by law, any objection they may now or thereafter
have to the laying of venue of any such court and any claim that any such suit,
action or proceeding brought in such a court has been brought in an inconvenient
forum. The Company and the Guarantors agree that a final nonappealable judgment
in any such suit, action or proceeding brought in any such court shall be
conclusive and binding upon each of them and may be enforced in any other courts
to the jurisdiction of which the Company and the Guarantors are or may be
subject, by suit upon such judgment. The Company and the Guarantors hereby
appoint, without power of revocation, CT Corporation System as their agent to
accept and acknowledge on their behalf service of any and all process which may
be served in any suit, action or proceeding arising out of or relating to this
letter.
(l) 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 reasonable best efforts to find and employ an alternative
means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or unenforceable.
(m) ENTIRE AGREEMENT. This Agreement, together with the other Operative
Documents (as defined in the Purchase Agreement), is intended by the parties as
a final expression of their agreement, and is intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein and therein.
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<PAGE>
There are no restrictions, promises, warranties or undertakings, other than
those set forth or referred to in this Agreement with respect to the
registration rights granted by the Company with respect to the Registrable
Securities. This Agreement supersedes all prior agreements and understandings
between the parties with respect to such subject matter.
(n) SECURITIES HELD BY THE COMPANY, THE GUARANTORS OR THEIR AFFILIATES.
Whenever the consent or approval of Holders of a specified percentage of
Registrable Securities is required hereunder, Registrable Securities held by the
Company, the Guarantors or their affiliates (as such term is defined in Rule 405
under the Securities Act) shall not be deemed to be outstanding for purposes of
determining whether such consent or approval was given by the Holders of such
required percentage.
[SIGNATURE PAGES FOLLOW]
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
NCI BUILDING SYSTEMS, INC.
By: /s/ Robert J. Medlock
----------------------------------------------
Name: Robert J. Medlock
Title: Executive Vice President
NCI OPERATING CORP.
By: /s/ Robert J. Medlock
----------------------------------------------
Name: Robert J. Medlock
Title: Executive Vice President
NCI HOLDING CORP.
By: /s/ Robert J. Medlock
----------------------------------------------
Name: Robert J. Medlock
Title: Executive Vice President
A&S BUILDING SYSTEMS, L.P.
By: NCI Operating Corp.
a Nevada corporation,
its general partner
By: /s/ Robert J. Medlock
----------------------------------------------
Name: Robert J. Medlock
Title: Executive Vice President
NCI BUILDING SYSTEMS, L.P.
By: NCI Operating Corp.
a Nevada corporation,
its general partner
<PAGE>
By: /s/ Robert J. Medlock
----------------------------------------------
Name: Robert J. Medlock
Title: Executive Vice President
METAL BUILDING COMPONENTS, L.P.
By: NCI Operating Corp.
a Nevada corporation,
its general partner
By: /s/ Robert J. Medlock
----------------------------------------------
Name: Robert J. Medlock
Title: Executive Vice President
METAL COATERS OPERATING, L.P.
By: NCI Operating Corp.
a Nevada corporation,
its general partner
By: /s/ Robert J. Medlock
----------------------------------------------
Name: Robert J. Medlock
Title: Executive Vice President
METAL BUILDING COMPONENTS HOLDING, INC.
By: /s/ Robert J. Medlock
----------------------------------------------
Name: Robert J. Medlock
Title: Executive Vice President
METAL COATERS HOLDING, INC.
By: /s/ Robert J. Medlock
----------------------------------------------
Name: Robert J. Medlock
Title: Executive Vice President
<PAGE>
METAL COATERS OF CALIFORNIA, INC.
By: /s/ Robert J. Medlock
---------------------------------
Name: Robert J. Medlock
Title: Executive Vice President
Accepted and agreed as of the date first above written:
WARBURG DILLON READ LLC NATIONSBANC MONTGOMERY SECURITIES LLC
By: /s/ James Stone By: /s/ J. G. Weinmann, Jr.
--------------------------------- ---------------------------------
Name: James Stone Name: J. G. Weinmann, Jr.
Title: Director Title: Managing Director
By: /s/ David Borth
---------------------------------
Name: David Borth
Title: Director
BEAR, STEARNS & CO. INC. FIRST UNION CAPITAL MARKETS
By: /s/ John J. Veatch, Jr. By: /s/ Douglas J. Fink
-------------------------------- -------------------------------
Name: John J. Veatch, Jr. Name: Douglas J. Fink
Title: Managing Director Title: Managing Director
<PAGE>
EXECUTION COPY
==============================================================================
------------------------------
NCI BUILDING SYSTEMS, INC.
AS ISSUER
THE GUARANTORS
NAMED HEREIN
$125,000,000
9-1/4% SENIOR SUBORDINATED NOTES DUE 2009
INDENTURE
------------------------------
Dated as of May 5, 1999
------------------------------
Harris Trust Company of New York
Trustee
==============================================================================
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
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ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
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SECTION 1.01. Definitions..................................................1
SECTION 1.02. Other Definitions...........................................28
SECTION 1.03. TIA Terms...................................................29
SECTION 1.04. Rules of Construction.......................................30
ARTICLE TWO
THE NOTES
SECTION 2.01. Form and Dating.............................................30
SECTION 2.02. Execution and Authentication................................32
SECTION 2.03. Registrar and Paying Agent..................................33
SECTION 2.04. Paying Agent to Hold Money in Trust.........................34
SECTION 2.05. Holder Lists................................................34
SECTION 2.06. Transfer and Exchange.......................................34
SECTION 2.07. Replacement Notes...........................................50
SECTION 2.08. Outstanding Notes...........................................51
SECTION 2.09. Treasury Notes..............................................51
SECTION 2.10. Temporary Notes.............................................51
SECTION 2.11. Cancellation................................................52
SECTION 2.12. Defaulted Interest..........................................52
SECTION 2.13. CUSIP Number................................................53
ARTICLE THREE
REDEMPTION AND PREPAYMENT
SECTION 3.01. Notices to Trustee..........................................53
SECTION 3.02. Selection of Notes to Be Redeemed...........................53
SECTION 3.03. Notice of Redemption........................................54
SECTION 3.04. Effect of Notice of Redemption..............................55
SECTION 3.05. Deposit of Redemption Price.................................55
SECTION 3.06. Notes Redeemed in Part......................................55
SECTION 3.07. Optional Redemption.........................................56
SECTION 3.08. Mandatory Redemption........................................56
SECTION 3.09. Offer to Purchase by Application of Excess Proceeds.........57
SECTION 3.10. Change of Control...........................................59
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Notes............................................61
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SECTION 4.02. Maintenance of Office or Agency.............................61
SECTION 4.03. Reports.....................................................62
SECTION 4.04. Compliance Certificate......................................62
SECTION 4.05. Taxes.......................................................63
SECTION 4.06. Stay, Extension and Usury Laws..............................63
SECTION 4.07. Restricted Payments.........................................64
SECTION 4.08. Restrictions on Distributions from Restricted Subsidiaries..68
SECTION 4.09. Limitation on Additional Indebtedness.......................69
SECTION 4.10. Asset Sales.................................................69
SECTION 4.11. Transactions with Affiliates................................72
SECTION 4.12. Liens.......................................................74
SECTION 4.13. Corporate Existence.........................................75
SECTION 4.14 Limitation on Issuances and Sales of Capital Stock..........75
SECTION 4.15. Limitation on Layering......................................76
SECTION 4.16. Additional Subsidiary Guarantees............................76
ARTICLE FIVE
SUCCESSORS
SECTION 5.01. Merger, Consolidation, or Sale of Assets....................77
SECTION 5.02. Successor Corporation Substituted...........................78
ARTICLE SIX
DEFAULTS AND REMEDIES
SECTION 6.01. Events of Default...........................................78
SECTION 6.02. Acceleration................................................80
SECTION 6.03. Other Remedies..............................................80
SECTION 6.04. Waiver of Past Defaults.....................................81
SECTION 6.05. Control by Majority.........................................81
SECTION 6.06. Limitation on Suits.........................................81
SECTION 6.07. Rights of Holders to Receive Payment........................82
SECTION 6.08. Collection Suit by Trustee..................................82
SECTION 6.09. Trustee May File Proofs of Claim............................82
SECTION 6.10. Priorities..................................................83
SECTION 6.11. Undertaking for Costs.......................................84
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee...........................................84
SECTION 7.02. Rights of Trustee...........................................85
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SECTION 7.03. Individual Rights of Trustee................................86
SECTION 7.04. Trustee's Disclaimer........................................86
SECTION 7.05. Notice of Defaults..........................................86
SECTION 7.06. Reports by Trustee to Holders...............................87
SECTION 7.07. Compensation and Indemnity..................................87
SECTION 7.08. Replacement of Trustee......................................88
SECTION 7.09. Successor Trustee by Merger, etc............................89
SECTION 7.10. Eligibility; Disqualification...............................89
SECTION 7.11. Preferential Collection of Claims Against Company...........90
ARTICLE EIGHT
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.01. Option to Effect Legal Defeasance or Covenant Defeasance....90
SECTION 8.02. Legal Defeasance and Discharge..............................90
SECTION 8.03. Covenant Defeasance.........................................91
SECTION 8.04. Conditions to Legal or Covenant Defeasance..................91
SECTION 8.05. Deposited Money and Government Securities to Be Held
in Trust; Other Miscellaneous Provisions....................93
SECTION 8.06. Repayment to Company........................................94
SECTION 8.07. Reinstatement...............................................94
ARTICLE NINE
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.01. Without Consent of Holders..................................95
SECTION 9.02. With Consent of Holders.....................................95
SECTION 9.03. Compliance with Trust Indenture Act.........................97
SECTION 9.04. Revocation and Effect of Consents...........................97
SECTION 9.05. Notation on or Exchange of Notes............................97
SECTION 9.06. Trustee to Sign Amendments, etc.............................97
ARTICLE TEN
SUBSIDIARY GUARANTEES
SECTION 10.01. Subsidiary Guarantee........................................98
SECTION 10.02. Agreement to Subordinate....................................99
SECTION 10.03. Limitation on Liability of Subsidiary Guarantors............99
SECTION 10.04. Liquidation; Dissolution; Bankruptcy.......................100
SECTION 10.05. Subsidiary Guarantors Not to Make Payments with
Respect to Guarantees in Certain Circumstances.............101
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<PAGE>
SECTION 10.06. When Distribution Must Be Paid Over........................102
SECTION 10.07. Subrogation................................................103
SECTION 10.08. Subordination May Not Be Impaired by.......................103
SECTION 10.09. Distribution or Notice to Representative...................103
SECTION 10.10. Rights of Trustee and Paying Agent.........................103
SECTION 10.11. Officers' Certificate......................................104
SECTION 10.12. Obligation of Subsidiary Guarantors Unconditional..........105
SECTION 10.13. Article Ten Not To Prevent Events of Default...............105
SECTION 10.14. Execution and Delivery of Guarantee........................106
SECTION 10.15. Subsidiary Guarantors May Consolidate, Etc.,...............106
SECTION 10.16. Releases Following Sale of Assets, Etc.....................107
ARTICLE ELEVEN
SUBORDINATION
SECTION 11.01. Agreement to Subordinate...................................108
SECTION 11.02. Liquidation; Dissolution; Bankruptcy.......................108
SECTION 11.03 Notes in Certain Circumstances.............................109
SECTION 11.04. Acceleration of Notes......................................111
SECTION 11.05. When Distribution Must Be Paid Over........................111
SECTION 11.06. Notice by Company..........................................111
SECTION 11.07. Subrogation................................................111
SECTION 11.08. Subordination May Not Be Impaired by Company...............112
SECTION 11.09. Distribution or Notice to Representative...................112
SECTION 11.10. Rights of Trustee and Paying Agent.........................112
SECTION 11.11. Officers' Certificate......................................113
SECTION 11.12. Obligation of Company Unconditional........................113
SECTION 11.13. Article Eleven Not To Prevent Events of Default............114
ARTICLE TWELVE
MISCELLANEOUS
SECTION 12.01. Trust Indenture Act Controls...............................114
SECTION 12.02. Notices....................................................114
SECTION 12.03. Communication by Holders with Other Holders................116
SECTION 12.04. Certificate and Opinion as to Conditions Precedent.........116
SECTION 12.05. Statements Required in Certificate or Opinion..............116
SECTION 12.06. Rules by Trustee and Agents................................117
SECTION 12.07. No Personal Liability of Directors, Officers, Employees
and Stockholders...........................................117
SECTION 12.08. Governing Law..............................................117
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SECTION 12.09. No Adverse Interpretation of Other Agreements..............118
SECTION 12.10. Successors.................................................118
SECTION 12.11. Severability...............................................118
SECTION 12.12. Counterpart Originals......................................118
SECTION 12.13. Table of Contents, Headings, etc...........................118
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
EXHIBITS
<S> <C>
Exhibit A-1 Form of Note
Exhibit A-2 Form of Regulation S Temporary Global Note
Exhibit B Form of Certificate of Transfer
Exhibit C Form of Certificate of Exchange
Exhibit D-1 Form of Certificate of Acquiring Institutional Accredited Investor
Exhibit D-2 Form of Certificate of Acquiring Affiliate Accredited Investor
Exhibit E Form of Senior Subordinated Subsidiary Guarantee
Exhibit F Form of Supplemental Indenture
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
SCHEDULES
<S> <C>
Schedule I Affiliate Transactions pursuant to agreements entered into or in
effect on the Issue Date
</TABLE>
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<PAGE>
INDENTURE dated as of May 5, 1999 among NCI Building Systems,
Inc., a Delaware corporation (the "COMPANY"), the subsidiary guarantors named
herein (the "SUBSIDIARY GUARANTORS") and Harris Trust Company of New York
(the "TRUSTEE").
The Company, the Subsidiary Guarantors and the Trustee agree
as follows for the benefit of each other and for the equal and ratable
benefit of the Holders of the 9-1/4% Series A Senior Subordinated Notes due
2009 (the "SERIES A NOTES"), the 9-1/4% Series B Senior Subordinated Notes
due 2009 issued in the Exchange Offer and any Private Exchange (the "SERIES B
NOTES") and any Additional Notes (and any related Exchange Notes and Private
Exchange Notes) (together with the Series A Notes and the Series B Notes, the
"NOTES"):
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS.
"144A GLOBAL NOTE" means a global note in the form of Exhibit
A-1 hereto bearing the Global Note 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 principal amount of the Notes sold in reliance on Rule 144A.
"ACQUIRED INDEBTEDNESS" means (a) with respect to any Person
that becomes a Restricted Subsidiary after the date of this Indenture,
Indebtedness of such Person and its Subsidiaries existing at the time such
Person becomes a Restricted Subsidiary that was not incurred in connection
with, or in contemplation of, such Person becoming a Restricted Subsidiary
and (b) with respect to the Company or any of its Restricted Subsidiaries,
any Indebtedness of a Person (other than the Company or a Restricted
Subsidiary) existing at the time such Person is merged with or into the
Company or a Restricted Subsidiary, or Indebtedness assumed by the Company or
any of its Restricted Subsidiaries in connection with the acquisition of an
asset or assets from another Person, which Indebtedness was not, in any case,
incurred by such other Person in connection with, or in contemplation of,
such merger or acquisition.
"ADDITIONAL NOTES" means Notes issued under this Indenture
subsequent to the date of this Indenture in accordance with Sections 2.02 and
4.09 hereof.
"AFFILIATE" of any Person means any Person (i) which directly
or indirectly controls or is controlled by, or is under direct or indirect
common control with, the referent
<PAGE>
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Person, (ii) which beneficially owns or holds, directly or indirectly, 10% or
more of any class of the Voting Stock of the referent Person, (iii) of which
10% or more of the Voting Stock is beneficially owned or held, directly or
indirectly, by the referent Person or (iv) with respect to an individual, any
immediate family member of such Person. For purposes of this definition,
control of a Person shall mean the power to direct the management and
policies of such Person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise.
"AFFILIATE ACCREDITED INVESTOR" means a natural person who is
a director or executive officer of the Company that at the time has an
individual net worth or joint net worth with his or her spouse that exceeds
$1,000,000 or had individual income in excess of $200,000 in each of the two
most recent years or joint income with his or her spouse in excess of
$300,000 in each of those years and has a reasonable expectation of reaching
the same income level in the current year.
"AGENT" means any Registrar, Paying Agent or co-registrar.
"APPLICABLE PROCEDURES" means, with respect to any transfer or
exchange of or for beneficial interests in any Global Note, the rules and
procedures of the Depositary, Euroclear and Cedel that apply to such transfer
or exchange.
"ASSET SALE" means any sale, issuance, conveyance, transfer,
lease, assignment or other disposition to any Person other than the Company
or any of its Restricted Subsidiaries (including by means of a Sale and
Leaseback Transaction or a merger or consolidation) (collectively, for
purposes of this definition, a "transfer"), directly or indirectly, in one
transaction or a series of related transactions, of (a) any Capital Stock of
any Subsidiary or (b) any other properties or assets of the Company or any of
its Subsidiaries. For purposes of this definition, the term "Asset Sale"
shall not include: (i) transfers of cash, Cash Equivalents, defaulted
accounts receivable , inventory or other properties or assets in the ordinary
course of business (other than in connection with a Receivables Facility);
(ii) transfers of properties or assets (including Capital Stock) that are
governed by, and made in accordance with, the provisions described Section
5.01 hereof; (iii) transfers of properties or assets to a Subsidiary,
including an Unrestricted Subsidiary, and a transfer of assets that
constitutes a Restricted Investment, in each case if permitted under Section
4.07 hereof; (iv) transfers of damaged, worn-out or obsolete equipment or
assets that, in the Company's reasonable judgment, are no longer used or
useful in the business of the Company or its Subsidiaries; PROVIDED that the
proceeds thereof are used to purchase replacement or similar assets for use
in the business of the Company and its Subsidiaries; (v) any transfer or
series of related transfers that, but for this clause (v), would be Asset
Sales, if after giving effect to such transfers, the aggregate Fair Market
Value of the properties or assets transferred in such transaction or any such
series of related transactions does not exceed $1,000,000; (vi) a Sale and
Leaseback Transaction with
<PAGE>
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respect to the Company's home office building being constructed in Houston,
Texas, PROVIDED (a) the Attributable Indebtedness with respect to such Sale
and Leaseback Transaction does not exceed a principal amount of $5.5 million
and is otherwise permitted to be incurred under this Indenture, and (b) the
gross cash proceeds of that Sale and Leaseback Transaction are at least equal
to the Fair Market Value of the asset subject thereto; or (vii) a
contribution, transfer or other disposition of Receivables in connection with
a Qualifying Receivables Facility.
"ATTRIBUTABLE INDEBTEDNESS," when used with respect to any
Sale and Leaseback Transaction, means, as at the time of determination, the
present value (discounted at a rate equivalent to the Company's then-current
weighted average cost of funds for borrowed money as at the time of
determination, compounded on a semi-annual basis) of the total obligations of
the lessee for rental payments during the remaining term of the lease
included in any such Sale and Leaseback Transaction.
"BANKRUPTCY LAW" means Title 11, U.S. Code or any similar
federal or state law for the relief of debtors.
"BOARD OF DIRECTORS" means the board of directors of the
Company or any authorized committee of the Board of Directors.
"BOARD RESOLUTION" means a duly adopted resolution of the
Board of Directors and delivered to the Trustee.
"BSM" means Building Systems de Mexico, S.A. de C.V., a
Mexican stock corporation.
"BUSINESS DAY" means any day other than a Legal Holiday.
"CAPITALIZED LEASE" means a lease required to be capitalized
for financial reporting purposes in accordance with GAAP.
"CAPITAL STOCK" of any Person means (i) any and all shares or
other equity interests (including common stock, Preferred Stock and
partnership interests) in such Person and (ii) all rights to purchase,
warrants or options (whether or not currently exercisable), participations or
other equivalents of or interests in (however designated) such shares or
other interests in such Person.
"CAPITALIZED LEASE OBLIGATIONS" of any Person means the
obligations of such Person to pay rent or other amounts under a Capitalized
Lease, and the amount of such obligation shall be the capitalized amount
thereof determined in accordance with GAAP.
"CASH EQUIVALENTS" means (i) marketable obligations with a
maturity of 180
<PAGE>
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days or less issued or directly and fully guaranteed or insured by the United
States of America or any agency or instrumentality thereof (provided that the
full faith and credit of the United States of America is pledged in support
thereof); (ii) demand and time deposits and certificates of deposit or
acceptances with a maturity of 180 days or less of any financial institution
that is a member of the Federal Reserve System having combined capital and
surplus and undivided profits of not less than $500 million; (iii) commercial
paper maturing no more than 180 days from the date of creation thereof issued
by a corporation that is not the Company or an Affiliate of the Company, and
is organized under the laws of any State of the United States of America or
the District of Columbia and rated at least A-l by S&P or at least P-l by
Moody's; (iv) repurchase obligations with a term of not more than seven days
for underlying securities of the types described in clause (i) above entered
into with any commercial bank meeting the specifications of clause (ii)
above; and (v) investments in money market or other mutual funds
substantially all of whose assets comprise securities of the types described
in clauses (i) through (iv) above.
"CEDEL" means Cedel Bank, S.A.
"CHANGE OF CONTROL" means the occurrence of any of the
following: (i) any Person or group (as such term is used in Section 13(d)(3)
of the Exchange Act) is or becomes the beneficial owner (as defined in Rule
13d-3 of the Exchange Act), directly or indirectly, of Voting Stock
representing more than 50% of the voting power of the Voting Stock of the
Company, (ii) the Company consolidates with, or merges with or into, another
Person or sells, assigns, conveys, transfers, leases or otherwise disposes of
all or substantially all of the Company's assets or the assets of Company and
its Subsidiaries taken as a whole to any Person, or any Person consolidates
with, or merges with or into, the Company, in any such event pursuant to a
transaction in which the outstanding Voting Stock of the Company is converted
into or exchanged for cash, securities or other property, other than any such
transaction where the outstanding Voting Stock of the Company is converted
into or exchanged for Voting Stock (other than Disqualified Capital Stock) of
the surviving or transferee corporation and the beneficial owners of the
Voting Stock of the Company immediately prior to such transaction own,
directly or indirectly, not less than a majority of the Voting Stock of the
surviving corporation (including the Company) or transferee corporation
immediately after such transaction, or (iii) during any consecutive two-year
period, individuals who at the beginning of such period constituted the Board
of Directors (together with any new directors whose election by such Board of
Directors or whose nomination for election by the stockholders of the Company
was approved by a vote of two-thirds of the directors then still in office
who were either directors at the beginning of such period or whose election
or nomination for election was previously so approved) cease for any reason
to constitute a majority of the Board of Directors then in office.
"COMMISSION" means the U.S. Securities and Exchange Commission.
<PAGE>
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"COMMON EQUITY" of any Person means all Capital Stock of such
Person that is generally entitled to (i) vote in the election of directors of
such Person or (ii) if such Person is not a corporation, control, vote or
otherwise participate in the selection of the governing body, partners,
managers or others that controls the management and policies of such Person.
"CONSOLIDATED AMORTIZATION EXPENSE" for any period means the
amortization expense of the Company and its Restricted Subsidiaries for such
period (to the extent included in the computation of Consolidated Net
Income), determined on a consolidated basis in accordance with GAAP.
"CONSOLIDATED CASH FLOW" for any period means, without
duplication, the sum of the amounts for such period of (i) Consolidated Net
Income PLUS (ii) in each case to the extent deducted in determining
Consolidated Net Income, (A) Consolidated Income Tax Expense, (B)
Consolidated Amortization Expense (but only to the extent not included in
Consolidated Interest Expense), (C) Consolidated Depreciation Expense, (D)
Consolidated Interest Expense and (E) all other non-cash items reducing the
Consolidated Net Income (including any charge on account of contributions to
employee benefit plans made in Common Equity of the Company, but excluding
any non-cash charge that results in an accrual of a reserve for cash charges
in any future period) for such period, in each case determined on a
consolidated basis in accordance with GAAP and MINUS (iii) the aggregate
amount of all non-cash items, determined on a consolidated basis, to the
extent such items increased Consolidated Net Income for such period.
"CONSOLIDATED DEPRECIATION EXPENSE" for any period means the
depreciation expense of the Company and its Restricted Subsidiaries for such
period (to the extent included in the computation of Consolidated Net
Income), determined on a consolidated basis in accordance with GAAP.
"CONSOLIDATED INCOME TAX EXPENSE" for any period means the
provision for taxes based on income and profits of the Company and its
Restricted Subsidiaries to the extent such income or profits were included in
computing Consolidated Net Income for such period.
"CONSOLIDATED INTEREST COVERAGE RATIO" means, with respect to
any determination date, the ratio of (a) Consolidated Cash Flow for the four
full fiscal quarters immediately preceding the determination date for which
financial statements are publicly available (for any determination, the
"REFERENCE PERIOD"), to (b) Consolidated Interest Expense for such Reference
Period. In making such computations, (i) Consolidated Cash Flow and
Consolidated Interest Expense shall be calculated on a pro forma basis
assuming that (A) the Indebtedness to be incurred or the Disqualified Capital
Stock or Preferred Stock to be issued (and all other Indebtedness incurred or
Disqualified Capital Stock or Preferred Stock issued after the first day of
such Reference Period referred to in Section 4.09 hereof through and
including the date of
<PAGE>
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determination), and (if applicable) the application of the net proceeds
therefrom (and from any other such Indebtedness, Disqualified Capital Stock
or Preferred Stock), including the refinancing of other Indebtedness, had
been incurred or issued on the first day of such Reference Period and, in the
case of Acquired Indebtedness, on the assumption that the related transaction
(whether by means of purchase, merger or otherwise) also had occurred on such
date with the appropriate adjustments with respect to such acquisition being
included in such pro forma calculation and (B) any acquisition or disposition
by the Company or any Restricted Subsidiary of any properties or assets
outside the ordinary course of business or any repayment of any principal
amount of any Indebtedness of the Company or any Restricted Subsidiary prior
to the stated maturity thereof, in either case since the first day of such
Reference Period through and including the date of determination, had been
consummated on such first day of such Reference Period (and, in the case of
any such acquisition, Consolidated Cash Flow shall be calculated without
regard to clause (ii) of the proviso in the "Consolidated Net Income"
definition); (ii) the Consolidated Interest Expense attributable to interest
on any Indebtedness required to be computed on a pro forma basis in
accordance with Section 4.09 hereof and (A) bearing a floating interest rate
shall be computed as if the rate in effect on the date of computation had
been the applicable rate for the entire period and (B) which was not
outstanding during the period for which the computation is being made but
which bears, at the option of the Company, a fixed or floating rate of
interest, shall be computed by applying, at the option of the Company, either
the fixed or floating rate; (iii) the Consolidated Interest Expense
attributable to interest on any Indebtedness under a revolving credit
facility required to be computed on a pro forma basis in accordance with
Section 4.09 hereof shall be computed based upon the average daily balance of
such Indebtedness during the applicable period; PROVIDED that such average
daily balance shall be reduced by the amount of any repayment of Indebtedness
under a revolving credit facility during the applicable period, to the extent
such repayment permanently reduced the commitments or amounts available to be
reborrowed under such facility below the amount of such average daily balance
during the applicable period; (iv) notwithstanding the foregoing clauses (ii)
and (iii), interest on Indebtedness determined on a floating rate basis, to
the extent such interest is covered by agreements relating to Hedging
Obligations, shall be deemed to have accrued at the rate per annum resulting
after giving effect to the operation of such agreements; and (v) if after the
first day of the applicable Reference Period and before the date of
determination, the Company has permanently retired any Indebtedness out of
the net proceeds of the issuance and sale of shares of Capital Stock (other
than Disqualified Capital Stock) of the Company within 30 days of such
issuance and sale, Consolidated Interest Expense shall be calculated on a pro
forma basis as if such Indebtedness had been retired on the first day of such
period.
"CONSOLIDATED INTEREST EXPENSE" for any period means the sum,
without duplication, of the total interest expense of the Company and its
Restricted Subsidiaries for such period, determined on a consolidated basis
in accordance with GAAP and including without
<PAGE>
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duplication, (i) imputed interest on Capitalized Lease Obligations and
Attributable Indebtedness, (ii) commissions, discounts and other fees and
charges owed with respect to letters of credit securing financial
obligations, bankers' acceptance financing and Receivables financings, (iii)
the net costs associated with Hedging Obligations, (iv) amortization of other
financing fees and expenses, (v) the interest portion of any deferred payment
obligations, (vi) amortization of debt discount or premium, if any, (vii) all
other non-cash interest expense, (viii) capitalized interest, (ix) the
product of (a) all cash dividend payments (and non-cash dividend payments in
the case of a Restricted Subsidiary) on any series of Preferred Stock of the
Company or any Restricted Subsidiary, MULTIPLIED BY (b) a fraction, the
numerator of which is one and the denominator of which is one MINUS the then
current combined federal, state and local statutory tax rate of the Company
and its Restricted Subsidiaries, expressed as a decimal, (x) all interest
payable with respect to discontinued operations, and (xi) all interest on any
Indebtedness of any other Person Guaranteed by the Company or any Restricted
Subsidiary, provided that Consolidated Interest Expense shall not include the
write-off of debt issuance costs or debt discount or premium in connection
with an early retirement of debt.
"CONSOLIDATED NET INCOME" for any period means the net income
(or loss) of the Company and its Restricted Subsidiaries for such period
determined on a consolidated basis in accordance with GAAP; PROVIDED that
there shall be excluded from such net income (to the extent otherwise
included therein), without duplication: (i) the net income (or loss) of any
Person (other than a Restricted Subsidiary) in which any Person other than
the Company and its Restricted Subsidiaries has an ownership interest, except
to the extent that cash in an amount equal to any such income has actually
been received by the Company or any of its Wholly-Owned Restricted
Subsidiaries during such period; (ii) except to the extent includible in the
Consolidated Net Income pursuant to the foregoing clause (i), the net income
(or loss) of any Person that accrued prior to the date that (a) such Person
becomes a Restricted Subsidiary or is merged into or consolidated with the
Company or any Restricted Subsidiary or (b) the assets of such Person are
acquired by the Company or any Restricted Subsidiary; (iii) the net income of
any Restricted Subsidiary during such period to the extent that the
declaration or payment of dividends or similar distributions by such
Restricted Subsidiary of that income is not permitted by operation of the
terms of its charter or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to that Subsidiary during
such period; (iv) any gain (or loss), together with any related provisions
for taxes on any such gain (or the tax effect of any such loss), realized
during such period by the Company or any Restricted Subsidiary upon (a) the
acquisition of any securities, or the extinguishment of any Indebtedness, of
the Company or any Restricted Subsidiary or (b) any Asset Sale by the Company
or any of its Restricted Subsidiaries, (v) any extraordinary gain (or
extraordinary loss), together with any related provision for taxes on any
such extraordinary gain (or the tax effect of any such extraordinary loss),
realized by the Company or any Restricted Subsidiary during such period; and
(vi) in the case of a successor to the Company by consolidation,
<PAGE>
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merger or transfer of its assets, any income (or loss) of the successor prior
to such merger, consolidation or transfer of assets.
"CONSOLIDATED NET WORTH" means, with respect to any Person as
of any date, the consolidated stockholders' equity of such Person, determined
on a consolidated basis in accordance with GAAP, less (without duplication)
(i) any amounts thereof attributable to Disqualified Stock of such Person or
its Subsidiaries and (ii) 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 twelve 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 Subsidiary of such Person.
"CONSOLIDATED TANGIBLE ASSETS" means, with respect to any
Person, the total assets of such Person and its Restricted Subsidiaries,
determined on a consolidated basis in accordance with GAAP as of the end of
the most recent fiscal quarter of such Person for which financial statements
are publicly available, less (without duplication) the sum of: (i) all
intangible assets (including patents, trademarks, copyrights, goodwill,
organizational expenses and similar intangible items), and (ii) all
Investments in Persons that are not Restricted Subsidiaries (except Cash
Equivalents).
"CORPORATE TRUST OFFICE OF THE TRUSTEE" shall be at the
address of the Trustee specified in Section 12.02 hereof or such other
address as to which the Trustee may give notice to the Company.
"COVERAGE RATIO INCURRENCE CONDITION" would be met at any
specified time only if the Company (or its Successor, as the case may be)
would be able to incur $1.00 of additional Indebtedness at such specified
time pursuant to the Consolidated Interest Coverage Ratio test set forth in
clause (ii) of Section 4.09 hereof.
"CREDIT AGREEMENT" means the Credit Agreement dated as of
March 25, 1998 by and among the Company, as Borrower, NationsBank, N.A.
(formerly known as NationsBank of Texas, N.A.), as Administrative Agent,
certain financial institutions as Arrangers, Syndication Agents and
Documentation Agent, and the Lenders named therein, together with any
security documents, and guarantees in connection therewith and any additional
guarantees executed by the Subsidiary Guarantors, as any of the foregoing may
be subsequently amended, restated, refinanced, or replaced from time to time.
"CREDIT FACILITIES" means, with respect to the Company or any
Subsidiary Guarantor, one or more credit facilities with banks or other
institutional lenders providing for revolving loans, term loans, Receivables
financing (including through the sale of Receivables to such lenders or to
special purpose entities formed to borrow from or issue securities to such
<PAGE>
-9-
lenders against such Receivables) or letters of credit.
"DEFAULT" means (i) any Event of Default or (ii) any event,
act or condition that, after notice or the passage of time or both would be,
an Event of Default.
"DEFINITIVE NOTE" means a certificated Note registered in the
name of the Holder thereof and issued in accordance with Section 2.06 hereof,
in the form of Exhibit A-1 hereto except that such Note shall not bear the
Global Note Legend and shall not have the "Schedule of Exchanges of
Interests" attached thereto.
"DEPOSITARY" means the Person specified in Section 2.03 hereof
as the Depositary with respect to the Global Notes, and any and all
successors thereto appointed as Depositary hereunder and having become such
pursuant to the applicable provision of this Indenture.
"DESIGNATED SENIOR INDEBTEDNESS" means (i) Indebtedness under
the Credit Agreement (whether incurred pursuant to the definition of
Permitted Indebtedness or pursuant to clause (ii) of Section 4.09 hereof and
(ii) any other Indebtedness constituting Senior Indebtedness or Subsidiary
Guarantor Senior Indebtedness that at the date of determination, has an
aggregate principal amount outstanding of at least $25.0 million and that is
specifically designated by the Company or the Subsidiary Guarantor, in the
instrument creating or evidencing such Senior Indebtedness or Subsidiary
Guarantor Senior Indebtedness or in an Officers' Certificate delivered to the
Trustee, as "Designated Senior Indebtedness."
"DISQUALIFIED CAPITAL STOCK" means any Capital Stock of such
Person or any of its Subsidiaries that, by its terms, by the terms of any
agreement related thereto or by the terms of any security into which it is
convertible, puttable or exchangeable, is, or upon the happening of any event
or the passage of time would be, required to be redeemed or repurchased by
such Person or any of its Subsidiaries, whether or not at the option of the
holder thereof, or matures or is mandatorily redeemable, pursuant to a
sinking find obligation or otherwise, in whole or in part, on or prior to the
final maturity date of the Notes; PROVIDED, HOWEVER, that any class of
Capital Stock of such Person that, by its terms, authorizes such Person to
satisfy in full its obligations with respect to the payment of dividends or
upon maturity, redemption (pursuant to a sinking fund or otherwise) or
repurchase thereof or otherwise by the delivery of Capital Stock that is not
Disqualified Capital Stock, and that is not convertible, puttable or
exchangeable for Disqualified Capital Stock or Indebtedness, shall not be
deemed to be Disqualified Capital Stock so long as such Person satisfies its
obligations with respect thereto solely by the delivery of Capital Stock that
is not Disqualified Capital Stock.
"DISTRIBUTION COMPLIANCE PERIOD" means the 40-day distribution
compliance period as defined in Regulation S.
<PAGE>
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"DOMESTIC SUBSIDIARY" means any Subsidiary other than a
Foreign Subsidiary.
"EQUITY OFFERING" means an offering or sale of Capital Stock
(other than Disqualified Capital Stock) of the Company pursuant to a
registration statement filed with the Commission in accordance with the
Securities Act or pursuant to an exemption from the registration requirements
thereof.
"EUROCLEAR" means Morgan Guaranty Trust Company of New York,
Brussels office, as operator for the Euroclear system.
"EXCHANGE ACT" means the U.S. Securities Exchange Act of 1934,
as amended.
"EXCHANGE NOTES" means the Series B Notes issued in the
Exchange Offer pursuant to Section 2.06(f)(i) hereof.
"EXCHANGE OFFER" has the meaning set forth in the Registration
Rights Agreement.
"EXCHANGE OFFER REGISTRATION STATEMENT" has the meaning set
forth in the Registration Rights Agreement.
"EXISTING JOINT VENTURE INVESTMENTS" means the Investments of
the Company and its Restricted Subsidiaries in Midwest Metal Coating LLC, a
Delaware limited liability company, BSM, Metallic de Mexico, S.A. de C.V., a
Mexican stock corporation, and DOUBLECOTE L.L.C., a Delaware limited
liability company, to the extent in existence on the Issue Date or required
to be made following the Issue Date pursuant to legally binding commitments
in effect on the Issue Date. The aggregate amount of all Existing Joint
Venture Investments existing or committed on the Issue Date equals
approximately $38.1 million.
"FAIR MARKET VALUE" of any asset or items means the fair
market value of such asset or items as determined in good faith by the Board
of Directors and evidenced by a Board Resolution.
"FOREIGN SUBSIDIARY" means any Subsidiary of the Company that
is not incorporated or organized in the United States or in any State thereof
and substantially all of the assets of which are located outside of the
United States or that conducts substantially all of its business outside of
the United States.
"GAAP" means generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board
of the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a
<PAGE>
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significant segment of the accounting profession of the United States, as in
effect on the Issue Date.
"GLOBAL NOTE LEGEND" means the legend set forth in Section
2.06(g)(ii) hereof, which is required to be placed on all Global Notes issued
under this Indenture.
"GLOBAL NOTES" means, individually and collectively, each of
the Restricted Global Notes and the Unrestricted Global Notes, in the form of
Exhibit A hereto issued in accordance with Section 2.01, 2.06(b)(iv),
2.06(d)(ii) or 2.06(f) hereof.
"GOVERNMENT SECURITIES" means direct obligations of, or
obligations guaranteed by, the United States of America, and the payment for
which the United States pledges its full faith and credit.
"GUARANTEE" means a direct or indirect guarantee by any Person
of any Indebtedness of any other Person and includes any obligation, direct
or indirect, contingent or otherwise, of such Person: (i) to purchase or pay
(or advance or supply funds for the purchase or payment of) Indebtedness of
such other Person (whether arising by virtue of partnership arrangements, or
by agreements to keep-well, to purchase assets, goods, securities or services
(unless such purchase arrangements are on arm's-length terms and are entered
into in the ordinary course of business), to take-or-pay, or to maintain
financial statement conditions or otherwise); or (ii) entered into for
purposes of assuring in any other manner the obligee of such Indebtedness of
the payment thereof or to protect such obligee against loss in respect
thereof (in whole or in part). "Guarantee," when used as a verb, and
"Guaranteed" have correlative meanings.
"HEDGING OBLIGATIONS" of any Person means the obligations of
such Person pursuant to (i) any interest rate swap agreement, interest rate
collar agreement or other similar agreement or arrangement designed to
protect such Person against fluctuations in interest rates, (ii) agreements
or arrangements designed to protect such Person against fluctuations in
foreign currency exchange rates in the conduct of its operations, or (iii)
any forward contract, commodity swap agreement, commodity option agreement or
other similar agreement or arrangement designed to protect such Person
against fluctuations in commodity prices, in each case, entered into in the
ordinary course of business for BONA FIDE hedging purposes and not for the
purpose of speculation.
"HOLDER" means a Person in whose name a Note is registered.
"IAI GLOBAL NOTE" means the Global Note in the form of Exhibit
A-1 hereto bearing the Global Note 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
<PAGE>
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denomination equal to the outstanding principal amount of the Notes sold to
Institutional Accredited Investors.
"INCUR" means, with respect to any Indebtedness or Obligation,
incur, create, issue, assume, Guarantee or otherwise become directly or,
indirectly liable, contingently or otherwise, with respect to such
Indebtedness or Obligation; PROVIDED that (i) the Indebtedness of a Person
existing at the time such Person became a Restricted Subsidiary shall be
deemed to have been incurred by such Restricted Subsidiary and (ii) neither
the accrual of interest nor the accretion of accreted value shall be deemed
to be an incurrence of Indebtedness.
"INDEBTEDNESS" of any Person at any date means, without
duplication: (i) all liabilities, contingent or otherwise, of such Person
for borrowed money (whether or not the recourse of the lender is to the whole
of the assets of such person or only to a portion thereof); (ii) all
obligations of such Person evidenced by bonds, debentures, notes or other
similar instruments; (iii) all obligations of such Person in respect of
letters of credit or other similar instruments (or reimbursement obligations
with respect thereto); (iv) all obligations of such Person to pay the
deferred and unpaid purchase price of property or services, except trade
payables and accrued expenses incurred by such Person in the ordinary course
of business in connection with obtaining goods, materials or services, which
payable is not overdue by more than 60 days according to the original terms
of sale unless such payable is being contested in good faith; (v) the maximum
fixed redemption or repurchase price of all Disqualified Capital Stock of
such Person; (vi) all Capitalized Lease Obligations of such Person; (vii) all
Indebtedness of others secured by a Lien on any asset of such Person, whether
or not such Indebtedness is assumed by such Person; (viii) all Indebtedness
of others Guaranteed by such Person to the extent of such Guarantee; PROVIDED
that Indebtedness of the Company or its Subsidiaries that is Guaranteed by
the Company or the Company's Subsidiaries shall only be counted once in the
calculation of the amount of Indebtedness of the Company and its Subsidiaries
on a consolidated basis; (ix) all Attributable Indebtedness; and (x) to the
extent not otherwise included in this definition, Hedging Obligations of such
Person. The amount of Indebtedness of any Person at any date shall be the
outstanding balance at such date of all unconditional obligations as
described above, the maximum liability of such Person for any such contingent
obligations at such date and, in the case of clause (vii), the lesser of (A)
the Fair Market Value of any asset subject to a Lien securing the
Indebtedness of others on the date that the Lien attaches and (B) the amount
of the Indebtedness secured. For purposes of the preceding sentence, the
"maximum fixed redemption or repurchase price" of any Disqualified Capital
Stock that does not have a fixed redemption or repurchase price shall be
calculated in accordance with the terms of such Disqualified Capital Stock as
if such Disqualified Capital Stock were purchased or redeemed on any date on
which Indebtedness shall be required to be determined pursuant to this
Indenture, and if such price is based upon, or measured by, the Fair Market
Value of such Disqualified Capital Stock (or any equity security for which it
may be ex-
<PAGE>
-13-
changed or convened), such Fair Market Value shall be determined in good
faith by the Board of Directors of such Person, which determination shall be
evidenced by a Board Resolution. "Indebtedness" shall include with respect
to any Receivables Facility under which the purchaser has recourse to such
Person or any Restricted Subsidiary of such Person, the sum of (a) the
aggregate uncollected balances of Accounts Receivable (as defined in the
definition of "Receivables") transferred ("TRANSFERRED RECEIVABLES") in such
Receivables Facility plus (b) the aggregate amount of all collections of
Transferred Receivables theretofore received by such Person or a Subsidiary
of such Person but not yet remitted to the purchaser, net of all reserves or
holdbacks retained by or for the benefit of the purchaser and net of any
interest retained by such Person and reasonable costs and expenses (including
fees and commissions and taxes other than income taxes) incurred by such
Person in connection therewith and not payable to any Affiliate of such
Person.
"INDENTURE" means this Indenture, as amended or supplemented
from time to time.
"INDEPENDENT DIRECTOR" means a director of the Company who (i)
is in fact independent with respect to the transaction at issue; (ii) does
not have any direct financial interest or any material indirect financial
interest in the Company or any of its Subsidiaries, or in any Affiliate of
the Company or any of its Subsidiaries (other than as a result of holding
securities of the Company); and (iii) has not and whose Affiliates have not,
at any time during the twelve months prior to the taking of any action
hereunder, directly or indirectly, received, or entered into any
understanding or agreement to receive, any compensation, payment or other
benefit, of any type or form, from the Company or any of its Affiliates,
other than customary directors' fees for serving on the Board of Directors or
the board of directors of any Affiliate and reimbursement of out-of-pocket
expenses for attendance at the Company's or Affiliate's board and board
committee meetings.
"INDEPENDENT FINANCIAL ADVISOR" means an accounting, appraisal
or investment banking firm of nationally recognized standing that is, in the
reasonable judgment of the Board of Directors, qualified to perform the task
for which it has been engaged and disinterested and independent with respect
to the Company and its Affiliates.
"INDIRECT PARTICIPANT" means a Person who holds a beneficial
interest in a Global Note through a Participant.
"INITIAL PURCHASER" means any of Warburg Dillon Read LLC,
NationsBanc Montgomery Securities LLC, Bear, Stearns & Co. Inc. and First
Union Capital Markets.
"INSOLVENCY OR LIQUIDATION PROCEEDING" means, with respect to
any Person, any liquidation, dissolution or winding up of such Person, or any
bankruptcy, reorganization, in-
<PAGE>
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solvency, receivership or similar proceeding with respect to such Person,
whether voluntary or involuntary.
"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 that is not also a QIB.
"INVESTMENTS" of any Person means (i) all direct or indirect
investments by such Person in any other Person in the form of loans, advances
or capital contributions (excluding commission, travel and similar advances
to Officers and employees made in the ordinary course of business) or other
credit extensions constituting Indebtedness of such other Person, and any
Guarantee of Indebtedness of any other Person, (ii) all purchases (or other
acquisitions for consideration) by such Person of Indebtedness, Capital Stock
or other securities of any other Person and (iii) all other items that would
be classified as investments (including purchases of assets outside the
ordinary course of business) on a balance sheet of such Person prepared in
accordance with GAAP. Except as otherwise expressly specified herein, the
amount of any Investment (other than an Investment made in cash) shall be the
Fair Market Value thereof on the date such Investment is made. If the
Company or any Subsidiary sells or otherwise disposes of any Capital Stock of
any direct or indirect Subsidiary such that, after giving effect to any such
sale or disposition, such Person is no longer a Subsidiary, the Company shall
be deemed to have made an Investment on the date of any such sale or other
disposition equal to the Fair Market Value of the Capital Stock of and all
other Investments in such Subsidiary not sold or disposed of, which amount
shall be determined by the Board of Directors.
"ISSUE DATE" means the date on which the initial $125.0
million in Notes are issued.
"LEGAL HOLIDAY" means a Saturday, a Sunday or a day on which
banking institutions in the City of New York or at a place of payment are
authorized by law, regulation or executive order to remain closed. If a
payment date is a Legal Holiday at a place of payment, payment may be made at
that place on the next succeeding day that is not a Legal Holiday, and no
interest shall accrue on such payment for the intervening period.
"LETTER OF TRANSMITTAL" means the letter of transmittal to be
prepared by the Company and sent to all Holders for use by such Holders in
connection with the Exchange Offer.
"LIEN" means, with respect to any asset or property, any
mortgage, deed of trust, lien (statutory or other), pledge, lease, easement,
restriction, covenant, charge, security interest or other encumbrance of any
kind or nature in respect of such asset or property,
<PAGE>
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whether or not filed, recorded or otherwise perfected under applicable law,
including any conditional sale or other title retention agreement, and any
lease in the nature thereof (including mortgages or liens that are or would
be deemed to exist on property subject to leases in effect on January 31,
1999 which mortgages or liens are or under GAAP should be recorded as Capital
Leases), any option or other agreement to sell, and any filing of, or
agreement to give, any financing statement under the Uniform Commercial Code
(or equivalent statutes) of any jurisdiction (other than cautionary filings
in respect of operating leases).
"MOODY'S" means Moody's Investors Service, Inc., and its
successors.
"NET AVAILABLE PROCEEDS" means, with respect to any Asset
Sale, the proceeds thereof in the form of cash or Cash Equivalents including
payments in respect of deferred payment obligations when received in the form
of cash or Cash Equivalents (except to the extent that such obligations are
financed or sold with recourse to the Company or any Restricted Subsidiary),
net of (i) brokerage commissions and other fees and expenses (including fees
and expenses of legal counsel, accountants and investment banks) related to
such Asset Sale, (ii) provisions for all taxes payable as a result of such
Asset Sale (after taking into account any available tax credits or deductions
and any tax sharing arrangements), (iii) amounts required to be paid to any
Person (other than the Company or any Restricted Subsidiary) owning a
beneficial interest in the properties or assets subject to the Asset Sale or
having a Lien therein and (iv) appropriate amounts to be provided by the
Company or any Restricted Subsidiary, as the case may be, as a reserve
required in accordance with GAAP against any liabilities associated with such
Asset Sale and retained by the Company or any Restricted Subsidiary, as the
case may be, after such Asset Sale, including pensions and other
post-employment benefit liabilities, liabilities related to environmental
matters and liabilities under any indemnification obligations associated with
such Asset Sale, all as reflected in an Officers' Certificate delivered to
the Trustee; PROVIDED, HOWEVER, that any amounts remaining after adjustments,
revaluations or liquidations of such reserves shall constitute Net Available
Proceeds.
"NON-RECOURSE PURCHASE MONEY INDEBTEDNESS" means Indebtedness
of the Company or any of its Restricted Subsidiaries incurred to finance the
purchase of any assets of the Company or any of its Subsidiaries within 90
days of such purchase, (a) to the extent the amount of Indebtedness
thereunder does not exceed 100% of the purchase cost of such assets, (b) to
the extent the purchase cost of such assets is or should be included in
"additions to property, plant and equipment" in accordance with GAAP, and (c)
to the extent that the lenders thereunder expressly agree in the related
documentation that such Indebtedness is non-recourse to the Company and its
Restricted Subsidiaries and their respective assets, other than the assets so
purchased.
"NON-U.S. PERSON" means a Person who is not a U.S. Person.
<PAGE>
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"NOTES" has the meaning assigned to it in the preamble to this
Indenture.
"OBLIGATION" means any principal, interest (including, in the
case of Senior Indebtedness or Subsidiary Guarantor Senior Indebtedness,
interest accruing subsequent to the filing of a petition in bankruptcy or
insolvency at the rate specified in the document relating to such
Indebtedness, whether or not such interest is an allowed claim permitted to
be enforced against the obligor under applicable law), penalties, fees,
indemnification, reimbursements, costs, expenses, damages and other
liabilities payable under the documentation governing any Indebtedness.
"OFFERING" means the offering of the Notes by the Company.
"OFFERING MEMORANDUM" means the offering memorandum relating
to the issuance by the Company of the Series A Notes dated April 30, 1999.
"OFFICER" means any of the following of the Company: the
Chairman of the Board of Directors, the Chief Executive Officer, the Chief
Financial Officer, the President, any Vice President, the Treasurer or the
Secretary.
"OFFICERS' CERTIFICATE" means a certificate signed by two
Officers.
"OPINION OF COUNSEL" means an opinion from legal counsel who
is reasonably acceptable to the Trustee, that meets the requirements of
Section 12.05 hereof. The counsel may be an employee of or counsel to the
Company, any Subsidiary of the Company or the Trustee.
"PARI PASSU INDEBTEDNESS" means any Indebtedness of the
Company that ranks PARI PASSU with the Notes.
"PARTICIPANT" means, with respect to the Depositary, Euroclear
or Cedel, a Person who has an account with the Depositary, Euroclear or
Cedel, respectively (and, with respect to The Depository Trust Company, shall
include Euroclear and Cedel).
"PARTICIPATING BROKER-DEALER" has the meaning set forth in the
Registration Rights Agreement.
"PAYMENT RESTRICTION" with respect to a Subsidiary of any
Person, means any encumbrance, restriction or limitation, whether by
operation of the terms of its charter or by reason of any agreement,
instrument, judgment, decree, order, statute, rule or governmental
regulation, on the ability of (i) such Subsidiary to (a) pay dividends or
make other distributions on its Capital Stock or make payments on any
obligation, liability or Indebtedness owed to such Person or any other
Subsidiary of such Person, (b) make loans or advances to such
<PAGE>
-17-
Person or any other Subsidiary of such Person, (c) Guarantee any Indebtedness
of the Company or any Restricted Subsidiary, or (d) transfer any of its
properties or assets to such Person or any other Subsidiary of such Person
(other than customary restrictions on transfers of property subject to a Lien
permitted under this Indenture) or (ii) such Person or any other Subsidiary
of such Person to receive or retain any such dividends, distributions or
payments, loans or advances, Guarantees or transfer of properties or assets.
"PERMITTED INDEBTEDNESS" means any of the following:
(i) Indebtedness of the Company and any Subsidiary
Guarantor under Credit Facilities in an aggregate principal amount (or face
amount, in the case of letters of credit) at any time outstanding not to
exceed the sum of (a) $200.0 million, less the amount thereof that has been
repaid (or the amount of any permanent commitment reduction) under Section
4.10 hereof, and (b) the greater of (x) $240.0 million, less the amount
thereof that has been repaid (or the amount of any permanent commitment
reduction) under Section 4.10 hereof, and (y) the sum of 80% of the book
value of the accounts receivable and 50% of inventory of the Company and its
Restricted Subsidiaries, calculated on a consolidated basis and in accordance
with GAAP;
(ii) Indebtedness under the Notes (other than any Additional
Notes), the Subsidiary Guarantees and this Indenture;
(iii) Indebtedness of the Company and its Restricted
Subsidiaries outstanding on the Issue Date and described in the Offering
Memorandum (other than Indebtedness referred to in clauses (i) and (ii)
above, and after giving effect to the intended use of proceeds of the Notes);
(iv) Indebtedness under Hedging Obligations; PROVIDED that
(1) such Hedging Obligations are related to payment obligations on Permitted
Indebtedness or Indebtedness otherwise permitted by Section 4.09 hereof, and
(2) the notional principal amount of such Hedging Obligations at the time
incurred does not exceed the principal amount of such Indebtedness to which
such Hedging Obligations relate;
(v) Indebtedness of the Company to a Subsidiary Guarantor
and Indebtedness of any Subsidiary Guarantor to the Company or any other
Subsidiary Guarantor; PROVIDED, HOWEVER, that upon either (1) the subsequent
issuance (other than directors' qualifying shares), sale, transfer or other
disposition of any Capital Stock or any other event which results in any such
Subsidiary Guarantor ceasing to be a Subsidiary Guarantor or (2) the transfer
or other disposition of any such Indebtedness (except to the Company or a
Subsidiary Guarantor), the provisions of this clause (v) shall no longer be
applicable to such Indebtedness and such Indebtedness shall be deemed, in
each case, to be incurred and shall be treated as an in-
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currence for purposes of Section 4.09 hereof at the time the Subsidiary
Guarantor in question ceased to be a Subsidiary Guarantor or the time such
transfer or other disposition occurred;
(vi) Guarantees by Subsidiary Guarantors of Indebtedness of
the Company permitted to be incurred by clause (ii) of Section 4.09 hereof;
(vii) Indebtedness in respect of bid, performance or surety
bonds issued for the account of the Company in the ordinary course of
business, including Guarantees or obligations of the Company with respect to
letters of credit supporting such bid, performance or surety obligations (in
each case other than for an obligation for money borrowed);
(viii) Indebtedness incurred by the Company or any Restricted
Subsidiary in respect of (a) Non-Recourse Purchase Money Indebtedness, or (b)
other purchase money Indebtedness (including Capitalized Leases) incurred for
the purpose of financing all or any part of the purchase price of property,
plant or equipment used in the business of the Company or such Restricted
Subsidiary within 90 days of such purchase, PROVIDED the aggregate principal
amount of such Indebtedness under this clause (b) does not exceed $10.0
million at any time outstanding;
(ix) Refinancing Indebtedness with respect to Indebtedness
incurred pursuant to clause (ii), (iii) or (viii) above; and
(x) Indebtedness of the Company and the Subsidiary
Guarantors, other than Indebtedness incurred pursuant to the foregoing
clauses of this definition, with an aggregate principal face or stated amount
(as applicable) at any time outstanding for all such Indebtedness incurred
pursuant to this clause not in excess of $10.0 million.
"PERMITTED JUNIOR SECURITIES" means (i) capital stock of the
Company (other than Disqualified Capital Stock), (ii) securities of the
Company, any Subsidiary Guarantor or any other corporation authorized by an
order or decree giving effect, and stating in such order or decree that
effect is given, to the subordination of the Notes or Subsidiary Guarantee to
the Senior Indebtedness or Subsidiary Guarantor Senior Indebtedness, and made
by a court of competent jurisdiction in a reorganization proceeding under any
applicable bankruptcy, insolvency or other similar law, or (iii) any
securities of the Company or any Subsidiary Guarantor provided for by a plan
of reorganization or readjustment that are subordinated in right of payment
to all Senior Indebtedness or Subsidiary Guarantor Senior Indebtedness, as
the case may be, that may at the time be outstanding to substantially the
same extent as, or to a greater extent than, the Notes or Subsidiary
Guarantee are subordinated to Senior Indebtedness or Subsidiary Guarantor
Senior Indebtedness.
"PERMITTED SALE OR ISSUANCE" means (i) any sale by the Company
of Capital
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Stock of a Restricted Subsidiary or (ii) any issuance by a Restricted
Subsidiary of its Capital Stock, in each case in a single transaction or
series of substantially contemporaneous related transactions, PROVIDED that
(a) immediately following such sale or issuance, the Company and its
Restricted Subsidiaries own, in the aggregate, no more than 10% of any class
of Capital Stock of such former Subsidiary, and (b) the remaining ownership
interest in such former Subsidiary shall be deemed to be the making of a
Restricted Investment in the amount set forth in the definition of
"Investment" and the Company and its Restricted Subsidiaries is able to make
such Restricted Investment at the time of such sale or issuance under Section
4.07 hereof.
"PERSON" means any individual, corporation, partnership,
limited liability company, joint venture, incorporated or unincorporated
association, joint-stock company, trust, unincorporated organization or
government or other agency or political subdivision thereof or other entity
of any kind.
"PLAN OF LIQUIDATION" with respect to any Person, means a plan
that provides for, contemplates or the effectuation of which is preceded or
accompanied by (whether or not substantially contemporaneously, in phases or
otherwise): (i) the sale, lease, conveyance or other disposition of all or
substantially all of the assets of such Person otherwise than as an entirety
or substantially as an entirety; and (ii) the distribution of all or
substantially all of the proceeds of such sale, lease, conveyance or other
disposition of all or substantially all of the remaining assets of such
Person to holders of Capital Stock of such Person.
"POST-PETITION INTEREST" means, with respect to any
Indebtedness of any Person, all interest accrued or accruing on such
Indebtedness after the commencement of any Insolvency or Liquidation
Proceeding against such Person in accordance with and at the contract rate
(including, without limitation, any rate applicable upon default) specified
in the agreement or instrument creating, evidencing or governing such
Indebtedness, whether or not, pursuant to applicable law or otherwise, the
claim for such interest is allowed as a claim in such Insolvency or
Liquidation Proceeding.
"PREFERRED STOCK" means, with respect to any Person, any and
all preferred or preference stock or other equity interests (however
designated) of such Person whether now outstanding or issued after the Issue
Date.
"PRIVATE EXCHANGE" means an offer by the Company, pursuant to
the Registration Rights Agreement, to issue and deliver to certain
purchasers, in exchange for the Notes issued on the Issue Date and held by
such purchasers as part of their initial distribution, or otherwise not
eligible to be exchanged in the Exchange Offer, a like aggregate principal
amount of Private Exchange Notes.
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"PRIVATE EXCHANGE NOTES" means the Series B Notes of the
Company issued in exchange for Series A Notes issued on the Issue Date
pursuant to Section 2.06(f)(ii) in connection with a Private Exchange
pursuant to the Registration Rights Agreement.
"PRIVATE PLACEMENT LEGEND" means the legend set forth in
Section 2.06(g)(i) to be placed on all Notes issued under this Indenture
except where otherwise permitted by the provisions of this Indenture.
"QIB" means a "qualified institutional buyer" as defined in
Rule 144A.
"QUALIFYING JOINT VENTURE INVESTMENT" means (i) any Existing
Joint Venture Investment or (ii) any Restricted Investment made after the
Issue Date into a joint venture, or a Subsidiary that is not a Subsidiary
Guarantor, engaged in a Related Business, PROVIDED the amount of such
Investment, when made, reduced the amount available for subsequent Restricted
Payments under clause (iii) of the first paragraph of Section 4.07 hereof.
"QUALIFYING RECEIVABLES FACILITY" means any Receivables
Facility, PROVIDED that (a) consideration in an amount at least equal to the
Fair Market Value of the Receivables sold in such facility is received,
directly or indirectly, by the Company or any of its Restricted Subsidiaries,
and (b) all the net cash proceeds of such facility are remitted to the
Company or any Restricted Subsidiary.
"RECEIVABLES" means, collectively, (a) the Indebtedness and
other obligations owed to the Company or any of its Subsidiaries (before
giving effect to any sale or transfer thereof pursuant to a Receivables
Facility), whether constituting an account, chattel paper, an instrument, a
document or general intangible, arising in connection with the sale of goods
and/or services by the Company or such Subsidiary, including the obligation
to pay any late fees, interest or other finance charges with respect thereto
(each referred to in this definition as an "Account Receivable"), (b) all of
the Company's or such Subsidiary's interest in the goods (including returned
goods), if any, the sale of which gave rise to any Account Receivable, and
all insurance contracts with respect thereto, (c) all other security
interests or Liens and property subject thereto from time to time, if any,
purporting to secure payment of any Account Receivable, together with all
financing statements and security agreements describing any collateral
securing such Account Receivable, (d) all Guarantees, insurance and other
agreements or arrangements of whatever character from time to time supporting
or securing payment of any Account Receivable, (e) all contracts, invoices,
books and records of any kind related to any Account Receivable, (f) all cash
collections in respect of, and cash proceeds of, any of the foregoing and any
and all lockboxes, lockbox accounts, collection accounts, concentration
accounts and similar accounts in or into which such collections and cash
proceeds are now or hereafter deposited, collected or concentrated, and (g)
all proceeds of any of the foregoing.
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"RECEIVABLES FACILITY" means, with respect to any Person, any
Receivables securitization or factoring program pursuant to which such Person
receives proceeds pursuant to a sale, pledge or other encumbrance of its
Receivables. A Receivables Facility involving the sale, pledge or other
encumbrance of Receivables of, and the direct or indirect receipt of the
proceeds thereof by, the Company or any Restricted Subsidiary thereof shall
constitute a Receivables Facility of the Company and/or its Restricted
Subsidiaries whether or not as part of such securitization or factoring
program such Receivables are initially contributed or otherwise transferred
to an Unrestricted Subsidiary of the Company (and then resold or encumbered
by such Unrestricted Subsidiary).
"RECEIVABLES SUBSIDIARY" means any Subsidiary created
primarily to purchase or finance the Receivables of the Company and/or its
Subsidiaries pursuant to a Receivables Facility, so long as (i) no portion of
the Indebtedness or any other obligation (contingent or otherwise) of such
Subsidiary (a) is Guaranteed by the Company or any Restricted Subsidiary, (b)
is recourse to the Company or any Restricted Subsidiary or (c) subjects any
property or asset of the Company or any Restricted Subsidiary, directly or
indirectly, contingently or otherwise, to the satisfaction thereof and (ii)
no default or event of default with respect to any Indebtedness of such
Subsidiary would permit any holder of any Indebtedness of the Company or any
Restricted Subsidiary (other than the Notes) to declare such Indebtedness of
the Company or any Restricted Subsidiary due and payable prior to its
maturity. If, at any time, such Receivables Subsidiary would fail to meet the
foregoing requirements as a Receivables Subsidiary, it shall thereafter cease
to be a Receivables Subsidiary for purposes of this Indenture and any
Indebtedness of such Receivables Subsidiary shall be deemed to be incurred by
a Subsidiary of the Company as of such date (and, if such Indebtedness is not
permitted to be incurred as of such date under Section 4.09 hereof, the
Company shall be in default of such Section).
"REFINANCING INDEBTEDNESS" means Indebtedness of the Company
or a Restricted Subsidiary issued in exchange for, or the proceeds from the
issuance and sale or disbursement of which are used substantially
concurrently to repay, redeem, refund, refinance, discharge or otherwise
retire for value, in whole or in part (collectively, "repay"), or
constituting an amendment, modification or supplement to or a deferral or
renewal of (collectively, an "amendment"), any Indebtedness of the Company or
any Restricted Subsidiary (the "REFINANCED INDEBTEDNESS") in a principal
amount not in excess of the principal amount of the Refinanced Indebtedness
so repaid or amended (or, if such Refinancing Indebtedness refinances
Indebtedness under a revolving credit facility or other agreement providing a
commitment for subsequent borrowings, with a maximum commitment not to exceed
the maximum commitment under such revolving credit facility or other
agreement); PROVIDED that: (i) the Refinancing Indebtedness is the
obligation of the same Person as that of the Refinanced Indebtedness, (ii) if
the Refinanced Indebtedness was subordinated to or PARI PASSU with the Note
In-
<PAGE>
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debtedness or the Subsidiary Guarantee Indebtedness, as the case may be,
then such Refinancing Indebtedness, by its terms, is expressly PARI PASSU
with (in the case of Refinanced Indebtedness that was PARI PASSU with) or
subordinate in right of payment to (in the case of Refinanced Indebtedness
that was subordinated to) the Note Indebtedness or the Subsidiary Guarantee
Indebtedness, as the case may be, at least to the same extent as the
Refinanced Indebtedness; (iii) the Refinancing Indebtedness is scheduled to
mature either (a) no earlier than the Refinanced Indebtedness being repaid or
amended or (b) after the maturity date of the Notes; (iv) the portion, if
any, of the Refinancing Indebtedness that is scheduled to mature on or prior
to the maturity date of the Notes has a Weighted Average Life to Maturity at
the time such Refinancing Indebtedness is incurred that is equal to or
greater than the Weighted Average Life to Maturity of the portion of the
Refinanced Indebtedness being repaid that is scheduled to mature on or prior
to the maturity date of the Notes; and (v) the Refinancing Indebtedness is
secured only to the extent, if at all, and by the assets, that the Refinanced
Indebtedness being repaid or amended is secured.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement, dated as of the Issue Date, by and among the Company, the Subsidiary
Guarantors and the Initial Purchasers, as such agreement may be amended,
modified or supplemented from time to time, and, with respect to any Additional
Notes, one or more registration rights agreements among the Company, the
Subsidiary Guarantors and the other parties thereto, as such agreement(s) may be
amended, modified or supplemented from time to time, relating to rights given by
the Company to the purchasers of Additional Notes to register such Additional
Notes under the Securities Act.
"REGULATION S" means Regulation S promulgated under the
Securities Act.
"REGULATION S GLOBAL NOTE" means a Regulation S Temporary Global
Note or Regulation S Permanent Global Note, as appropriate.
"REGULATION S PERMANENT GLOBAL NOTE" means a permanent global
Note in the form of Exhibit A-1 hereto bearing the Global Note 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 principal amount of the Regulation S Temporary Global Note upon
expiration of the Distribution Compliance Period.
"REGULATION S TEMPORARY GLOBAL NOTE" means a temporary Global
Note in the form of Exhibit A-2 hereto bearing the Private Placement Legend and
the Regulation S Temporary Note 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 principal amount of the Notes initially
sold in reliance on Rule 903 of Regulation S.
<PAGE>
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"REGULATION S TEMPORARY NOTE LEGEND" means the legend set forth
in Section 2.06(g)(iii) hereof which is required to be placed on all Regulation
S Temporary Global Notes issued under this Indenture.
"RELATED BUSINESS" means any business or industry in which the
Company and its Subsidiaries operate on the Issue Date, or that is reasonably
related or complementary to the business of the Company and its Subsidiaries as
such business exists on the Issue Date.
"RELATED BUSINESS INVESTMENT" means any Investment directly by
the Company or its Subsidiaries in any Related Business.
"REPRESENTATIVE" means the indenture trustee or other trustee,
agent or representative for an issue of Senior Indebtedness.
"RESPONSIBLE OFFICER," when used with respect to the Trustee,
means any officer within the Corporate Trust Office of the Trustee (or any
successor group of the Trustee) or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
"RESTRICTED DEBT PAYMENT" means any prepayment, purchase,
redemption, defeasance (including Covenant Defeasance or Legal Defeasance) or
other acquisition or retirement for value, directly or indirectly, by the
Company or a Restricted Subsidiary, prior to the scheduled maturity or prior to
any scheduled repayment of principal or sinking fund payment, as the case may
be, in respect of Subordinated Indebtedness.
"RESTRICTED DEFINITIVE NOTE" means a Definitive Note bearing the
Private Placement Legend.
"RESTRICTED GLOBAL NOTE" means a Global Note bearing the Private
Placement Legend.
"RESTRICTED INVESTMENT" means any Investment by the Company or
any Restricted Subsidiary, except (i) an Investment in Cash Equivalents, (ii) an
Investment in a Subsidiary Guarantor, and (iii) an 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 Subsidiary Guarantor or (b) such Person, in
one transaction or a series of substantially concurrent related transactions, 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
Subsidiary Guarantor.
"RESTRICTED PAYMENT" means with respect to any Person: (i) the
declaration or
<PAGE>
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payment of any dividend (other than a dividend declared by a Wholly-Owned
Restricted Subsidiary to holders of its Common Equity) or the making of any
other payment or distribution of cash, securities or other property or assets
in respect of such Person's Capital Stock (except that a dividend payable
solely in Capital Stock (other than Disqualified Capital Stock) of such
Person shall not constitute a Restricted Payment); (ii) any payment on
account of the purchase, redemption, retirement or other acquisition for
value of such Person's Capital Stock (or, in the case of the Company, the
Capital Stock of any Subsidiary Guarantor or, in the case of any Restricted
Subsidiary, the Capital Stock of the Company or any Subsidiary Guarantor) or
any other payment or distribution made in respect of any such Capital Stock,
either directly or indirectly (other than a payment solely in Capital Stock
that is not Disqualified Capital Stock); (iii) any Restricted Investment; or
(iv) any Restricted Debt Payment.
"RESTRICTED SUBSIDIARY" means any Subsidiary of the Company other
than an Unrestricted Subsidiary.
"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 the Securities Act.
"SEC" means the Securities and Exchange Commission.
"S&P" means Standard & Poor's Ratings Services, a division of the
McGraw-Hill Companies, Inc., and its successors.
"SALE AND LEASEBACK TRANSACTIONS" means with respect to any
Person an arrangement with any bank, insurance company or other lender or
investor or to which such lender or investor is a party, providing for the
leasing by such Person of any property or asset of such Person which has been or
is being sold or transferred by such Person to such lender or investor or to any
Person to whom funds have been or are to be advanced by such lender or investor
on the security of such property or asset.
"SECRETARY'S CERTIFICATE" means a certificate signed by the
Secretary of the Company.
"SECURITIES ACT" means the U.S. Securities Act of 1933, as
amended.
"SENIOR INDEBTEDNESS" means all Indebtedness and other
Obligations specified below payable directly or indirectly by the Company,
whether outstanding on the Issue Date
<PAGE>
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or thereafter created, incurred or assumed by the Company: (i) the principal
of and interest on and all other Obligations under the Credit Agreement
(including all loans, letters of credit and unpaid drawings with respect
thereto and other extensions of credit under the Credit Agreement, and all
expenses, fees, reimbursements, indemnities and other amounts owing pursuant
to the Credit Agreement), (ii) amounts payable in respect of any Hedging
Obligations with respect to Senior Indebtedness, and (iii) all other
Indebtedness of the Company referred to in clauses (i), (ii), (iii), (iv),
(vi) and (vii) of the definition of "Indebtedness" and all Guarantees of the
Company of any such Indebtedness, in each case to the extent not prohibited
by Section 4.09 hereof, provided such Indebtedness is not expressly PARI
PASSU with, or subordinated to, the Notes. Notwithstanding anything to the
contrary in the foregoing, Senior Indebtedness will not include (a) any
Indebtedness which by the express terms of the agreement or instrument
creating, evidencing or governing the same is junior or subordinate in right
of payment to any item of Senior Indebtedness, (b) any trade payable or
accrued expense arising from the purchase of goods or materials or for
services obtained in the ordinary course of business, (c) Indebtedness
incurred (but only to the extent incurred) in violation of this Indenture as
in effect at the time of the respective incurrence, (d) any Indebtedness of
the Company, when incurred, was without recourse to the Company, (e) any
Indebtedness to any employee of the Company or any of its respective
Subsidiaries, (f) any Indebtedness of the Company to any of its Subsidiaries
or Affiliates of the Company (including any of their respective officers or
directors) or (g) any liability for taxes owed or owing by the Company.
"SHELF REGISTRATION STATEMENT" means the Shelf Registration
Statement as set forth in the Registration Rights Agreement.
"SIGNIFICANT SUBSIDIARY" means any 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 Securities Act as such Registration
is in effect on the Issue Date.
"SPECIAL INTEREST" means Special Interest as set forth in the
Registration Rights Agreement.
"SUBORDINATED INDEBTEDNESS" means Indebtedness of the Company or
any Restricted Subsidiary that is subordinated in right of payment to the Notes
or the Subsidiary Guarantees, respectively.
"SUBSIDIARY" of any Person means (i) any corporation of which at
least a majority of the aggregate voting power of all classes of the Common
Equity is owned by such Person directly or through one or more other
Subsidiaries of such Person and (ii) any entity other than a corporation in
which such Person, directly or indirectly, owns at least a majority of the
Common Equity of such entity. Unless otherwise specified, "Subsidiary" means a
Subsidiary of the Company.
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"SUBSIDIARY GUARANTEES" mean the guarantees endorsed on the Notes
by the Subsidiary Guarantors.
"SUBSIDIARY GUARANTOR SENIOR INDEBTEDNESS" means all Indebtedness
and other Obligations specified below payable directly or indirectly by any
Subsidiary Guarantor, whether outstanding on the Issue Date or thereafter
created, incurred or assumed by such Subsidiary Guarantor: (i) the Guarantees
by any Subsidiary Guarantor of principal of and interest on and all other
Obligations under the Credit Agreement (including all loans, letters of credit
and unpaid drawings with respect thereto and other extensions of credit under
the Credit Agreement, and all expenses, fees, reimbursements, indemnities and
other amounts owing pursuant to the Credit Agreement), (ii) amounts payable in
respect of any Hedging Obligations with respect to Subsidiary Guarantor Senior
Indebtedness, and (iii) all other Indebtedness of a Subsidiary Guarantor
referred to in clauses (i), (ii), (iii), (iv), (vi) and (vii) of the definition
of "Indebtedness" and all Guarantees of any such Indebtedness of the Company or
any Subsidiary Guarantor, in each case to the extent not prohibited by Section
4.09 hereof, provided such Indebtedness is not expressly PARI PASSU with, or
subordinated to, the Notes. Notwithstanding anything to the contrary in the
foregoing, Senior Indebtedness will not include (a) any Indebtedness which by
the express terms of the agreement or instrument creating, evidencing or
governing the same is junior or subordinate in right of payment to any item of
Subsidiary Guarantor Senior Indebtedness, (b) any trade payable or accrued
expense arising from the purchase of goods or materials or for services obtained
in the ordinary course of business, (c) Indebtedness incurred (but only to the
extent incurred) in violation of this Indenture as in effect at the time of the
respective incurrence, (d) any Indebtedness of a Subsidiary Guarantor that, when
incurred, was without recourse to such Subsidiary Guarantor, (e) any
Indebtedness to any employee of a Subsidiary Guarantor or the Company or any of
its respective Subsidiaries, (f) any Indebtedness of a Subsidiary Guarantor to
the Company or any of its Subsidiaries or Affiliates (including any of their
respective officers or directors) or (g) any liability for taxes owed or owing
by the Subsidiary Guarantor.
"SUBSIDIARY GUARANTORS" means each Restricted Subsidiary of the
Company on the Issue Date, and each other Person who is required to become a
Subsidiary Guarantor by the terms of this Indenture after the Issue Date (or
whom the Company otherwise causes to become a Subsidiary Guarantor).
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections
77aaa-77bbbb) as in effect on the date on which this Indenture is qualified
under the TIA.
"TRANSFER RESTRICTED SECURITIES" has the meaning set forth in the
Offering Memorandum.
"TRUSTEE" means the party named as such above until a successor
replaces it in
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accordance with the applicable provisions of this Indenture and thereafter
means the successor serving hereunder.
"UNRESTRICTED DEFINITIVE NOTE" means one or more Definitive Notes
that do not bear and are not required to bear the Private Placement Legend.
"UNRESTRICTED GLOBAL NOTE" means a permanent global Note in the
form of Exhibit A-1 attached hereto that bears the Global Note Legend and that
has the "Schedule of Exchanges of Interests" attached thereto, and that is
deposited with or on behalf of and registered in the name of the Depositary,
representing a series of Notes that do not bear the Private Placement Legend.
"UNRESTRICTED SUBSIDIARY" means (i) any Subsidiary that at the
time of determination shall be designated an Unrestricted Subsidiary by the
Board of Directors in the manner provided below and (ii) any Subsidiary of an
Unrestricted Subsidiary. Initially, BSM is designated an Unrestricted
Subsidiary. The Board of Directors may designate any Restricted Subsidiary to
be an Unrestricted Subsidiary, and any such designation shall be deemed to be a
Restricted Investment at the time of and immediately upon such designation by
the Company and its Restricted Subsidiaries in the amount of the Consolidated
Net Worth of such designated Subsidiary and its consolidated Subsidiaries at
such time; PROVIDED that such designation shall be permitted only if (A) the
Company and its Restricted Subsidiaries would be able to make the Restricted
Investment deemed made pursuant to such designation at such time, (B) no portion
of the Indebtedness or any other obligation (contingent or otherwise) of such
Subsidiary (x) is Guaranteed by the Company or any Restricted Subsidiary, (y) is
recourse to the Company or any Restricted Subsidiary or (z) subjects any
property or asset of the Company or any Restricted Subsidiary, directly or
indirectly, contingently or otherwise, to the satisfaction thereof and (C) no
default or event of default with respect to any Indebtedness of such Subsidiary
would permit any holder of any Indebtedness of the Company or any Restricted
Subsidiary (other than the Notes) to declare such Indebtedness of the Company or
any Restricted Subsidiary due and payable prior to its maturity. The Board of
Directors may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary, and any such designation shall be deemed to be an incurrence by the
Company and its Subsidiaries of the Indebtedness (if any) of such Subsidiary so
designated for purposes of Section 4.09 hereof as of the date of such
designation; PROVIDED that such designation shall be permitted only if
immediately after giving effect to such designation and the incurrence of any
such additional Indebtedness deemed to have been incurred thereby (x) the
Company would meet the Coverage Ratio Incurrence Condition and (y) no Default
shall be continuing. Any such designation by the Board of Directors described
in the two preceding sentences shall be evidenced to the Trustee by the filing
with the Trustee of a certified copy of the Board Resolution giving effect to
such designation and an Officer's Certificate certifying that such designation
complied with the foregoing conditions and setting forth the underlying
calculations of such certificate. If, at any time
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after being designated as such, any Unrestricted Subsidiary fails to meet any
of the requirements of the proviso of the second sentence of this definition,
it shall thereafter cease to be an Unrestricted Subsidiary for purposes of
this Indenture, such Subsidiary shall be deemed to have been acquired on such
date and any Indebtedness or Preferred Stock of and Investments made by such
Subsidiary shall be deemed to be incurred or acquired by a Restricted
Subsidiary as of such date (and, if such Indebtedness, Preferred Stock or
Investments are not permitted to be incurred, issued or acquired as of such
date under Sections 4.07, 4.08, 4.09 or 4.14 hereof, as applicable, the
Company shall be in default of such Sections).
"U.S. PERSON" means a U.S. person as defined in Rule 902(o) under
the Securities Act.
"VOTING STOCK" with respect to any Person, means securities of
any class of Capital Stock of such Person entitling the holders thereof (whether
at all times or only so long as no senior class of stock or other relevant
equity interest has voting power by reason of any contingency) to vote in the
election of members of the board of directors of such Person.
"WEIGHTED AVERAGE LIFE TO MATURITY" when applied to any
Indebtedness at any date, means 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 payment
of principal, including payment at final maturity, in respect thereof by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment by (ii) the then outstanding principal
amount of such Indebtedness.
"WHOLLY-OWNED RESTRICTED SUBSIDIARY" means a Restricted
Subsidiary of which 100% of the Capital Stock (except for directors' qualifying
shares or certain minority interests owned by other Persons solely due to local
law requirements that there be more than one stockholder, but which interest is
not in excess of what is required for such purpose) is owned directly by the
Company or through one or more Wholly-Owned Restricted Subsidiaries.
SECTION 1.02. OTHER DEFINITIONS.
"AFFILIATE TRANSACTION"........................ 4.11
"AUTHENTICATION ORDER"......................... 2.02
"CHANGE OF CONTROL OFFER"...................... 3.10
"CHANGE OF CONTROL PURCHASE PRICE.............. 3.10
"COVENANT DEFEASANCE".......................... 8.03
"EVENT OF DEFAULT"............................. 6.01
"EXCESS PROCEEDS".............................. 4.10
"LEGAL DEFEASANCE"............................. 8.02
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"NET PROCEEDS DEFICIENCY"...................... 4.10
"NET PROCEEDS OFFER"........................... 3.09
"NON-PAYMENT DEFAULT".......................... 11.03
"NOTE INDEBTEDNESS"............................ 11.01
"OFFER AMOUNT"................................. 3.09
"OFFER PERIOD"................................. 3.09
"OFFERED PRICE"................................ 4.10
"PARI PASSU INDEBTEDNESS PRICE"................ 4.10
"PAYING AGENT"................................. 2.03
"PAYMENT AMOUNT"............................... 4.10
"PAYMENT BLOCKAGE NOTICE"...................... 11.03
"PAYMENT BLOCKAGE PERIOD"...................... 11.03
"PAYMENT DEFAULT".............................. 11.03
"PURCHASE DATE"................................ 3.09
"REGISTRAR".................................... 2.03
"SERIES A NOTES"............................... Preamble
"SERIES B NOTES"............................... Preamble
"SUBSIDIARY GUARANTEE INDEBTEDNESS............. 10.02
"SUCCESSOR".................................... 5.01
SECTION 1.03. TIA TERMS.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"INDENTURE SECURITIES" means the Notes;
"INDENTURE SECURITY HOLDER" means a Holder;
"INDENTURE TO BE QUALIFIED" means this Indenture;
"INDENTURE TRUSTEE" or "INSTITUTIONAL TRUSTEE" means the Trustee;
and
"OBLIGOR" on the Notes and the Guarantees means the Company and
the Subsidiary Guarantors, respectively, and any successor obligor upon the
Notes and the Guarantees, respectively.
All other terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule under
the TIA have the meanings so
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assigned to them.
SECTION 1.04. RULES OF CONSTRUCTION.
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive and "including" is not limiting;
(4) words in the singular include the plural, and in the
plural include the singular;
(5) provisions apply to successive events and transactions;
(6) all references to "interest" include Special Interest,
whether or not stated; and
(7) references to sections of or rules under the Securities
Act shall be deemed to include substitute, replacement or successor
sections or rules adopted by the SEC from time unless the context
otherwise requires.
ARTICLE TWO
THE NOTES
SECTION 2.01. FORM AND DATING.
(a) GENERAL. The Notes and the Trustee's certificate of
authentication shall be substantially in the form of Exhibit A hereto. The
Notes may have notations, legends or endorsements required by law, stock
exchange rule or usage. Each Note shall be dated the date of its
authentication. The Notes shall be in denominations of $1,000 and integral
multiples thereof.
The terms and provisions contained in the Notes shall constitute,
and are hereby expressly made, a part of this Indenture and the Company, the
Subsidiary Guarantors and the Trustee, by their execution and delivery of this
Indenture, expressly agree to such terms and provisions and to be bound thereby.
However, to the extent any provision of any Note conflicts with the express
provisions of this Indenture, the provisions of this Indenture
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shall govern and be controlling.
(b) GLOBAL NOTES. Notes issued in global form shall be
substantially in the form of Exhibit A-1 or A 2 attached hereto (including the
Global Note Legend thereon and the "Schedule of Exchanges of Interests" attached
thereto). Notes issued in definitive form shall be substantially in the form of
Exhibit A-1 attached hereto (but without the Global Note Legend thereon and
without the "Schedule of Exchanges of Interests" attached thereto) and may or
may not have the Private Placement Legend thereon, as provided elsewhere in this
Indenture. Each Global Note shall represent such of the outstanding Notes as
shall be specified therein and each shall provide that it shall represent the
aggregate principal amount of outstanding Notes from time to time endorsed
thereon and that the aggregate principal amount of outstanding Notes represented
thereby may from time to time be reduced or increased, as appropriate, to
reflect exchanges and redemptions. Any endorsement of a Global Note to reflect
the amount of any increase or decrease in the aggregate principal amount of
outstanding Notes represented thereby shall be made by the Trustee or the Paying
Agent, at the direction of the Trustee, in accordance with instructions given by
the Holder thereof as required by Section 2.06 hereof.
(c) TEMPORARY GLOBAL NOTE. Notes offered and sold in
reliance on Regulation S shall be issued initially in the form of the
Regulation S Temporary Global Note, which shall be deposited on behalf of the
purchasers of the Notes represented thereby with the Depositary, and registered
in the name of the Depositary or the nominee of the Depositary for the accounts
of designated agents holding on behalf of Euroclear or Cedel Bank, duly executed
by the Company and authenticated by the Trustee as hereinafter provided. The
Distribution Compliance Period shall be terminated upon the receipt by the
Trustee of (i) a written certificate from the Depositary, together with copies
of certificates from Euroclear and Cedel Bank certifying that they have received
certification of non-United States beneficial ownership of 100% of the aggregate
principal amount of the Regulation S Temporary Global Note (except to the extent
of any beneficial owners thereof who acquired an interest therein during the
Distribution Compliance Period pursuant to another exemption from registration
under the Securities Act and who will take delivery of a beneficial ownership
interest in a 144A Global Note or an IAI Global Note bearing a Private Placement
Legend, all as contemplated by Section 2.06(a)(ii) hereof), and (ii) an
Officers' Certificate from the Company. Following the termination of the
Distribution Compliance Period, beneficial interests in the Regulation S
Temporary Global Note shall be exchanged for beneficial interests in
Regulation S Permanent Global Notes pursuant to the Applicable Procedures.
Simultaneously with the authentication of Regulation S Permanent Global Notes,
the Trustee shall cancel the Regulation S Temporary Global Note. The aggregate
principal amount of the Regulation S Temporary Global Note and the Regulation S
Permanent Global Notes may from time to time be increased or decreased by
adjustments made on the records of the Trustee and the Depositary or its
nominee,
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as the case may be, in connection with transfers of interest as hereinafter
provided.
(d) EUROCLEAR AND CEDEL PROCEDURES APPLICABLE. The
provisions of the "Operating Procedures of the Euroclear System" and "Terms and
Conditions Governing Use of Euroclear" and the "General Terms and Conditions of
Cedel Bank" and "Customer Handbook" of Cedel Bank shall be applicable to
transfers of beneficial interests in the Regulation S Temporary Global Note and
the Regulation S Permanent Global Notes that are held by Participants through
Euroclear or Cedel Bank.
SECTION 2.02. EXECUTION AND AUTHENTICATION.
Two Officers shall sign the Notes for the Company by manual or
facsimile signature. The seal of the Company, if any, shall be reproduced on
the Notes and may be in facsimile form.
If an Officer whose signature is on a Note no longer holds that
office at the time a Note is authenticated, the Note shall nevertheless be
valid.
A Note shall not be valid until authenticated by the manual
signature of the Trustee. The signature shall be conclusive evidence that the
Note has been authenticated under this Indenture.
The Trustee shall, upon written order of the Company signed by an
Officer of the Company (an "AUTHENTICATION ORDER"), authenticate (i) Series A
Notes for original issue on the date of this Indenture in an aggregate principal
amount equal to $125,000,000, (ii) Exchange Notes and Private Exchange Notes in
an aggregate principal amount equal to $125,000,000, and (iii) after the date of
this Indenture, Additional Notes (and Exchange Notes and Private Exchange Notes
in an aggregate principal amount equal to the principal amount of Additional
Notes so issued) issued by the Company having identical terms and conditions to
the Notes offered hereby, subject to compliance with Section 4.09 hereof (such
Additional Notes to be substantially in the form of Exhibit A-1 or Exhibit A-2,
as the case may be). Any Additional Notes will be part of the same issue as the
Notes offered on the date of this Indenture and will vote on all matters as one
class with the Notes offered on the date of this Indenture.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Notes. An authenticating agent may authenticate Notes
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with Holders or
Affiliates of the Company.
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In the event that the Company shall issue and the Trustee shall
authenticate any Notes issued under this Indenture subsequent to the Issue Date
pursuant to this Section 2.02, the Company shall use its best efforts to obtain
the same "CUSIP" number for such Notes as is printed on the Notes outstanding at
such time; PROVIDED, HOWEVER, that if any series of Notes issued under this
Indenture subsequent to the Issue Date is determined, pursuant to an Opinion of
Counsel of the Company in a form reasonably satisfactory to the Trustee to be a
different class of security than the Notes outstanding at such time for federal
income tax purposes, the Company may obtain a "CUSIP" number for such Notes that
is different than the "CUSIP" number printed on the Notes then outstanding.
Notwithstanding the foregoing, all Notes issued under this Indenture shall vote
and consent together on all matters as one class and no series of Notes will
have the right to vote or consent as a separate class on any matter.
SECTION 2.03. REGISTRAR AND PAYING AGENT.
The Company shall maintain an office or agency where Notes may be
presented for registration of transfer or for exchange ("REGISTRAR") and an
office or agency where Notes may be presented for payment ("PAYING AGENT"). The
Registrar shall keep a register of the Notes and of their transfer and exchange.
The Company may appoint one or more co-registrars and one or more additional
paying agents. The term "Registrar" includes any co-registrar and the term
"Paying Agent" includes any additional paying agent. The Company may change any
Paying Agent or Registrar without notice to any Holder. The Company shall
notify the Trustee in writing of the name and address of any Agent not a party
to this Indenture. If the Company fails to appoint or maintain another entity
as Registrar or Paying Agent, the Trustee shall act as such. The Company or any
of its Subsidiaries may act as Paying Agent or Registrar.
The Company initially appoints The Depository Trust Company
("DTC") to act as Depositary with respect to the Global Notes.
The Company initially appoints the Trustee to act as the
Registrar and Paying Agent and with respect to the Global Notes.
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST.
The Company shall require each Paying Agent other than the
Trustee to agree in writing that the Paying Agent will hold in trust for the
benefit of Holders or the Trustee all money held by the Paying Agent for the
payment of principal, premium or Special Interest, if any, or interest on the
Notes, and will notify the Trustee of any default by the Company in making any
such payment. While any such default continues, the Trustee may require a
Paying Agent to pay all money held by it to the Trustee. The Company at any
time may require a Paying Agent to pay all money held by it to the Trustee.
Upon payment over to the Trustee,
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the Paying Agent (if other than the Company or a Subsidiary of the Company)
shall have no further liability for the money. If the Company or a
Subsidiary of the Company acts as Paying Agent, it shall segregate and hold
in a separate trust fund for the benefit of the Holders all money held by it
as Paying Agent. Upon any Insolvency or Liquidation Proceedings relating to
the Company, the Trustee shall serve as Paying Agent for the Notes.
SECTION 2.05. HOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA Section 312(a). If the Trustee
is not the Registrar, the Company shall furnish to the Trustee at least seven
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of the Holders and the
Company shall otherwise comply with TIA Section 312(a).
SECTION 0.06. TRANSFER AND EXCHANGE.
(a) TRANSFER AND EXCHANGE OF GLOBAL NOTES. A Global Note may
not be transferred as a whole except by the Depositary to a nominee of the
Depositary, by a nominee of the Depositary to the Depositary or to another
nominee of the Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary. All Global
Notes will be exchanged by the Company for Definitive Notes if (i) the Company
delivers to the Trustee notice from the Depositary that it is unwilling or
unable to continue to act as Depositary or that it is no longer a clearing
agency registered under the Exchange Act and, in either case, a successor
Depositary is not appointed by the Company within 120 days after the date of
such notice from the Depositary or (ii) the Company in its sole discretion
determines that the Global Notes (in whole but not in part) should be exchanged
for Definitive Notes and delivers a written notice to such effect to the
Trustee; provided that in no event shall the Regulation S Temporary Global Note
be exchanged by the Company for Definitive Notes prior to (x) the expiration of
the Distribution Compliance Period and (y) the receipt by the Registrar of any
certificates required pursuant to Rule 903(b)(3)(ii)(B) under the Securities
Act. Upon the occurrence of either of the preceding events in (i) or (ii) above,
Definitive Notes shall be issued in such names as the Depositary shall instruct
the Trustee. Global Notes also may be exchanged or replaced, in whole or in
part, as provided in Sections 2.07 and 2.10 hereof. Every Note authenticated
and delivered in exchange for, or in lieu of, a Global Note or any portion
thereof, pursuant to this Section 2.06 or Section 2.07 or 2.10 hereof, shall be
authenticated and delivered in the form of, and shall be, a Global Note. A
Global Note may not be exchanged for another Note other than as provided in this
Section 2.06(a); however, beneficial interests in a Global Note may be
transferred and exchanged as provided in Section 2.06(b),(c) or (f) hereof.
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(b) TRANSFER AND EXCHANGE OF BENEFICIAL INTERESTS IN THE
GLOBAL NOTES. The transfer and exchange of beneficial interests in the Global
Notes shall be effected through the Depositary, in accordance with the
provisions of this Indenture and the Applicable Procedures. Beneficial
interests in the Restricted Global Notes shall be subject to restrictions on
transfer comparable to those set forth herein to the extent required by the
Securities Act. Transfers of beneficial interests in the Global Notes also
shall require compliance with either subparagraph (i) or (ii) below, as
applicable, as well as one or more of the other following subparagraphs, as
applicable:
(i) TRANSFER OF BENEFICIAL INTERESTS IN THE SAME GLOBAL NOTE.
Beneficial interests in any Restricted Global Note may be transferred to
Persons who take delivery thereof in the form of a beneficial interest
in the same Restricted Global Note in accordance with the transfer
restrictions set forth in the Private Placement Legend; provided,
however, that prior to the expiration of the Distribution Compliance
Period, transfers of beneficial interests in the Temporary Regulation S
Global Note may not be made to a U.S. Person or for the account or
benefit of a U.S. Person (other than the Initial Purchasers.)
Beneficial interests in any Unrestricted Global Note may be transferred
to Persons who take delivery thereof in the form of a beneficial
interest in an Unrestricted Global Note. No written orders or
instructions shall be required to be delivered to the Registrar to
effect the transfers described in this Section 2.06(b)(i).
(ii) ALL OTHER TRANSFERS AND EXCHANGES OF BENEFICIAL INTERESTS
IN GLOBAL NOTES. In connection with all transfers and exchanges of
beneficial interests that are not subject to Section 2.06(b)(i) above,
the transferor of such beneficial interest must deliver to the Registrar
either (A) (1) a written order from a Participant or an Indirect
Participant given to the Depositary in accordance with the Applicable
Procedures directing the Depositary to credit or cause to be credited a
beneficial interest in another Global Note in an amount equal to the
beneficial interest to be transferred or exchanged and (2) instructions
given in accordance with the Applicable Procedures containing
information regarding the Participant account to be credited with such
increase or (B) (1) a written order from a Participant or an Indirect
Participant given to the Depositary in accordance with the Applicable
Procedures directing the Depositary to cause to be issued a Definitive
Note in an amount equal to the beneficial interest to be transferred or
exchanged and (2) instructions given by the Depositary to the Registrar
containing information regarding the Person in whose name such
Definitive Note shall be registered to effect the transfer or exchange
referred to in (1) above; provided that in no event shall Definitive
Notes be issued upon the transfer or exchange of beneficial interests in
the Regulation S Temporary Global Note prior to (x) the expiration of
the Distribution Compliance Period and (y) the receipt by the Registrar
of any certificates required pursuant to Rule 903 under the Securities
Act. Upon consummation of an
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Exchange Offer by the Company in accordance with Section 2.06(f)
hereof, the requirements of this Section 2.06(b)(ii) shall be
deemed to have been satisfied upon receipt by the Registrar of the
instructions contained in the Letter of Transmittal delivered by
the Holder of such beneficial interests in the Restricted Global
Notes. Upon satisfaction of all of the requirements for transfer
or exchange of beneficial interests in Global Notes contained in
this Indenture and the Notes or otherwise applicable under the
Securities Act, the Trustee shall adjust the principal amount of
the relevant Global Note(s) pursuant to Section 2.06(h) hereof.
(iii) TRANSFER OF BENEFICIAL INTERESTS TO ANOTHER RESTRICTED
GLOBAL NOTE. A beneficial interest in any Restricted Global Note may be
transferred to a Person who takes delivery thereof in the form of a
beneficial interest in another Restricted Global Note if the transfer
complies with the requirements of Section 2.06(b)(ii) above and the
Registrar receives the following:
(A) if the transferee will take delivery in the form
of a beneficial interest in the 144A Global Note, then the
transferor must deliver a certificate in the form of Exhibit B
hereto, including the certifications in item (1) thereof;
(B) if the transferee will take delivery in the form
of a beneficial interest in the Regulation S Temporary Global
Note or the Regulation S Permanent Global Note, then the
transferor must deliver a certificate in the form of Exhibit B
hereto, including the certifications in item (2) thereof; and
(C) if the transferee will take delivery in the form
of a beneficial interest in the IAI Global Note, then the
transferor must deliver a certificate in the form of Exhibit B
hereto, including the certifications and certificates and Opinion
of Counsel required by item (3) thereof, if applicable.
(iv) TRANSFER AND EXCHANGE OF BENEFICIAL INTERESTS IN A
RESTRICTED GLOBAL NOTE FOR BENEFICIAL INTERESTS IN THE UNRESTRICTED
GLOBAL NOTE. A beneficial interest in any Restricted Global Note may be
exchanged by any Holder thereof for a beneficial interest in an
Unrestricted Global Note or transferred to a Person who takes delivery
thereof in the form of a beneficial interest in an Unrestricted Global
Note if the exchange or transfer complies with the requirements of
Section 2.06(b)(ii) above and:
(A) such exchange or transfer is effected pursuant to
the Exchange Offer in accordance with the Registration Rights
Agreement and the Holder of the beneficial interest to be
transferred, in the case of an exchange, or the transferee, in
the case of a transfer, certifies in the applicable Letter of
Transmittal that it is not (1) a broker-dealer, (2) a Person
participating in the distribution of
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the Exchange Notes or (3) a Person who is an affiliate (as
defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) such transfer is effected by a Participating
Broker-Dealer pursuant to the Exchange Offer Registration
Statement in accordance with the Registration Rights Agreement;
or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest
in a Restricted Global Note proposes to exchange such
beneficial interest for a beneficial interest in an
Unrestricted Global Note, a certificate from such holder
in the form of Exhibit C hereto, including the
certifications in item (1)(a) thereof; or
(2) if the holder of such beneficial interest
in a Restricted Global Note proposes to transfer such
beneficial interest to a Person who shall take delivery
thereof in the form of a beneficial interest in an
Unrestricted Global Note, a certificate from such holder
in the form of Exhibit B hereto, including the
certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar or the Company so requests or if the Applicable
Procedures so require, an Opinion of Counsel in form reasonably
acceptable to the Registrar to the effect that such exchange or
transfer is in compliance with the Securities Act and that the
restrictions on transfer contained herein and in the Private
Placement Legend are no longer required in order to maintain
compliance with the Securities Act.
If any such transfer is effected pursuant to subparagraph (B) or
(D) above at a time when an Unrestricted Global Note has not yet been issued,
the Company shall issue and, upon receipt of an Authentication Order in
accordance with Section 2.02 hereof, the Trustee shall authenticate one or more
Unrestricted Global Notes in an aggregate principal amount equal to the
aggregate principal amount of beneficial interests transferred pursuant to
subparagraph (B) or (D) above.
Beneficial interests in an Unrestricted Global Note cannot be
exchanged for, or transferred to Persons who take delivery thereof in the form
of, a beneficial interest in a Restricted Global Note.
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(c) TRANSFER OR EXCHANGE OF BENEFICIAL INTERESTS FOR
DEFINITIVE NOTES.
(i) BENEFICIAL INTERESTS IN RESTRICTED GLOBAL NOTES TO
RESTRICTED DEFINITIVE NOTES. If any holder of a beneficial interest in
a Restricted Global Note proposes to exchange such beneficial interest
for a Restricted Definitive Note or to transfer such beneficial interest
to a Person who takes delivery thereof in the form of a Restricted
Definitive Note, then, upon receipt by the Registrar of the following
documentation:
(A) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial
interest for a Restricted Definitive Note, a certificate from
such holder in the form of Exhibit C hereto, including the
certifications in item (2)(a) thereof;
(B) if such beneficial interest is being transferred
to a QIB in accordance with Rule 144A, a certificate to the
effect set forth in Exhibit B hereto, including the
certifications in item (1) thereof;
(C) if such beneficial interest is being transferred
to a Non-U.S. Person in an offshore transaction in accordance
with Rule 903 or Rule 904, a certificate to the effect set forth
in Exhibit B hereto, including the certifications in item (2)
thereof;
(D) if such beneficial interest is being transferred
pursuant to an exemption from the registration requirements of
the Securities Act in accordance with Rule 144, a certificate to
the effect set forth in Exhibit B hereto, including the
certifications in item (3)(a) thereof;
(E) if such beneficial interest is being transferred
to an Institutional Accredited Investor or an Affiliate
Accredited Investor in reliance on an exemption from the
registration requirements of the Securities Act other than those
listed in subparagraphs (B) through (D) above, a certificate to
the effect set forth in Exhibit B hereto, including the
certifications, certificates and Opinion of Counsel required by
item (3) thereof, if applicable;
(F) if such beneficial interest is being transferred
to the Company or any of its Subsidiaries, a certificate to the
effect set forth in Exhibit B hereto, including the
certifications in item (3)(b) thereof; or
(G) if such beneficial interest is being transferred
pursuant to an effective registration statement under the
Securities Act, a certificate to the effect set forth in Exhibit
B hereto, including the certifications in item (3)(c) thereof,
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the Trustee shall cause the aggregate principal amount of the applicable
Global Note to be reduced accordingly pursuant to Section 2.06(h)
hereof, and the Company shall execute and the Trustee shall authenticate
and deliver to the Person designated in the instructions a Definitive
Note in the appropriate principal amount. Any Definitive Note issued in
exchange for a beneficial interest in a Restricted Global Note pursuant
to this Section 2.06(c) shall be registered in such name or names and in
such authorized denomination or denominations as the Holder of such
beneficial interest shall instruct the Registrar through instructions
from the Depositary and the Participant or Indirect Participant. The
Trustee shall deliver such Definitive Notes to the Persons in whose
names such Notes are so registered. Any Definitive Note issued in
exchange for a beneficial interest in a Restricted Global Note pursuant
to this Section 2.06(c)(i) shall bear the Private Placement Legend and
shall be subject to all restrictions on transfer contained therein.
Notwithstanding Sections 2.06(c)(i)(A) and (C) hereof, a beneficial
interest in the Regulation S Temporary Global Note may not be exchanged
for a Definitive Note or transferred to a Person who takes delivery
thereof in the form of a Definitive Note prior to (x) the expiration of
the Distribution Compliance Period and (y) the receipt by the Registrar
of any certificates required pursuant to Rule 903(c)(3)(ii)(B) under the
Securities Act, except in the case of a transfer pursuant to an
exemption from the registration requirements of the Securities Act other
than Rule 903 or Rule 904.
(ii) BENEFICIAL INTERESTS IN RESTRICTED GLOBAL NOTES TO
UNRESTRICTED DEFINITIVE NOTES. A holder of a beneficial interest in a
Restricted Global Note may exchange such beneficial interest for an
Unrestricted Definitive Note or may transfer such beneficial interest to
a Person who takes delivery thereof in the form of an Unrestricted
Definitive Note only if:
(A) such exchange or transfer is effected pursuant to
the Exchange Offer in accordance with the Registration Rights
Agreement and the holder of such beneficial interest, in the case
of an exchange, or the transferee, in the case of a transfer,
certifies in the applicable Letter of Transmittal that it is not
(1) a broker-dealer, (2) a Person participating in the
distribution of the Exchange Notes or (3) a Person who is an
affiliate (as defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) such transfer is effected by a Participating
Broker-Dealer pursuant to the Exchange Offer Registration
Statement in accordance with the Reg-
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istration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest
in a Restricted Global Note proposes to exchange such
beneficial interest for a Definitive Note that does not
bear the Private Placement Legend, a certificate from
such holder in the form of Exhibit C hereto, including
the certifications in item (1)(b) thereof; or
(2) if the holder of such beneficial interest
in a Restricted Global Note proposes to transfer such
beneficial interest to a Person who shall take delivery
thereof in the form of a Definitive Note that does not
bear the Private Placement Legend, a certificate from
such holder in the form of Exhibit B hereto, including
the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar or the Company so requests or if the Applicable
Procedures so require, an Opinion of Counsel in form reasonably
acceptable to the Registrar to the effect that such exchange or
transfer is in compliance with the Securities Act and that the
restrictions on transfer contained herein and in the Private
Placement Legend are no longer required in order to maintain
compliance with the Securities Act.
(iii) BENEFICIAL INTERESTS IN UNRESTRICTED GLOBAL NOTES TO
UNRESTRICTED DEFINITIVE NOTES. If any holder of a beneficial interest
in an Unrestricted Global Note proposes to exchange such beneficial
interest for a Definitive Note or to transfer such beneficial interest
to a Person who takes delivery thereof in the form of a Definitive Note,
then, upon satisfaction of the conditions set forth in Section
2.06(b)(ii) hereof, the Trustee shall cause the aggregate principal
amount of the applicable Global Note to be reduced accordingly pursuant
to Section 2.06(h) hereof, and the Company shall execute and the Trustee
shall authenticate and deliver to the Person designated in the
instructions a Definitive Note in the appropriate principal amount. Any
Definitive Note issued in exchange for a beneficial interest pursuant to
this Section 2.06(c)(iii) shall be registered in such name or names and
in such authorized denomination or denominations as the holder of such
beneficial interest shall instruct the Registrar through instructions
from the Depositary and the Participant or Indirect Participant. The
Trustee shall deliver such Definitive Notes to the Persons in whose
names such Notes are so registered. Any Definitive Note issued in
exchange for a beneficial interest pursuant to this Section 2.06(c)(iii)
shall not bear the Private Placement Legend.
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(d) TRANSFER AND EXCHANGE OF DEFINITIVE NOTES FOR BENEFICIAL
INTERESTS.
(i) RESTRICTED DEFINITIVE NOTES TO BENEFICIAL INTERESTS IN
RESTRICTED GLOBAL NOTES. If any Holder of a Restricted Definitive Note
proposes to exchange such Note for a beneficial interest in a Restricted
Global Note or to transfer such Restricted Definitive Notes to a Person
who takes delivery thereof in the form of a beneficial interest in a
Restricted Global Note, then, upon receipt by the Registrar of the
following documentation:
(A) if the Holder of such Restricted Definitive Note
proposes to exchange such Note for a beneficial interest in a
Restricted Global Note, a certificate from such Holder in the
form of Exhibit C hereto, including the certifications in item
(2)(b) thereof;
(B) if such Restricted Definitive Note is being
transferred to a QIB in accordance with Rule 144A, a certificate
to the effect set forth in Exhibit B hereto, including the
certifications in item (1) thereof;
(C) if such Restricted Definitive Note is being
transferred to a Non-U.S. Person in an offshore transaction in
accordance with Rule 903 or Rule 904, a certificate to the effect
set forth in Exhibit B hereto, including the certifications in
item (2) thereof;
(D) if such Restricted Definitive Note is being
transferred pursuant to an exemption from the registration
requirements of the Securities Act in accordance with Rule 144, a
certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (3)(a) thereof;
(E) if such Restricted Definitive Note is being
transferred to an Institutional Accredited Investor in reliance
on an exemption from the registration requirements of the
Securities Act other than those listed in subparagraphs (B)
through (D) above, a certificate to the effect set forth in
Exhibit B hereto, including the certifications, certificates and
Opinion of Counsel required by item (3) thereof, if applicable;
(F) if such Restricted Definitive Note is being
transferred to the Company or any of its Subsidiaries, a
certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (3)(b) thereof; or
(G) if such Restricted Definitive Note is being
transferred pursuant to an effective registration statement under
the Securities Act, a certificate to
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the effect set forth in Exhibit B hereto, including the
certifications in item (3)(c) thereof,
the Trustee shall cancel the Restricted Definitive Note, increase or
cause to be increased the aggregate principal amount of, in the case of
clause (A) above, the appropriate Restricted Global Note, in the case of
clause (B) above, the 144A Global Note, in the case of clause (c) above,
the Regulation S Global Note, and in all other cases, the IAI Global
Note.
(ii) RESTRICTED DEFINITIVE NOTES TO BENEFICIAL INTERESTS IN
UNRESTRICTED GLOBAL NOTES. A Holder of a Restricted Definitive Note may
exchange such Note for a beneficial interest in an Unrestricted Global
Note or transfer such Restricted Definitive Note to a Person who takes
delivery thereof in the form of a beneficial interest in an Unrestricted
Global Note only if:
(A) such exchange or transfer is effected pursuant to
the Exchange Offer in accordance with the Registration Rights
Agreement and the Holder, in the case of an exchange, or the
transferee, in the case of a transfer, certifies in the
applicable Letter of Transmittal that it is not (1) a
broker-dealer, (2) a Person participating in the distribution of
the Exchange Notes or (3) a Person who is an affiliate (as
defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) such transfer is effected by a Participating
Broker-Dealer pursuant to the Exchange Offer Registration
Statement in accordance with the Registration Rights Agreement;
or
(D) the Registrar receives the following:
(1) if the Holder of such Definitive Notes
proposes to exchange such Notes for a beneficial interest
in the Unrestricted Global Note, a certificate from such
Holder in the form of Exhibit C hereto, including the
certifications in item (1)(c) thereof; or
(2) if the Holder of such Definitive Notes
proposes to transfer such Notes to a Person who shall
take delivery thereof in the form of a beneficial interest
in the Unrestricted Global Note, a certificate from such
Holder in the form of Exhibit B hereto, including the
certifications in item (4) thereof;
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and, in each such case set forth in this subparagraph (D), if the
Registrar or the Company so requests or if the Applicable
Procedures so require, an Opinion of Counsel in form reasonably
acceptable to the Registrar to the effect that such exchange or
transfer is in compliance with the Securities Act and that the
restrictions on transfer contained herein and in the Private
Placement Legend are no longer required in order to maintain
compliance with the Securities Act.
Upon satisfaction of the conditions of any of the subparagraphs in this
Section 2.06(d)(ii), the Trustee shall cancel the Definitive Notes and
increase or cause to be increased the aggregate principal amount of the
Unrestricted Global Note.
(iii) UNRESTRICTED DEFINITIVE NOTES TO BENEFICIAL INTERESTS IN
UNRESTRICTED GLOBAL NOTES. A Holder of an Unrestricted Definitive Note
may exchange such Note for a beneficial interest in an Unrestricted
Global Note or transfer such Definitive Notes to a Person who takes
delivery thereof in the form of a beneficial interest in an Unrestricted
Global Note at any time. Upon receipt of a request for such an exchange
or transfer, the Trustee shall cancel the applicable Unrestricted
Definitive Note and increase or cause to be increased the aggregate
principal amount of one of the Unrestricted Global Notes.
If any such exchange or transfer from a Definitive Note to a
beneficial interest is effected pursuant to subparagraph (ii)(B), (ii)(D) or
(iii) above at a time when an Unrestricted Global Note has not yet been
issued, the Company shall issue and, upon receipt of an Authentication Order
in accordance with Section 2.02 hereof, the Trustee shall authenticate one or
more Unrestricted Global Notes in an aggregate principal amount equal to the
principal amount of Definitive Notes so transferred.
(e) TRANSFER AND EXCHANGE OF DEFINITIVE NOTES FOR
DEFINITIVE NOTES. Upon request by a Holder of Definitive Notes and such
Holder's compliance with the provisions of this Section 2.06(e), the
Registrar shall register the transfer or exchange of Definitive Notes. Prior
to such registration of transfer or exchange, the requesting Holder shall
present or surrender to the Registrar the Definitive Notes duly endorsed or
accompanied by a written instruction of transfer in form satisfactory to the
Registrar duly executed by such Holder or by his attorney, duly authorized in
writing. In addition, the requesting Holder shall provide any additional
certifications, documents and information, as applicable, required pursuant
to the following provisions of this Section 2.06(e).
(i) RESTRICTED DEFINITIVE NOTES TO RESTRICTED DEFINITIVE
NOTES. Any Restricted Definitive Note may be transferred to and
registered in the name of Persons who take delivery thereof in the form
of a Restricted Definitive Note if the Registrar receives the following:
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(A) if the transfer will be made pursuant to Rule
144A, then the transferor must deliver a certificate in the form
of Exhibit B hereto, including the certifications in item (1)
thereof;
(B) if the transfer will be made pursuant to Rule 903
or Rule 904, then the transferor must deliver a certificate in
the form of Exhibit B hereto, including the certifications in
item (2) thereof; and
(C) if the transfer will be made pursuant to any other
exemption from the registration requirements of the Securities
Act, then the transferor must deliver a certificate in the form
of Exhibit B hereto, including the certifications, certificates
and Opinion of Counsel required by item (3) thereof, if
applicable.
(ii) RESTRICTED DEFINITIVE NOTES TO UNRESTRICTED DEFINITIVE
NOTES. Any Restricted Definitive Note may be exchanged by the Holder
thereof for an Unrestricted Definitive Note or transferred to a Person
or Persons who take delivery thereof in the form of an Unrestricted
Definitive Note if:
(A) such exchange or transfer is effected pursuant to
the Exchange Offer in accordance with the Registration Rights
Agreement and the Holder, in the case of an exchange, or the
transferee, in the case of a transfer, certifies in the
applicable Letter of Transmittal that it is not (1) a
broker-dealer, (2) a Person participating in the distribution of
the Exchange Notes or (3) a Person who is an affiliate (as
defined in Rule 144) of the Company;
(B) any such transfer is effected pursuant to the
Shelf Registration Statement in accordance with the Registration
Rights Agreement;
(C) any such transfer is effected by a Participating
Broker-Dealer pursuant to the Exchange Offer Registration
Statement in accordance with the Registration Rights Agreement;
or
(D) the Registrar receives the following:
(1) if the Holder of such Restricted Definitive
Notes proposes to exchange such Notes for an Unrestricted
Definitive Note, a certificate from such Holder in the
form of Exhibit C hereto, including the certifications in
item (1)(d) thereof; or
(2) if the Holder of such Restricted Definitive
Notes proposes to transfer such Notes to a Person who
shall take delivery thereof
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in the form of an Unrestricted Definitive Note, a
certificate from such Holder in the form of Exhibit B
hereto, including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar or the Company so requests, an Opinion of Counsel in
form reasonably acceptable to the Company to the effect that such
exchange or transfer is in compliance with the Securities Act and
that the restrictions on transfer contained herein and in the
Private Placement Legend are no longer required in order to
maintain compliance with the Securities Act.
(iii) UNRESTRICTED DEFINITIVE NOTES TO UNRESTRICTED DEFINITIVE
NOTES. A Holder of Unrestricted Definitive Notes may transfer such
Notes to a Person who takes delivery thereof in the form of an
Unrestricted Definitive Note. Upon receipt of a request to register
such a transfer, the Registrar shall register the Unrestricted
Definitive Notes pursuant to the instructions from the Holder thereof.
(f) EXCHANGE OFFER.
(i) Upon the occurrence of the Exchange Offer in accordance
with the Registration Rights Agreement, the Company shall issue and,
upon receipt of an Authentication Order in accordance with Section 2.02,
the Trustee shall authenticate (A) one or more Unrestricted Global Notes
in an aggregate principal amount equal to the principal amount of the
beneficial interests in the Restricted Global Notes tendered for
acceptance by Persons that certify in the applicable Letters of
Transmittal that (1) they are not broker-dealers, (2) they are not
participating in a distribution of the Exchange Notes and (3) they are
not affiliates (as defined in Rule 144) of the Company, and accepted for
exchange in the Exchange Offer and (B) Unrestricted Definitive Notes in
an aggregate principal amount equal to the principal amount of the
Restricted Definitive Notes accepted for exchange in the Exchange Offer
to Persons that make the certifications referred to in (1), (2) and (3)
of the foregoing clause (A). Concurrently with the issuance of such
Notes, the Trustee shall cause the aggregate principal amount of the
applicable Restricted Global Notes to be reduced accordingly, and the
Company shall execute and the Trustee shall authenticate and deliver to
the Persons designated by the Holders of Definitive Notes so accepted
Unrestricted Definitive Notes in the appropriate principal amount.
(ii) Upon the occurrence of a Private Exchange in accordance
with the Registration Rights Agreement, the Company shall issue and,
upon receipt of an Authentication Order in accordance with Section 2.02,
the Trustee shall authenticate (A) one or more Restricted Global Notes
in an aggregate principal amount equal to the
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principal amount of the beneficial interests in the Restricted Global
Notes tendered for acceptance by Persons who requested such Private
Exchange pursuant to the Registration Rights Agreement and (B)
Restricted Definitive Notes in an aggregate principal amount equal to
the principal amount of the Restricted Definitive Notes tendered for
acceptance by Persons who requested such Private Exchange pursuant to
the Registration Rights Agreement. Concurrently with the issuance of
such Notes, the Trustee shall cause the aggregate principal amount of
the applicable Restricted Global Notes so tendered for acceptance to
be reduced accordingly.
(g) LEGENDS. The following legends shall appear on the face
of all Global Notes and Definitive Notes issued under this Indenture unless
specifically stated otherwise in the applicable provisions of this Indenture.
(i) PRIVATE PLACEMENT LEGEND.
(A) Except as permitted by subparagraph (B) below,
each Global Note and each Definitive Note (and all Notes issued
in exchange therefor or substitution thereof) shall bear the
legend in substantially the following form:
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED BY THIS CERTIFICATE WAS
ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER
SECTION 5 OF THE U.S. SECURITIES ACT OF 1933, AND THE SECURITY EVIDENCED
BY THIS CERTIFICATE MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF REGISTRATION OR AN APPLICABLE EXEMPTION
FROM THE SECURITIES ACT. EACH PURCHASER OF THE SECURITY EVIDENCED BY
THIS CERTIFICATE (1) BY ITS ACQUISITION OF THE SECURITY REPRESENTS THAT
(A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT), (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING
THE SECURITY EVIDENCED BY THIS CERTIFICATE IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, (C) IT IS AN
"ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) OR
(7) UNDER THE SECURITIES ACT (AN "INSTITUTIONAL ACCREDITED INVESTOR")
THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF
AN INSTITUTIONAL ACCREDITED INVESTOR OR (D) IS AN "ACCREDITED INVESTOR"
WITHIN THE MEANING OF RULE 501(a)(4) AND EITHER RULE 501(a)(5) OR (6)
UNDER THE SECURITIES ACT WHO IS ACQUIRING THE SECURITY
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FOR HIS OWN ACCOUNT (AN "AFFILIATE ACCREDITED INVESTOR") AND (2) 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 OR
ANOTHER EXEMPTION UNDER THE SECURITIES ACT. THE HOLDER OF THE SECURITY
EVIDENCED BY THIS CERTIFICATE AGREES FOR THE BENEFIT OF THE ISSUER THAT
(X) THIS 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)
IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (B) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES
ACT, IF AVAILABLE, (C) OUTSIDE THE UNITED STATES TO A PERSON THAT IS NOT
A U.S. PERSON (AS DEFINED IN RULE 902 UNDER THE SECURITIES ACT) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES
ACT, (D) TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT IS PURCHASING AT
LEAST $100,000 OF NOTES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF AN
INSTITUTIONAL ACCREDITED INVESTOR (AND BASED UPON AN OPINION OF COUNSEL
IF THE COMPANY SO REQUESTS) OR (E) TO AN AFFILIATE ACCREDITED INVESTOR
WHO IS PURCHASING NOTES FOR HIS OWN ACCOUNT (AND BASED UPON AN OPINION
OF COUNSEL IF THE COMPANY SO REQUESTS), (2) TO THE COMPANY OR ANY OF ITS
SUBSIDIARIES OR (3) UNDER AN EFFECTIVE REGISTRATION STATEMENT AND, IN
EACH CASE, IN COMPLIANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY
STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND
(Y) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY
ANY PURCHASER FROM IT OF THE SECURITY, EVIDENCED BY THIS CERTIFICATE OF
THE RESALE RESTRICTIONS DESCRIBED IN (X) ABOVE. IN CONNECTION WITH ANY
TRANSFER OF THIS SECURITY WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE
OF THIS SECURITY, IF THE PROPOSED TRANSFEREE IS AN ACCREDITED INVESTOR,
THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE
COMPANY SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS
EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS
BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
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TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT."
(B) Notwithstanding the foregoing, any Global Note or
Definitive Note issued pursuant to subparagraphs (b)(iv),
(c)(ii), (c)(iii), (d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f)(i)
to this Section 2.06 (and all Notes issued in exchange therefor
or substitution thereof) shall not bear the Private Placement
Legend.
(ii) GLOBAL NOTE LEGEND. Each Global Note shall bear a legend
in substantially the following form:
"THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS 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 TRUSTEE MAY MAKE SUCH NOTATIONS
HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.07 OF THE INDENTURE,
(II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT
TO SECTION 2.06(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE
DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF
THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A
SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF NCI BUILDING
SYSTEMS, INC."
(iii) REGULATION S TEMPORARY GLOBAL NOTE LEGEND. The Regulation
S Temporary Global Note shall bear a legend in substantially the
following form:
"THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND
THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED
NOTES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER
THE HOLDER NOR THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY
GLOBAL NOTE SHALL BE ENTITLED TO RECEIVE PAYMENT OF INTEREST HEREON."
(h) CANCELLATION AND/OR ADJUSTMENT OF GLOBAL NOTES. At
such time as all beneficial interests in a particular Global Note have been
exchanged for Definitive Notes or a particular Global Note has been redeemed,
repurchased or canceled in whole and not in part, each such Global Note shall
be returned to or retained and canceled by the Trustee in accordance with
Section 2.11 hereof. At any time prior to such cancellation, if any
beneficial inter-
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est in a Global Note is exchanged for or transferred to a Person who will
take delivery thereof in the form of a beneficial interest in another Global
Note or for Definitive Notes, the principal amount of Notes represented by
such Global Note shall be reduced accordingly and an endorsement shall be
made on such Global Note by the Trustee or by the Depositary at the direction
of the Trustee 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 Note, such other
Global Note shall be increased accordingly and an endorsement shall be made
on such Global Note by the Trustee or by the Depositary at the direction of
the Trustee to reflect such increase.
(i) GENERAL PROVISIONS RELATING TO TRANSFERS AND EXCHANGES.
(i) To permit registrations of transfers and exchanges, the
Company shall execute and the Trustee shall authenticate Global Notes
and Definitive Notes upon the Company's order or at the Registrar's
request.
(ii) No service charge shall be made to a holder of a
beneficial interest in a Global Note or to a Holder of a Definitive Note
for any registration of transfer or exchange, but the Company may
require payment of a sum sufficient to cover any transfer tax or similar
governmental charge payable in connection therewith (other than any such
transfer taxes or similar governmental charge payable upon exchange or
transfer pursuant to Sections 2.10, 3.06, 3.09, 3.10, 4.10, and 9.05
hereof).
(iii) The Registrar shall not be required to register the
transfer of or exchange any Note selected for redemption in whole or in
part, except the unredeemed portion of any Note being redeemed in part.
(iv) All Global Notes and Definitive Notes issued upon any
registration of transfer or exchange of Global Notes or Definitive Notes
shall be the valid obligations of the Company, evidencing the same debt,
and entitled to the same benefits under this Indenture, as the Global
Notes or Definitive Notes surrendered upon such registration of transfer
or exchange.
(v) The Company shall not be required (A) to issue, to
register the transfer of or to exchange any Notes during a period
beginning at the opening of business 15 days before the day of any
selection of Notes for redemption under Section 3.02 hereof and ending
at the close of business on the day of selection, (B) to register the
transfer of or to exchange any Note so selected for redemption in whole
or in part, except the unredeemed portion of any Note being redeemed in
part or (c) to register the transfer of or to exchange a Note between a
record date and the next succeeding Interest Payment Date.
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(vi) Prior to due presentment for the registration of a
transfer of any Note, the Trustee, any Agent and the Company may deem
and treat the Person in whose name any Note is registered as the
absolute owner of such Note for the purpose of receiving payment of
principal of and interest on such Notes and for all other purposes, and
none of the Trustee, any Agent or the Company shall be affected by
notice to the contrary.
(vii) The Trustee shall authenticate Global Notes and
Definitive Notes in accordance with the provisions of Section 2.02
hereof.
(viii) All certifications, certificates and Opinions of Counsel
required to be submitted to the Registrar pursuant to this Section 2.06
to effect a registration of transfer or exchange may be submitted by
facsimile.
SECTION 2.07. REPLACEMENT NOTES.
If any mutilated Note is surrendered to the Trustee or the
Company or if the Trustee receives evidence to its satisfaction of the
destruction, loss or theft of any Note, then, in the absence of notice to the
Company that the Note has been acquired by a protected purchaser, the Company
shall issue and the Trustee shall authenticate a replacement Note if the
Trustee's requirements are met. If required by the Trustee or the Company,
an indemnity bond must be supplied by the Holder that is sufficient in the
judgment of the Trustee and the Company to protect the Company, the Trustee,
any Agent and any authenticating agent from any loss that any of them may
suffer if a Note is replaced. The Company may charge for its expenses in
replacing a Note.
Every replacement Note is an additional obligation of the
Company and shall be entitled to all of the benefits of this Indenture
equally and proportionately with all other Notes duly issued hereunder.
SECTION 2.08. OUTSTANDING NOTES.
The Notes outstanding at any time are all the Notes
authenticated by the Trustee except for those canceled by it, those delivered
to it for cancellation, those reductions in the interest in a Global Note
effected by the Trustee in accordance with the provisions hereof, and those
described in this Section as not outstanding. Except as set forth in Section
2.09 hereof, a Note does not cease to be outstanding because the Company or
an Affiliate of the Company holds the Note; however, Notes held by the
Company or a Subsidiary of the Company shall not be deemed to be outstanding
for purposes of Section 3.07(b) hereof.
If a Note is replaced pursuant to Section 2.07 hereof, it ceases
to be outstand-
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ing unless the Trustee receives proof satisfactory to it that the replaced
Note is held by a protected purchaser.
If the principal amount of any Note is considered paid under
Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to
accrue.
If the Paying Agent (other than the Company, a Subsidiary of
the Company or an Affiliate of any thereof) holds, on a redemption date or
maturity date, money sufficient to pay Notes payable on that date, then on
and after that date such Notes shall be deemed to be no longer outstanding
and shall cease to accrue interest.
SECTION 2.09. TREASURY NOTES.
In determining whether the Holders of the required principal
amount of Notes have concurred in any direction, waiver or consent, Notes
owned by the Company, or by any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company,
shall be considered as though not outstanding, except that for the purposes
of determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Notes that the Trustee knows are so owned
shall be so disregarded.
SECTION 2.10. TEMPORARY NOTES.
Until certificates representing Notes are ready for delivery,
the Company may prepare and the Trustee, upon receipt of an Authentication
Order, shall authenticate temporary Notes. Temporary Notes shall be
substantially in the form of certificated Notes but may have variations that
the Company considers appropriate for temporary Notes and as shall be
reasonably acceptable to the Trustee. Without unreasonable delay, the
Company shall prepare and the Trustee shall authenticate Definitive Notes in
exchange for temporary Notes.
Holders of temporary Notes shall be entitled to all of the
benefits of this Indenture.
SECTION 2.11. CANCELLATION.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee
any Notes surrendered to them for registration of transfer, exchange or
payment. The Trustee and no one else shall cancel all Notes surrendered for
registration of transfer, exchange, payment, replacement or cancellation and
shall hold and dispose of canceled Notes (subject to the record retention
requirement of the Exchange Act) in accordance with its document retention
policies in effect from time to time, unless the Company shall direct that
canceled Notes shall be returned to it. The Com-
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pany may not issue new Notes to replace Notes that it has paid or that have
been delivered to the Trustee for cancellation.
SECTION 2.12. DEFAULTED INTEREST.
If the Company defaults in a payment of interest on the Notes,
it shall pay the defaulted interest in any lawful manner plus, to the extent
lawful, interest payable on the defaulted interest, to the Persons who are
Holders on a subsequent special record date, in each case at the rate
provided in the Notes and in Section 4.01 hereof. The Company shall notify
the Trustee in writing of the amount of defaulted interest proposed to be
paid on each Note and the date of the proposed payment. The Company shall
fix or cause to be fixed each such special record date and payment date,
PROVIDED that no such special record date shall be less than 10 days prior to
the related payment date for such defaulted interest. At least 15 days
before the special record date, the Company (or, upon the written request of
the Company, the Trustee in the name and at the expense of the Company) shall
mail or cause to be mailed to Holders a notice that states the special record
date, the related payment date and the amount of such interest to be paid.
SECTION 2.13. CUSIP NUMBER.
The Company in issuing the Notes may use one or more "CUSIP"
numbers, and if so, the appropriate CUSIP number(s) shall be included in all
notices of redemption or exchange as a convenience to Holders; PROVIDED that
any such notice may state that no representation is made by the Trustee as to
the correctness or accuracy of any CUSIP number(s) printed in the notice or
on the Notes, and that reliance may be placed only on the other
identification numbers printed on the Notes. The Company shall promptly
notify the Trustee of any change in the CUSIP number.
ARTICLE THREE
REDEMPTION AND PREPAYMENT
SECTION 3.01. NOTICES TO TRUSTEE.
If the Company elects to redeem Notes pursuant to the optional
redemption provisions of Section 3.07 hereof, it shall furnish to the
Trustee, at least 30 days but not more than 60 days before a redemption date,
an Officers' Certificate setting forth (i) the clause of this Indenture
pursuant to which the redemption shall occur, (ii) the redemption date, (iii)
the principal amount of Notes to be redeemed and (iv) the redemption price.
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SECTION 3.02. SELECTION OF NOTES TO BE REDEEMED.
If less than all of the Notes are to be redeemed or purchased
in an offer to purchase at any time, the Trustee shall select the Notes to be
redeemed or purchased among the Holders in compliance with the requirements
of the principal national securities exchange, if any, on which the Notes are
listed or, if the Notes are not so listed, on a PRO RATA basis, by lot or in
accordance with any other method the Trustee considers fair and appropriate.
In the event of partial redemption by lot, the particular Notes to be
redeemed shall be selected, unless otherwise provided herein, not less than
30 nor more than 60 days prior to the redemption date by the Trustee from the
outstanding Notes not previously called for redemption.
The Trustee shall promptly notify the Company in writing of
the Notes selected for redemption and, in the case of any Note selected for
partial redemption, the principal amount thereof to be redeemed. Notes and
portions of Notes selected shall be in amounts of $1,000 or whole multiples
of $1,000 except that if all of the Notes of a Holder are to be redeemed, the
entire outstanding amount of Notes held by such Holder, even if not a
multiple of $1,000, shall be redeemed. Except as provided in the preceding
sentence, provisions of this Indenture that apply to Notes called for
redemption also apply to portions of Notes called for redemption.
SECTION 3.03. NOTICE OF REDEMPTION.
Subject to the provisions of Section 3.09 hereof, at least 30
days but not more than 60 days before a redemption date, the Company shall
mail or cause to be mailed, by first class mail, a notice of redemption to
each Holder whose Notes are to be redeemed at its registered address.
The notice shall identify the Notes to be redeemed and shall
state:
(a) the redemption date;
(b) the redemption price;
(c) if any Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the
redemption date upon surrender of such Note, a new Note or Notes in
principal amount equal to the unredeemed portion shall be issued upon
cancellation of the original Note;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to
the Paying Agent to collect the redemption price;
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(f) that, unless the Company defaults in making such
redemption payment, interest on Notes called for redemption ceases to
accrue on and after the redemption date;
(g) the paragraph of the Notes and/or Section of this
Indenture pursuant to which the Notes called for redemption are being
redeemed; and
(h) that no representation is made as to the correctness or
accuracy of the CUSIP number, if any, listed in such notice or printed
on the Notes.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at its expense; PROVIDED, HOWEVER, that
the Company shall have delivered to the Trustee, at least 45 days prior to
the redemption date, an Officers' Certificate requesting that the Trustee
give such notice and setting forth the information to be stated in such
notice as provided in the preceding paragraph.
SECTION 3.07. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with Section
3.03 hereof, Notes called for redemption become irrevocably due and payable
on the redemption date at the redemption price. A notice of redemption may
not be conditional.
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE.
One Business Day prior to the redemption date, the Company
shall deposit with the Trustee or with the Paying Agent money sufficient to
pay the redemption price of and accrued interest on all Notes to be redeemed
on that date. The Trustee or the Paying Agent shall promptly return to the
Company any money deposited with the Trustee or the Paying Agent by the
Company in excess of the amounts necessary to pay the redemption price of,
and accrued interest on, all Notes to be redeemed.
If the Company complies with the provisions of the preceding
paragraph, on and after the redemption date, interest shall cease to accrue
on the Notes or the portions of Notes called for redemption. If a Note is
redeemed on or after an interest record date but on or prior to the related
interest payment date, then any accrued and unpaid interest shall be paid to
the Person in whose name such Note was registered at the close of business on
such record date. If any Note called for redemption shall not be so paid
upon surrender for redemption because of the failure of the Company to comply
with the preceding paragraph, interest shall be paid on the unpaid principal,
from the redemption date until such principal is paid, and to the extent
lawful on any interest not paid on such unpaid principal, in each case at the
rate provided in the Notes and in Section 4.01 hereof.
<PAGE>
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SECTION 3.06. NOTES REDEEMED IN PART.
Upon surrender of a Note that is redeemed in part, the Company
shall issue and the Trustee shall authenticate for the Holder at the expense
of the Company a new Note equal in principal amount to the unredeemed portion
of the Note surrendered.
SECTION 3.07. OPTIONAL REDEMPTION.
(a) The Notes may not be redeemed prior to May 1, 2004, but
will be redeemable at the option of the Company, in whole or in part, at any
time on or after May 1, 2004, at the redemption prices (expressed as
percentages of principal amount) set forth below, together with accrued and
unpaid interest thereon, including Special Interest, if any, to the
redemption date, if redeemed during the 12-month period beginning May 1 of
the years indicated:
<TABLE>
<CAPTION>
YEAR OPTIONAL REDEMPTION PRICE
---- -------------------------
<S> <C>
2004........................... 104.625%
2005........................... 103.083%
2006........................... 101.542%
2007 and thereafter............ 100.000%
</TABLE>
(b) Notwithstanding the foregoing, at any time prior to
May 1, 2002, the Company may redeem up to 35% of the sum of (i) the initial
aggregate principal amount of the Notes and (ii) the initial aggregate
principal amount of any Additional Notes with the net cash proceeds of one or
more Equity Offerings at a redemption price equal to 109.250% of the
principal amount thereof, plus accrued and unpaid interest thereon (including
Special Interest), if any, to the redemption date; PROVIDED that (a) 65% of
the sum of (i) the initial aggregate principal amount of Notes issued on the
Issue Date and (ii) the initial aggregate principal amount of any Additional
Notes remains outstanding immediately after the occurrence of such redemption
and (b) such redemption occurs within 90 days of the date of the closing of
any such Equity Offering.
(c) Any redemption pursuant to this Section 3.07 shall be
made pursuant to the provisions of Section 3.01 through 3.06 hereof.
SECTION 3.08. MANDATORY REDEMPTION.
The Company shall not be required to make mandatory redemption
payments with respect to the Notes.
<PAGE>
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SECTION 3.09. OFFER TO PURCHASE BY APPLICATION OF EXCESS
PROCEEDS.
In the event that, pursuant to Section 4.10 hereof, the
Company shall be required to commence an offer to all Holders to purchase
Notes (a "NET PROCEEDS OFFER"), it shall follow the procedures specified
below.
The Net Proceeds Offer shall remain open for a period of 20
Business Days following its commencement and no longer, except to the extent
that a longer period is required by applicable law (the "OFFER PERIOD"). No
later than five Business Days after the termination of the Offer Period (the
"PURCHASE DATE"), the Company shall purchase the principal amount of Notes
required to be purchased pursuant to Section 4.10 hereof (the "OFFER AMOUNT")
or, if less than the Offer Amount has been tendered, all Notes tendered in
response to the Net Proceeds Offer. Payment for any Notes so purchased shall
be made in the same manner as interest payments are made.
If the Purchase Date is on or after an interest record date
and on or before the related interest payment date, any accrued and unpaid
interest shall be paid to the Person in whose name a Note is registered at
the close of business on such record date, and no additional interest shall
be payable to Holders who tender Notes pursuant to the Net Proceeds Offer.
Upon the commencement of a Net Proceeds Offer, the Company
shall send, by first class mail, a notice to the Trustee and each of the
Holders, with a copy to the Trustee. The notice shall contain all
instructions and materials necessary to enable such Holders to tender Notes
pursuant to the Net Proceeds Offer. The Net Proceeds Offer shall be made to
all Holders. The notice, which shall govern the terms of the Net Proceeds
Offer, shall state:
(i) that the Net Proceeds Offer is being made pursuant to
this Section 3.09 and Section 4.10 hereof and the length of time the Net
Proceeds Offer shall remain open;
(j) the Offer Amount, the purchase price and the Purchase
Date;
(k) that any Note not tendered or accepted for payment shall
continue to accrue interest;
(l) that, unless the Company defaults in making such payment,
any Note accepted for payment pursuant to the Net Proceeds Offer shall
cease to accrue interest after the Purchase Date;
(m) that Holders electing to have a Note purchased pursuant
to a Net Pro-
<PAGE>
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ceeds Offer may only elect to have all of such Note purchased and may
not elect to have only a portion of such Note purchased;
(n) that Holders electing to have a Note purchased pursuant
to any Net Proceeds Offer shall be required to surrender the Note, with
the form entitled "Option of Holder to Elect Purchase" on the reverse of
the Note completed, to a Paying Agent at the address specified in the
notice at least three days before the Purchase Date;
(o) that Holders shall be entitled to withdraw their election
if the Paying Agent receives, not later two Business Days prior to the
expiration of the Offer Period, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the
principal amount of the Note the Holder delivered for purchase and a
statement that such Holder is withdrawing his election to have such Note
purchased;
(p) that, if the aggregate principal amount of Notes
surrendered by Holders exceeds the Offer Amount, the Company shall
select the Notes to be purchased on a PRO RATA basis (with such
adjustments as may be deemed appropriate by the Company so that only
Notes in denominations of $1,000, or integral multiples thereof, shall
be purchased); and
(q) that Holders whose Notes were purchased only in part
shall be issued new Notes equal in principal amount to the unpurchased
portion of the Notes surrendered, PROVIDED, HOWEVER, that each Note
purchased and each new Note issued shall be in an original principal
amount of $1,000 or integral multiples thereof.
On or before the Purchase Date, the Company shall, to the
extent lawful, accept for payment, on a PRO RATA basis to the extent
necessary, the Offer Amount of Notes or portions thereof tendered pursuant to
the Net Proceeds Offer, or if less than the Offer Amount has been tendered,
all Notes tendered, and shall deliver to the Trustee an Officers' Certificate
stating that such Notes or portions thereof were accepted for payment by the
Company in accordance with the terms of this Section 3.09. The Company, the
Depositary or the Paying Agent, as the case may be, shall promptly (but in
any case not later than five days after the Purchase Date) mail or deliver to
each tendering Holder an amount equal to the purchase price of the Notes
tendered by such Holder and accepted by the Company for purchase, and the
Trustee shall authenticate and mail or deliver (or cause to be transferred by
book entry) a new Note to such Holder, in a principal amount equal to any
unpurchased portion of the Note surrendered, PROVIDED, HOWEVER, that each
Note purchased and each new Note issued shall be in an original principal
amount of $1,000 or integral multiples thereof. Any Note not so accepted
shall be promptly mailed or delivered by the Company to the Holder thereof.
The Company will publicly announce the results of the Net Proceeds Offer on
the Purchase Date.
<PAGE>
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Other than as specifically provided in this Section 3.09, any
purchase pursuant to this Section 3.09 shall be made pursuant to the
provisions of Sections 3.01 through 3.06 hereof.
SECTION 3.10 CHANGE OF CONTROL.
(a) 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 equal to 101% of the aggregate principal amount thereof
plus accrued and unpaid interest and Special Interest thereon, if any, to the
date of purchase (the "CHANGE OF CONTROL PAYMENT"). Within ten 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").
The notice to the Holders shall contain all instructions and materials
necessary to enable such Holders to tender Notes pursuant to the Change of
Control Offer. Such notice shall state:
(i) that the Change of Control Offer is being made pursuant
to this Section 4.10 and that all Notes tendered and not withdrawn shall
be accepted for payment;
(ii) the amount of the Change of Control Payment and the
Change of Control Payment Date;
(iii) that any Note not tendered shall continue to accrue
interest;
(iv) that, unless the Company defaults in making payment
therefor, any Note accepted for payment pursuant to the Change of
Control Offer shall cease to accrue interest after the Change of Control
Payment Date;
(v) that Holders electing to have a Note purchased pursuant
to a Change of Control Offer shall be required to surrender the Note,
with the form entitled "Option of Holder to Elect Purchase" on the
reverse of the Note completed, to the Paying Agent at the address
specified in the notice prior to the close of business on the third
Business Day prior to the Change of Control Payment Date;
(vi) that Holders shall be entitled to withdraw their election
if the Paying Agent receives, not later than the second Business Day
prior to the Change of Control Payment Date, a telegram, telex,
facsimile transmission or letter setting forth the name of the Holder,
the principal amount of the Notes the Holder delivered for purchase and
<PAGE>
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a statement that such Holder is withdrawing his election to have such
Notes purchased;
(vii) that Holders whose Notes are purchased only in part shall
be issued new Notes in a principal amount equal to the unpurchased
portion of the Notes surrendered, PROVIDED, HOWEVER, that each Note
purchased and each new Note issued shall be in an original principal
amount of $1,000 or integral multiples thereof; and
(viii) the circumstances and relevant facts regarding such
Change of Control.
(b) On the Change of Control Payment Date, the Company
will, to the extent lawful, (1) accept for payment all Notes or portions
thereof properly tendered pursuant to the Change of Control Offer, (2)
deposit with the Paying Agent an amount equal to the Change of Control
Payment in respect of all Notes or portions thereof so tendered and (3)
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 Paying Agent
will promptly mail to each Holder of Notes so tendered the Change of Control
Payment for such Notes, and the Company will issue 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 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.
(c) The Company will comply with the requirements of Rule
14e-1 under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in
connection with the repurchase of the Notes as a result of a Change of
Control.
(d) Notwithstanding the above, the Company is not 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 this 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.
<PAGE>
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ARTICLE FOUR
COVENANTS
SECTION 4.01. PAYMENT OF NOTES.
The Company shall pay or cause to be paid the principal of,
premium, if any, and interest on the Notes on the dates and in the manner
provided in the Notes. Principal, premium, if any, and interest shall be
considered paid on the date due if the Paying Agent, if other than the
Company or a Subsidiary thereof, holds as of 10:00 a.m. Eastern Time on the
due date money deposited by the Company in immediately available funds and
designated for and sufficient to pay all principal, premium, if any, and
interest then due. The Company shall pay all Special Interest, if any, in the
same manner on the dates and in the amounts set forth in the Registration
Rights Agreement.
The Company shall pay interest (including Post-Petition
Interest in any proceeding under any Bankruptcy Law) on overdue principal at
the rate equal to 1% per annum in excess of the then applicable interest rate
on the Notes to the extent lawful; it shall pay interest (including
Post-Petition Interest in any proceeding under any Bankruptcy Law) on overdue
installments of interest and Special Interest (without regard to any
applicable grace period) at the same rate to the extent lawful.
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain in the Borough of Manhattan, the
City of New York, an office or agency (which may be an office of the Trustee
or an Affiliate of the Trustee, Registrar or co-registrar) where Notes may be
surrendered for registration of transfer or for exchange and where notices
and demands to or upon the Company in respect of the Notes and this Indenture
may be served. The Company shall give prompt written notice to the Trustee
of the location, and any change in the location, of such office or agency.
If at any time the Company shall fail to maintain any such required office or
agency or shall fail to furnish the Trustee with the address thereof, such
presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Trustee.
The Company may also from time to time designate one or more
other offices or agencies where the Notes may be presented or surrendered for
any or all such purposes and may from time to time rescind such designations;
PROVIDED, HOWEVER, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in the
Borough of Manhattan, the City of New York for such purposes. The Company
shall give prompt written notice to the Trustee of any such designation or
rescission and
<PAGE>
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of any change in the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of
the Trustee as one such office or agency of the Company in accordance with
Section 2.03.
SECTION 4.03. REPORTS.
Whether or not required by the rules and regulations of the
Commission, so long as any Notes are outstanding, the Company and the
Subsidiary Guarantors will file with the Commission, to the extent such
filings are accepted by the Commission, and will furnish to the Holders all
quarterly and annual reports and other information, documents and reports
that would be required to be filed with the Commission pursuant to Section 13
of the Exchange Act if the Company and the Subsidiary Guarantors were
required to file under such section. In addition, the Company and the
Subsidiary Guarantors will make such information available to prospective
purchasers of the Notes, securities analysts and broker-dealers who request
it in writing. The Company and the Subsidiary Guarantors have agreed that,
for so long as any Notes remain outstanding, they will furnish to the Holders
and to prospective purchasers of Notes designated by the holders of Transfer
Restricted Securities and to broker-dealers, upon their request, the
information required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act.
SECTION 4.04. COMPLIANCE CERTIFICATE.
(r) The Company and each Subsidiary Guarantor (to the
extent that such Subsidiary Guarantors are so required under the TIA) shall
deliver to the Trustee, within 90 days after the end of each fiscal year, an
Officers' Certificate stating that a review of the activities of the Company
and its Subsidiaries during the preceding fiscal year has been made under the
supervision of the signing Officers with a view to determining whether the
Company has kept, observed, performed and fulfilled its obligations under
this Indenture, and further stating, as to each such Officer signing such
certificate, that to the best of his or her knowledge the Company has kept,
observed, performed and fulfilled each and every covenant contained in this
Indenture and is not in default in the performance or observance of any of
the terms, provisions and conditions of this Indenture (or, if a Default or
Event of Default shall have occurred, describing all such Defaults or Events
of Default of which he or she may have knowledge and what action the Company
is taking or proposes to take with respect thereto) and that to the best of
his or her knowledge no event has occurred and remains in existence by reason
of which payments on account of the principal of or interest, if any, on the
Notes is prohibited or if such event has occurred, a description of the event
and what action the Company is taking or proposes to take with respect
thereto.
(s) So long as not contrary to the then current
recommendations of the
<PAGE>
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American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.03(a) above shall be accompanied
by a written statement of the Company's independent public accountants (who
shall be a firm of established national reputation) that in making the
examination necessary for certification of such financial statements, nothing
has come to their attention that would lead them to believe that the Company
has violated any provisions of Article Four or Article Five hereof or, if any
such violation has occurred, specifying the nature and period of existence
thereof, it being understood that such accountants shall not be liable
directly or indirectly to any Person for any failure to obtain knowledge of
any such violation.
(t) The Company shall, so long as any of the Notes are
outstanding, deliver to the Trustee, forthwith upon any Officer becoming
aware of any Default or Event of Default, an Officers' Certificate specifying
such Default or Event of Default and what action the Company is taking or
proposes to take with respect thereto.
SECTION 4.05. TAXES.
The Company shall pay, and shall cause each of its
Subsidiaries to pay, prior to delinquency, all material taxes, assessments,
and governmental levies except such as are contested in good faith and by
appropriate proceedings or where the failure to effect such payment would not
have a material adverse effect on Holders.
SECTION 4.06. STAY, EXTENSION AND USURY LAWS.
The Company and each of the Subsidiary Guarantors covenant (to
the extent that they may lawfully do so) that they shall not at any time
insist upon, plead, or in any manner whatsoever claim or take the benefit or
advantage of, any stay, extension or usury law wherever enacted, now or at
any time hereafter in force, that may affect the covenants or the performance
of this Indenture; and the Company and each of the Subsidiary Guarantors (to
the extent that they may lawfully do so) hereby expressly waive all benefit
or advantage of any such law, and covenants that they shall not, by resort to
any such law, hinder, delay or impede the execution of any power herein
granted to the Trustee, but shall suffer and permit the execution of every
such power as though no such law has been enacted.
SECTION 4.07. RESTRICTED PAYMENTS.
The Company will not and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, make any Restricted Payment (except
as permitted below) if at the time of such Restricted Payment:
(i) a Default or Event of Default shall have occurred and be
continuing or
<PAGE>
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shall occur as a consequence thereof;
(ii) the Company would be unable to meet the Coverage Ratio
Incurrence Condition; or
(iii) the amount of such Restricted Payment, when added to the
aggregate amount of all other Restricted Payments made after the Issue
Date, exceeds the sum of
(A) 50% of the Company's Consolidated Net Income
(taken as one accounting period) from November 1, 1998 to the end
of the Company's most recently ended fiscal quarter for which
financial statements are publicly available at the time of such
Restricted Payment (or, if such aggregate Consolidated Net Income
shall be a deficit, minus 100% of such aggregate deficit), PLUS
(B) the net cash proceeds from the issuance and sale
(other than to a Subsidiary of the Company) after the Issue Date
of (1) the Company's Capital Stock that is not Disqualified
Capital Stock or (2) debt securities of the Company that have
been converted into the Company's Capital Stock that is not
Disqualified Capital Stock and that is not then held by a
Subsidiary of the Company, PLUS
(C) to the extent that any Restricted Investment that
was made after the Issue Date (other than an Existing Joint
Venture Investment) is sold for cash or otherwise liquidated or
repaid for cash, the sum of (x) cash realized from such sale,
liquidation or repayment of such Restricted Investment (less the
cost of disposition, if any) up to (and not to exceed) the amount
of such Restricted Investment at the time it was made (net of
prior reductions), PLUS (y) 50% of the excess, if any, of the
cash realized from such sale, liquidation or repayment (less the
cost of disposition, if any) over the amount of such Restricted
Investment at the time it was made (net of prior reductions),
PLUS
(D) when an Unrestricted Subsidiary is designated a
Restricted Subsidiary of the Company in accordance with the
definition of "Unrestricted Subsidiary" and becomes a Subsidiary
Guarantor, the sum of (x) the Fair Market Value of all
Investments in such Subsidiary Guarantor immediately following
such designation, up to (and not to exceed) the aggregate amount
of such Investments at the time they were made (to the extent
such Investments reduced the amount available for subsequent
Restricted Payments under this clause (iii) and were not
previously repaid or otherwise reduced), PLUS (y) 50% of the
excess, if any, of such Fair Market Value over the amount of such
Investments at
<PAGE>
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the time they were made (to the extent such Investments reduced
the amount available for subsequent Restricted Payments under
this clause (iii) and were not previously repaid or reduced),
PLUS
(E) $7.5 million,
PROVIDED that any amounts that increase the amount available
for Restricted Payments under any subpart of this clause (iii) shall not
duplicatively increase amounts available for Restricted Payments under any
other subpart of this clause (iii) or for Restricted Investments under the
next paragraph.
The foregoing provisions will not prohibit:
(1) the payment by the Company or any Restricted Subsidiary
of any dividend within 60 days after the date of declaration thereof, if
at said date of declaration such payment would have complied with the
provisions of this Indenture;
(2) the redemption, repurchase, retirement or other
acquisition of any Capital Stock of the Company or any Restricted
Subsidiary in exchange for, or out of the proceeds of, the substantially
concurrent sale (other than to a Subsidiary of the Company) of other
Capital Stock of the Company (other than any Disqualified Capital
Stock);
(3) the defeasance, redemption, repurchase or other
retirement of Subordinated Indebtedness of the Company or any Restricted
Subsidiary in exchange for, or out of the proceeds of, the substantially
concurrent issue and sale of Capital Stock of the Company (other than
(x) Disqualified Capital Stock, (y) Capital Stock sold to a Subsidiary
of the Company and (z) Capital Stock purchased with the proceeds of
loans from the Company or any of its Subsidiaries);
(4) the defeasance, redemption, repurchase or other
retirement of Subordinated Indebtedness in exchange for, or out of the
proceeds of, the substantially concurrent issue and sale of Refinancing
Indebtedness permitted to be incurred under Section 4.09 hereof and the
other terms of this Indenture;
(5) the making of a Related Business Investment in joint
ventures or Subsidiaries that are not Subsidiary Guarantors in exchange
for or out of the proceeds of the substantially concurrent issue and
sale of Capital Stock of the Company (other than (x) Disqualified
Capital Stock, (y) Capital Stock sold to a Subsidiary of the Company and
(z) Capital Stock purchased with the proceeds of loans from the Company
or any of its Subsidiaries);
<PAGE>
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(6) the making of (a) Related Business Investments in joint
ventures or Subsidiaries that are not Subsidiary Guarantors in an
aggregate amount not to exceed the aggregate amount realized in cash by
the Company or any of the Subsidiary Guarantors after the Issue Date in
respect of (or the Fair Market Value of any Investment (other than an
Investment in Debt incurred in connection with or in anticipation of
such transaction) in a joint venture engaged in any Related Business
received by the Company or any Subsidiary Guarantor in exchange for) a
Qualifying Joint Venture Investment, less the cost of disposition, if
any, when such Investments are sold for cash or otherwise liquidated or
repaid for cash (or exchanged for such Investment), but in each case
only to the extent the Company elects not to take such amounts into
account for purpose of calculating amounts available for Restricted
Payments under clause (iii) of the immediately preceding paragraph, and
(b) Existing Joint Venture Investments;
(7) the purchase, redemption, acquisition, cancellation or
other retirement for value of shares of Capital Stock of the Company
held by Officers, directors or employees or former Officers, directors
or employees (or their transferees, estates or beneficiaries under their
estates), upon death, disability, retirement, severance or termination
of employment or service or pursuant to any agreement under which such
shares of Capital Stock or related rights were issued; PROVIDED that the
aggregate cash consideration paid for all such purchases, redemptions,
acquisitions, cancellations or other retirements of such shares of
Capital Stock (a) during any calendar year does not exceed $2.5 million
(with unused amounts in any calendar year being usable in all subsequent
calendar years) and (b) during the period from the Issue Date through
the maturity date of the Notes does not exceed $7.5 million;
(8) payments to holders of Common Equity of the Company (a)
in lieu of the issuance of fractional shares of Common Equity, (b) to
redeem or repurchase stock purchase or similar rights issued as a
shareholder rights device and (c) to repurchase shares of Common Equity
of the Company from holders who hold less than 100 shares in each
instance;
(9) any Investments in a Receivables Subsidiary in connection
with a Qualifying Receivables Facility;
(10) the prepayment, purchase, redemption, defeasance or other
acquisition or retirement of Subordinated Indebtedness (other than
Subordinated Indebtedness held by Affiliates of the Company) upon a
Change of Control or Asset Sale to the extent required by the agreement
governing such Subordinated Indebtedness, but only (x) if the Company
shall have complied with Section 3.09, 3.10 or 4.10 hereof, as the case
may be, and repurchased all Notes tendered pursuant to the offer
required by such Sections prior to prepaying or otherwise acquiring or
retiring such Subordinated In-
<PAGE>
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debtedness, (y) in the case of an Asset Sale, to the extent of the
Excess Proceeds remaining after the offer to Holders and Pari Passu
Indebtedness required by Section 3.09 and 4.10 hereof is consummated
and (z) within 60 days of the date such offer is consummated; or
(11) Related Business Investments the aggregate amount of
which (excluding the amount of any Existing Joint Venture Investments),
together with the amount of all other Restricted Investments made
pursuant to this clause (11) after the Issue Date (including the initial
amount of any such Restricted Investments subsequently taken into
account for purposes of clause (6)(a) above), does not exceed
$12.5 million at any time outstanding;
PROVIDED that, in the case of any Restricted Payment pursuant
to any of the foregoing clauses (3) through (11), no Default or Event of
Default shall have occurred and be continuing or occur as a consequence of
the actions or payments set forth therein.
Each Restricted Payment permitted pursuant to the preceding
paragraph (other than the Restricted Payments referred to in clauses (2),
(3), (4) and (5) thereof) shall be included once in calculating whether the
conditions of clause (iii) of the second preceding paragraph have been met
with respect to any subsequent Restricted Payments. If an issuance of
Capital Stock of the Company is applied to make a Restricted Payment pursuant
to clause (2), (3) or (5) above, then, in calculating whether the conditions
of clause (iii) of the second preceding paragraph have been met with respect
to any subsequent Restricted Payments, the proceeds of any such issuance
shall be included under such clause (iii) only to the extent such proceeds
are not applied as so described in this sentence. For purposes of
determining compliance with this Section 4.07, in the event that a
transaction meets the criteria of more than one of the types of Restricted
Payments described in the clauses of the immediately preceding paragraph or
any clause of the definition of "Restricted Payment," the Company, in its
sole discretion, shall classify such transaction and only be required to
include the amount and type of such transaction in one of such clauses.
Not later than the date of making any Restricted Payment, the
Company shall deliver to the Trustee an Officers' Certificate stating that
such Restricted Payment is permitted and setting forth the basis upon which
the calculations required by this Section 4.07 were computed, which
calculations shall be based upon the Company's latest available financial
statements.
SECTION 4.08. RESTRICTIONS ON DISTRIBUTIONS FROM RESTRICTED
SUBSIDIARIES.
The Company will not, and will not permit any of its
Restricted Subsidiaries
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to, create or otherwise cause or suffer to exist or become effective any
consensual Payment Restriction with respect to any of its Restricted
Subsidiaries, except for:
(a) any such Payment Restriction in effect on the Issue
Date under the Credit Agreement or any similar Payment Restriction under any
other Credit Facility (whether or not in effect on the Issue Date) or any
amendment, restatement, renewal, replacement or refinancing of any of the
foregoing; PROVIDED that such similar Payment Restrictions are not, taken as
a whole, more restrictive than the Payment Restrictions in effect on the
Issue Date under the Credit Agreement;
(b) any such Payment Restriction under any agreement
evidencing any Acquired Indebtedness that was permitted to be incurred
pursuant to this Indenture in effect at the time of such incurrence and not
created in contemplation of such event; PROVIDED that such Payment
Restriction only applies to assets that were subject to such restriction and
encumbrances prior to the acquisition of such assets by the Company or its
Subsidiaries;
(c) any such Payment Restriction arising in connection with
Refinancing Indebtedness; PROVIDED that any such Payment Restrictions that
arise under such Refinancing Indebtedness are not, taken as a whole, more
restrictive than those under the agreement creating or evidencing the
Indebtedness being refunded or refinanced;
(d) any Payment Restriction created pursuant to an asset
purchase agreement, stock sale agreement or similar instrument pursuant to
which a bona-fide Asset Sale is to be consummated, the proceeds of which are
applied as provided in this Indenture, so long as such restriction or
encumbrance shall apply only to the assets subject to such Asset Sale and
shall be effective only for a period from the execution and delivery of such
agreement or instrument through the earlier of the consummation of such Asset
Sale or the termination of such agreement or instrument;
(e) customary nonassignment provisions of any lease
governing any leasehold interest of the Company or any Restricted Subsidiary;
(f) any Payment Restriction existing under or by reason of
applicable law;
(g) any Payment Restriction imposed pursuant to an
agreement that has been entered into for the sale of all or substantially all
of the Capital Stock of a Restricted Subsidiary; and
(h) purchase money obligations for property acquired in the
ordinary course of business that impose restrictions of the type referred to
in clause (d) of the definition of "Payment Restriction."
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SECTION 4.09. LIMITATION ON ADDITIONAL INDEBTEDNESS
The Company will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, incur any Indebtedness
(including Acquired Indebtedness); PROVIDED that (i) the Company and its
Restricted Subsidiaries may incur Permitted Indebtedness and (ii) the Company
may incur additional Indebtedness if, after giving effect thereto, the
Company's Consolidated Interest Coverage Ratio on the date thereof would be
at least 2.0 to 1, determined on a PRO FORMA basis as if the incurrence of
such additional Indebtedness, and the application of the net proceeds
therefrom, had occurred at the beginning of the four-quarter period used to
calculate the Company's Consolidated Interest Coverage Ratio.
SECTION 4.10. ASSET SALES.
(a) The Company will not, and will not permit any of its
Restricted Subsidiaries to, consummate any Asset Sale unless:
(i) the Company or such Restricted Subsidiary receives
consideration at the time of such Asset Sale at least equal to the Fair
Market Value of the assets included in such Asset Sale (evidenced by the
delivery by the Company to the Trustee of an Officers' Certificate
certifying that such Asset Sale complies with this clause (i));
(ii) immediately before and immediately giving effect to such
Asset Sale, no Default or Event of Default shall have occurred and be
continuing, and
(iii) all of the consideration received by the Company or such
Restricted Subsidiary therefor is in the form of cash paid at the
closing thereof, PROVIDED that the Company shall be permitted to receive
property and securities other than cash so long as the aggregate Fair
Market Value of all such property and securities received in Asset Sales
and held by the Company and its Restricted Subsidiaries at any one time
(exclusive of amounts, property, assets or Investments referred to in
paragraph (b) below) does not exceed 5% of Consolidated Tangible Assets.
(b) The (x) amount (without duplication) of any Indebtedness
(other than Subordinated Indebtedness) of the Company or such Restricted
Subsidiary that is expressly assumed by the transferee in such Asset Sale and
with respect to which the Company or such Restricted Subsidiary, as the case may
be, is unconditionally released by the holder of such Indebtedness, (y) amount
of any Cash Equivalents, or other notes, securities or items of property
received from such transferee that are within 30 days converted by the Company
or such Restricted Subsidiary to cash (to the extent of the cash actually so
received), and (z) the Fair Market Value of any property or assets of any
Related Business (or any Investment in a joint venture engaged in any such
Related Business, other than an Investment in Indebtedness in-
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curred in connection with or in anticipation of such transaction) received by
the Company or any Restricted Subsidiary in exchange for similar property or
assets (or a joint venture Investment in a Person holding any such similar
property or assets) and to be used in any Related Business of the Company or
such Restricted Subsidiary, shall be deemed to be cash for purposes of clause
(iii) of paragraph (a) above (but not Net Available Proceeds for purposes of
paragraph (c) below) and, in the case of clause (x) above, shall also be
deemed to constitute a repayment of, and a permanent reduction in, the amount
of such Indebtedness (or any commitment) for purposes of the following
paragraph (c). If at any time any non-cash consideration received by the
Company or any Restricted Subsidiary of the Company, as the case may be, in
connection with any Asset Sale is repaid or converted into or sold or
otherwise disposed of for cash (other than interest received with respect to
any such non-cash consideration), then the date of such repayment, conversion
or disposition shall be deemed to constitute the date of an Asset Sale
hereunder and the Net Available Proceeds thereof shall be applied in
accordance with this Section.
(c) If the Company or any Restricted Subsidiary engages in
an Asset Sale, the Company or such Restricted Subsidiary shall, no later than
one year after such Asset Sale,
(i) apply all or any of the Net Available Proceeds therefrom
to repay amounts outstanding under the Credit Agreement or any other
Senior Indebtedness; PROVIDED, in each case, that the related loan
commitment (if any) is thereby permanently reduced by the amount of such
Indebtedness so repaid and/or
(ii) invest (or enter into a legally binding agreement to
invest) all or any part of the Net Available Proceeds thereof in the
purchase of fixed assets to be used by the Company and its Restricted
Subsidiaries in a Related Business (together with any short-term assets
incidental thereto), or the making of a Related Business Investment,
PROVIDED, HOWEVER, that in the case of any such legally binding
agreement to invest proceeds of an Asset Sale, such Investment is made
no later than one year after such agreement is entered into.
The amount of such Net Available Proceeds not applied or invested
as provided in this paragraph (c) will constitute "EXCESS PROCEEDS."
(d) When the aggregate amount of Excess Proceeds equals or
exceeds $10.0 million, the Company will be required to make an offer to
purchase, from all holders of the Notes and, if applicable, prepay, purchase or
redeem (or make an offer to do so) any Pari Passu Indebtedness of the Company
the provisions of which require the Company to prepay, purchase or redeem such
Indebtedness with the proceeds from any Asset Sales (or offer to do so), in an
aggregate principal amount of Notes and such Pari Passu Indebtedness equal to
the amount of such Excess Proceeds as follows:
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(i) The Company will (1) make a Net Proceeds Offer to all
Holders in accordance with the procedures set forth in Section 3.09
hereof, and (2) prepay, purchase or redeem (or make an offer to do so)
any such other Pari Passu Indebtedness, PRO RATA in proportion to the
respective principal amounts of the Notes and such other Indebtedness
required to be prepaid, purchased or redeemed or tendered for, the
maximum principal amount (expressed as a multiple of $1,000) of Notes
and Pari Passu Indebtedness that may be purchased, prepaid or redeemed
out of the amount (the "PAYMENT AMOUNT") of such Excess Proceeds.
(ii) The offer price for the Notes will be payable in cash in
an amount equal to 100% of the principal amount of the Notes tendered
pursuant to a Net Proceeds Offer, plus accrued and unpaid interest
(including Special Interest) thereon, if any, to the date such Net
Proceeds Offer is consummated (the "OFFERED PRICE"), in accordance with
the procedures set forth in this Indenture and the prepayment,
redemption, purchase or offer price for such Pari Passu Indebtedness
(the "PARI PASSU INDEBTEDNESS PRICE") shall be as set forth in the
related documentation governing such Indebtedness. To the extent that
the sum of the aggregate Offered Price of Notes tendered pursuant to a
Net Proceeds Offer and the aggregate Pari Passu Indebtedness Price paid
to the holders of such Pari Passu Indebtedness is less than the Payment
Amount relating thereto (such shortfall constituting a "NET PROCEEDS
DEFICIENCY"), the Company may use such Net Proceeds Deficiency, or a
portion thereof, for general corporate purposes, subject to the
limitations of Section 4.07 hereof.
(iii) If the aggregate Offered Price of Notes validly tendered
and not withdrawn by holders thereof exceeds the PRO RATA portion of the
Payment Amount allocable to the Notes, Notes to be purchased will be
selected on a PRO RATA basis.
(iv) Upon completion of such Net Proceeds Offer in accordance
with the foregoing provisions, the amount of Excess Proceeds with
respect to which such Net Proceeds Offer was made shall be deemed to be
zero.
The Company will not permit any Restricted Subsidiary to enter
into or suffer to exist any agreement that would place any restriction of any
kind (other than pursuant to law or regulation) on the ability of the Company to
make a Net Proceeds Offer following any Asset Sale. The Company will comply
with applicable tender offer rules, including the requirements of Rule 14e-1
under the Exchange Act and any other applicable laws and regulations in the
event that an Asset Sale occurs and the Company is required to purchase Notes as
described above.
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SECTION 4.11. TRANSACTIONS WITH AFFILIATES.
The Company will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, in one transaction or a
series of related transactions, sell, lease, transfer or otherwise dispose of
any of its properties or assets to, or purchase any property or assets from
or enter into any contract, agreement, understanding, loan, advance or
Guarantee with, or for the benefit of, any Affiliate (each of the foregoing,
an "AFFILIATE TRANSACTION"), unless:
(a) such Affiliate Transaction is on terms that are no less
favorable to the Company or the relevant Restricted Subsidiary than those
that would have been obtained in a comparable transaction by the Company or
such Restricted Subsidiary with an unrelated Person; and
(b) the Company delivers to the Trustee:
(i) with respect to any Affiliate Transaction (or series of
related transactions) involving aggregate payments in excess of
$5.0 million, an Officers' Certificate certifying that such Affiliate
Transaction complies with clause (i) above and a Secretary's Certificate
which sets forth and authenticates a Board Resolution that has been
adopted by a vote of a majority of the Independent Directors approving
such Affiliate Transaction or, if at the time fewer than three
Independent Directors are then in office, a Secretary's Certificate
which sets forth and authenticates a Board Resolution that has been
adopted unanimously by the Board of Directors; and
(ii) with respect to any Affiliate Transaction (or series of
related transactions) involving aggregate payments of $10.0 million or
more, the certificates described in the preceding clause (a) and an
opinion as to the fairness to the Company or such Restricted Subsidiary
from a financial point of view issued by an Independent Financial
Advisor;
PROVIDED, HOWEVER, that the following shall not be deemed to be
Affiliate Transactions:
(1) transactions exclusively between or among (1) the Company
and one or more Restricted Subsidiaries or (2) Restricted Subsidiaries;
PROVIDED, in each case, that no Affiliate of the Company (other than
another Restricted Subsidiary) owns Capital Stock of any such Restricted
Subsidiary;
(2) transactions between the Company or any Restricted
Subsidiary and any qualified employee stock ownership plan established
for the benefit of the Company's employees, or the establishment or
maintenance of any such plan;
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(3) reasonable director, Officer and employee compensation
and other benefits (including retirement, health and other benefit
plans), and indemnification arrangements, in each case approved by a
majority of the Independent Directors on the Board of Directors;
(4) Restricted Payments permitted by Section 4.07 hereof
(other than Investments covered by clause (1) above or clause (8)
below);
(5) the pledge of Capital Stock of Unrestricted Subsidiaries
to support the Indebtedness thereof;
(6) the entering into of a tax sharing agreement, or payments
pursuant thereto, between the Company and/or one or more Subsidiaries,
on the one hand, and any other Person with which the Company or such
Subsidiaries are required or permitted to file a consolidated tax return
or with which the Company or such Subsidiaries are part of a
consolidated group for tax purposes, on the other hand, which payments
by the Company and its Restricted Subsidiaries are not in excess of the
tax liabilities that would have been payable by them on a stand-alone
basis;
(7) commission, travel and similar advances to Officers and
employees made in the ordinary course of business and on customary
terms;
(8) transactions exclusively between (1) the Company or any
Restricted Subsidiary and (2) any joint venture or a Subsidiary;
PROVIDED, in each case, that no Affiliate of the Company (other than a
Restricted Subsidiary) owns Capital Stock of any such joint venture or
Subsidiary;
(9) the purchase of structural bolts from Southwest Bolt,
Inc. on terms that are no less favorable to the Company or the relevant
Restricted Subsidiary than those that would have been obtained in a
comparable transaction by the Company or such Restricted Subsidiary with
an unrelated Person; and
(10) transactions pursuant to agreements entered into or in
effect on the Issue Date and described on Schedule I to this Indenture,
including amendments, renewals and extensions thereof entered into after
the Issue Date, PROVIDED that the terms of any such amendment, renewal
or extension are not, in the aggregate, less favorable to the Company or
such Restricted Subsidiary than the terms of such agreement prior to
such amendment, renewal or extension.
SECTION 4.12. LIENS.
The Company shall not, and shall not permit any Restricted
Subsidiary to, di-
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rectly or indirectly, incur or permit to exist any Lien of any nature
whatsoever on any property of the Company or any Restricted Subsidiary
(including Capital Stock of a Restricted Subsidiary), whether owned at the
Issue Date or thereafter acquired, which secures Indebtedness that is not
Senior Indebtedness or secures trade payables, unless contemporaneously
therewith effective provision is made to secure the Notes equally and ratably
with (or if such Lien secures Indebtedness that is subordinated to the Notes,
prior to) such Indebtedness or trade payables so long as such Indebtedness or
trade payables are secured by a Lien.
The foregoing restrictions shall not apply to:
(i) Liens existing on the Issue Date securing Indebtedness
outstanding on the Issue Date;
(ii) Liens in favor of the Company or a Subsidiary Guarantor;
(iii) Liens to secure Non-Recourse Purchase Money Indebtedness
referred to in clause (viii) of the definition of "Permitted
Indebtedness," provided such Liens are limited to the assets acquired
with the proceeds of such Indebtedness;
(iv) Liens securing Acquired Indebtedness permitted to be
incurred under this Indenture; PROVIDED that the Liens do not extend to
property or assets not subject to such Lien at the time of acquisition
(other than improvements thereon);
(v) Liens on property of a Person existing at the time such
Person is acquired or merged with or into or consolidated with the
Company or any such Restricted Subsidiary (and not created in
anticipation or contemplation thereof);
(vi) Liens to secure Refinancing Indebtedness of Indebtedness
secured by Liens referred to in the foregoing clauses (i), (iii),
(iv) and (v); PROVIDED that in each case such Liens do not extend to any
additional property or assets (other than improvements thereon);
(vii) any Lien securing the payment of workers' compensation or
other insurance;
(viii) good faith deposits in connection with tenders,
leases or contracts (other than contracts for the payment of money) or
to secure public or statutory obligations, or in lieu of surety or
appeal bonds with respect to matters not yet finally determined and
being contested in good faith by appropriate proceedings;
(ix) Liens on Receivables to reflect sales of Receivables to
and by a Receivables Subsidiary pursuant to a Receivables Facility; or
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(x) Liens arising by operation of law in favor of mechanics,
materialmen, laborers, employees or suppliers (including under Article 2
of the Uniform Commercial Code), incurred in the ordinary course of
business for sums which are not yet delinquent or are being contested in
good faith by appropriate proceedings.
SECTION 4.13 CORPORATE EXISTENCE.
Subject to Article Five hereof, the Company shall do or cause
to be done all things necessary to preserve and keep in full force and effect
(i) its corporate existence, and the corporate, partnership or other
existence of each of its Subsidiaries, in accordance with the respective
organizational documents (as the same may be amended from time to time) of it
or any such Subsidiary and (ii) the rights (charter and statutory), licenses
and franchises of it and its Subsidiaries; PROVIDED, HOWEVER, that the
Company shall not be required to preserve any such right, license or
franchise, or the corporate, partnership or other existence of any of its
Subsidiaries, if the Board of Directors shall determine that the preservation
thereof is no longer desirable in the conduct of the Company's business and
that of its Subsidiaries, taken as a whole, and that the loss thereof is not
adverse in any material respect to the Holders.
SECTION 4.14 LIMITATION ON ISSUANCES AND SALES OF CAPITAL
STOCK IN RESTRICTED SUBSIDIARIES
The Company will not, and will not permit any Restricted
Subsidiary to, directly or indirectly, sell or issue any shares of Capital
Stock of any Restricted Subsidiary (including options, warrants or other
rights to purchase shares of such Capital Stock) except (i) to the Company or
a Wholly-Owned Restricted Subsidiary, (ii) subject to compliance with Section
4.10 hereof, a Permitted Sale or Issuance, or (iii) to the extent such shares
represent directors' qualifying shares or shares required by applicable law
to be held by a Person other than the Company or a Wholly-Owned Restricted
Subsidiary. The proceeds of any sale or issuance of Capital Stock permitted
hereunder and referred to in clauses (ii) or (iii) above will be treated as
Net Available Proceeds and must be applied in a manner consistent with the
provisions of Section 4.10 hereof, to the extent such transaction constitutes
an Asset Sale.
The Company will not permit any of its Restricted Subsidiaries
to issue any Preferred Stock (other than to the Company or a Wholly-Owned
Restricted Subsidiary) or permit any Person (other than the Company or a
Wholly-Owned Restricted Subsidiary) to own or hold any interest in any
Preferred Stock of any such Subsidiary unless such Restricted Subsidiary
would be permitted to incur (i) Permitted Indebtedness under clause (x) of
the definition thereof in an aggregate principal amount equal to the
aggregate liquidation value of such Preferred Stock or (ii) other
Indebtedness under clause (ii) of Section 4.09 hereof.
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SECTION 4.15. LIMITATION ON LAYERING.
The Company will not incur, directly or indirectly, any
Indebtedness that is subordinate or junior in ranking in right of payment to
its Senior Indebtedness unless such Indebtedness by its terms is PARI PASSU
with or is expressly subordinated in right of payment to the Notes. In
addition, each Subsidiary Guarantor will not incur, directly or indirectly,
any Indebtedness that is subordinate or junior in ranking in right of payment
to its Subsidiary Guarantor Senior Indebtedness unless such Indebtedness by
its terms is PARI PASSU with or is expressly subordinated in right of payment
to the Subsidiary Guarantees.
SECTION 4.16. ADDITIONAL SUBSIDIARY GUARANTEES.
If the Company or any of its Subsidiaries shall acquire or
create another Subsidiary (other than (x) a Foreign Subsidiary that has not
Guaranteed any Indebtedness of the Company or any of the Subsidiary
Guarantors or (y) a Subsidiary that has been designated as an Unrestricted
Subsidiary), then such newly acquired or created Subsidiary will be required
to execute a supplemental indenture substantially in the form attached hereto
as Exhibit F and a Subsidiary Guarantee, in accordance with Article Ten
hereof.
Upon execution of any such supplemental indenture providing
for a Subsidiary Guarantee, the relevant Subsidiary will deliver to the
Trustee an Opinion of Counsel (including opinions of local counsel in the
relevant jurisdictions) relating to such Subsidiary, the authorization and
enforceability of such Subsidiary Guarantee in accordance with the terms
hereof, subject to the effect of applicable bankruptcy, insolvency or similar
laws affecting creditors rights generally and equitable principles of general
applicability, and the other matters covered by the opinions rendered with
respect to the initial Subsidiary Guarantors and their respective Subsidiary
Guarantees on the Issue Date, in each case substantially similar in scope and
form to such opinions rendered on the Issue Date.
ARTICLE FIVE
SUCCESSORS
SECTION 5.01. MERGER, CONSOLIDATION, OR SALE OF ASSETS.
The Company will not, in a single transaction or a series of
related transactions, (a) consolidate or merge with or into (other than a
merger with a Wholly-Owned Restricted Subsidiary solely for the purpose of
changing the Company's jurisdiction of incorporation to another State of the
United States or the District of Columbia), or sell, lease, transfer, convey
or otherwise dispose of or assign all or substantially all of the assets of
the Company
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or the Company and its Subsidiaries (taken as a whole), or assign any of its
obligations under the Notes and this Indenture, to any Person or (b) adopt a
Plan of Liquidation unless, in either case:
(i) the Person formed by or surviving such consolidation or
merger (if other than the Company) or to which such sale, lease, conveyance
or other disposition or assignment shall be made (or, in the case of a Plan
of Liquidation, any Person to which assets are transferred) (collectively,
the "SUCCESSOR"), is a corporation organized and existing under the laws of
any State of the United States of America or the District of Columbia, and
the Successor assumes by supplemental indenture in a form satisfactory to the
Trustee all of the obligations of the Company under the Notes, this Indenture
and the Registration Rights Agreement;
(ii) immediately prior to and immediately after giving
effect to such transaction and the assumption of the obligations as set forth
in clause (i) above and the incurrence of any Indebtedness to be incurred in
connection therewith, no Default or Event of Default shall have occurred and
be continuing;
(iii) immediately after and giving effect to such transaction
and the assumption of the obligations set forth in clause (i) above and the
incurrence of any Indebtedness to be incurred in connection therewith, and
the use of any net proceeds therefrom on a pro forma basis, (1) the
Consolidated Net Worth of the Company or the Successor, as the case may be,
would be at least equal to the Consolidated Net Worth of the Company
immediately prior to such transaction and (2) the Company or the Successor,
as the case may be, could meet the Coverage Ratio Incurrence Condition; and
(iv) each Subsidiary Guarantor, unless it is the other party
to the transactions described above, shall have by amendment to its Guarantee
confirmed that its Guarantee of the Notes shall apply to the obligations of
the Company or the Successor under the Notes and this Indenture.
For purposes of this Section, any Indebtedness of the
Successor which was not Indebtedness of the Company immediately prior to the
transaction shall be deemed to have been incurred in connection with such
transaction.
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation or merger, or any sale, assignment,
transfer, lease, conveyance or other disposition of all or substantially all
of the assets of the Company in accordance with Section 5.01 hereof, the
Successor formed by such consolidation or into or with which the Company is
merged or to which such sale, assignment, transfer, lease, conveyance
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or other disposition is made shall succeed to, and be substituted for (so
that from and after the date of such consolidation, merger, sale, lease,
conveyance or other disposition, the provisions of this Indenture referring
to the "Company" shall refer instead to the Successor and not to the
Company), and may exercise every right and power of the Company under this
Indenture with the same effect as if such successor had been named as the
Company herein; PROVIDED, HOWEVER, that the predecessor Company shall not be
relieved from the obligation to pay the principal of and interest on the
Notes except in the case of a sale of all of the Company's assets that meets
the requirements of Section 5.01 hereof.
ARTICLE SIX
DEFAULTS AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT.
Each of the following constitutes an "EVENT OF DEFAULT"
(whatever the reason for such Event of Default and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to
any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body and whether or not by operation of
Section 10.05 or 11.05 hereof):
(i) failure by the Company to pay interest (including
Special Interest) on any of the Notes when it becomes due and payable and the
continuance of any such failure for 30 days;
(ii) failure by the Company to pay the principal or premium,
if any, on any of the Notes when it becomes due and payable, whether at
stated maturity, upon redemption, upon repurchase, upon acceleration or
otherwise;
(iii) failure by the Company to comply with Sections 3.09,
3.10, 4.10, and 5.01 hereof, respectively;
(iv) failure by the Company to comply with any other
covenant in this Indenture and continuance of such failure for 30 days after
notice of such failure has been given to the Company by the Trustee or by the
Holders of at least 25% of the aggregate principal amount of the Notes then
outstanding;
(v) failure by either the Company or any of its Restricted
Subsidiaries to make any payment when due after the expiration of any
applicable grace period, in respect of any Indebtedness of the Company or any
of such Subsidiaries, or the acceleration of the ma-
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turity of such Indebtedness by the holders thereof because of a default,
PROVIDED that the aggregate amount unpaid or accelerated, for all such
Indebtedness under this clause (v), equals $20.0 million or more;
(vi) one or more judgments or orders that exceed $20.0
million in the aggregate (net of amounts covered by insurance or bonded) for
the payment of money have been entered by a court or courts of competent
jurisdiction against the Company or any Subsidiary of the Company and such
judgment or judgments have not been satisfied, stayed, annulled or rescinded
within 60 days of being entered;
(vii) the Company or any of its Significant Subsidiaries:
(1) commences a voluntary case,
(2) consents to the entry of an order for relief against it
in an involuntary case,
(3) consents to the appointment of a custodian of it or for
all or substantially all of its property,
(4) makes a general assignment for the benefit of its
creditors, or
(5) generally is not paying its debts as they become due; or
(viii) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(1) is for relief against the Company or any of its
Significant Subsidiaries;
(2) appoints a custodian of the Company or any of its
Significant Subsidiaries or for all or substantially all of the property
of the Company or any of its Significant Subsidiaries; or
(3) orders the liquidation of the Company or any of its
Significant Subsidiaries;
and the order or decree remains unstayed and in effect for 60
consecutive days.
(ix) except as permitted by Section 10.16 hereof, any
Subsidiary Guarantee of any Significant Subsidiary ceases to be in full force
and effect or any Subsidiary Guarantor repudiates its obligations under any
Subsidiary Guarantee.
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SECTION 6.02. ACCELERATION.
If an Event of Default (other than an Event of Default
specified in clause (vii) or (viii) of Section 6.01 hereof), has occurred and
is continuing, the Trustee, by written notice to the Company, or the Holders
of at least 25% in aggregate principal amount of the Notes then outstanding
by written notice to the Company and the Trustee may declare all amounts
owing under the Notes to be due and payable immediately. Upon such
declaration of acceleration, the aggregate principal of, premium, if any, and
interest on the outstanding Notes shall immediately become due and payable.
If an Event of Default specified in clause (vii) or (viii) of Section 6.01
hereof occurs, all outstanding Notes shall become due and payable without any
further action or notice.
SECTION 6.03. OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee
may pursue any available remedy to collect the payment of principal, premium,
if any, and interest on the Notes or to enforce the performance of any
provision of the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not
possess any of the Notes or does not produce any of them in the proceeding.
A delay or omission by the Trustee or any Holder in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy
or constitute a waiver of or acquiescence in the Event of Default. All
remedies are cumulative to the extent permitted by law.
SECTION 6.04. WAIVER OF PAST DEFAULTS.
Holders of not less than a majority in aggregate principal
amount of the then outstanding Notes by notice to the Trustee may on behalf
of the Holders of all of the Notes waive an existing Default or Event of
Default and its consequences hereunder, except (i) a continuing Default or
Event of Default in the payment of the principal of, premium, interest and
Special Interest, if any, on the Notes (including in connection with an offer
to purchase), or (ii) any Default or Event of Default in respect of a
provision that under Article Nine hereof cannot be waived without the consent
of each Holder affected thereby. Upon any such waiver, such Default shall
cease to exist, and any Event of Default arising therefrom shall be deemed to
have been cured for every purpose of this Indenture; but no such waiver shall
extend to any subsequent or other Default or impair any right consequent
thereon.
SECTION 6.05. CONTROL BY MAJORITY.
Holders of a majority in principal amount of the then
outstanding Notes may direct the time, method and place of conducting any
proceeding for exercising any remedy
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available to the Trustee or exercising any trust or power conferred on it.
However, the Trustee may refuse to follow any direction that conflicts with
law or this Indenture that the Trustee determines may be unduly prejudicial
to the rights of other Holders or that may involve the Trustee in personal
liability.
SECTION 6.06. LIMITATION ON SUITS.
Holders may not enforce this Indenture or the Notes except as
provided in this Indenture. A Holder may pursue a remedy with respect to
this Indenture or the Notes only if:
(a) the Holder gives to the Trustee written notice of a
continuing Event of Default;
(b) the Holders of at least 25% in principal amount of the
then outstanding Notes make a written request to the Trustee to pursue
the remedy;
(c) such Holder or Holders offer and, if requested, provide
to the Trustee indemnity satisfactory to the Trustee against any loss,
liability or expense;
(d) the Trustee does not comply with the request within 60
days after receipt of the request and the offer and, if requested, the
provision of indemnity; and
(e) during such 60-day period the Holders of a majority in
principal amount of the then outstanding Notes do not give the Trustee a
direction inconsistent with the request.
A Holder may not use this Indenture to prejudice the rights of
another Holder or to obtain a preference or priority over another Holder.
SECTION 6.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right
of any Holder to receive payment of principal, premium and Special Interest, if
any, and interest on the Note, on or after the respective due dates expressed in
the Note (including in connection with an offer to purchase), or to bring suit
for the enforcement of any such payment on or after such respective dates, shall
not be impaired or affected without the consent of such Holder.
SECTION 6.08. COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 6.01(i) or (ii)
occurs and is continuing, the Trustee is authorized to recover judgment in its
own name and as Trustee of an express trust against the Company or any
Subsidiary Guarantor for the whole amount of prin-
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cipal of, premium, interest and Special Interest, if any, remaining unpaid on
the Notes and interest on overdue principal and, to the extent lawful,
interest 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 is authorized to file such proofs of claim and
other papers or documents as may be necessary or advisable in order to have
the claims of the Trustee (including any claim for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel) and the Holders allowed in any judicial proceedings relative to
the Company (or any other obligor upon the Notes, including any Subsidiary
Guarantor), its creditors or its property and shall be entitled and empowered
to collect, receive and distribute any money or other property payable or
deliverable on any such claims and any custodian in any such judicial
proceeding is hereby authorized by each Holder to make such payments to the
Trustee, and in the event that the Trustee shall consent to the making of
such payments directly to the Holders, to pay to the Trustee any amount due
to it for the reasonable compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel, and any other amounts due the Trustee
under Section 7.07 hereof. To the extent that the payment of any such
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 7.07 hereof
out of the estate in any such proceeding, shall be denied for any reason,
payment of the same shall be secured by a Lien on, and shall be paid out of,
any and all distributions, dividends, money, securities and other properties
that the Holders may be entitled to receive in such proceeding whether in
liquidation or under any plan of reorganization or arrangement or otherwise.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan
of reorganization, arrangement, adjustment or composition affecting the Notes
or the rights of any Holder, or to authorize the Trustee to vote in respect
of the claim of any Holder in any such proceeding.
SECTION 6.10. PRIORITIES.
If the Trustee collects any money pursuant to this Article, it
shall pay out the money in the following order:
FIRST: to the Trustee, its agents and attorneys for amounts due
under Section 7.07 hereof, including payment of all compensation,
expense and liabilities incurred, and all advances made, by the Trustee
and the costs and expenses of collection;
SECOND: to Holders for amounts due and unpaid on the Notes for
principal, premium, interest and Special Interest, if any, ratably,
without preference or priority of
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any kind, according to the amounts due and payable on the Notes for
principal, premium, interest and Special Interest, if any, respectively;
and
THIRD: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any
payment to Holders 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 a Trustee, a court in its discretion may require the filing
by any party litigant in the suit of an undertaking to pay the costs of the
suit, and the court in its discretion may assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in the suit, having
due regard to the merits and good faith of the claims or defenses made by the
party litigant. This Section does not apply to a suit by the Trustee, a suit
by a Holder pursuant to Section 6.07 hereof, or a suit by Holders of more
than 10% in principal amount of the then outstanding Notes.
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing,
the Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in its exercise, as a
prudent man would exercise or use under the circumstances in the conduct of
his own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by
the express provisions of this Indenture and the Trustee need perform
only those duties that are specifically set forth in this Indenture and
no others, and no implied covenants or obligations shall be read into
this Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness
of the opinions expressed
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therein, upon certificates or opinions furnished to the Trustee and
conforming to the requirements of this Indenture. However, the Trustee
shall examine the certificates and opinions to determine whether or not
they conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liabilities for its
own negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b)
of this Section;
(ii) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer, unless it is proved that
the Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 6.05 hereof.
(d) Whether or not therein expressly so provided, every
provision of this Indenture that in any way relates to the Trustee is subject
to paragraphs (a), (b), and (c) of this Section.
(e) No provision of this Indenture shall require the
Trustee to expend or risk its own funds or incur any liability. The Trustee
shall be under no obligation to exercise any of its rights and powers under
this Indenture at the request of any Holders, unless such Holder shall have
offered to the Trustee security and indemnity satisfactory to it against any
loss, liability or expense.
(f) The Trustee shall not be liable for interest on any
money received by it except as the Trustee may agree in writing with the
Company. Money held in trust by the Trustee need not be segregated from other
funds except to the extent required by law.
SECTION 7.02. RIGHTS OF TRUSTEE.
(a) The Trustee may conclusively rely 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
require an Officers' Certificate or an Opinion of Counsel or both. The
Trustee shall not be liable for any action it takes or omits to take in good
faith in reliance on such Officers' Certificate or Opinion of Counsel. The
Trustee may consult with counsel and the written advice of such counsel or
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any Opinion of Counsel shall be full and complete authorization and
protection from liability in respect of any action taken, suffered or omitted
by it hereunder in good faith and in reliance thereon.
(c) The Trustee may act through its attorneys and agents
and shall not be responsible for the misconduct or negligence of any agent
appointed with due care.
(d) The Trustee shall not be liable for any action it takes
or omits to take in good faith that it believes to be authorized or within
the rights or powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this
Indenture, any demand, request, direction or notice from the Company shall be
sufficient if signed by an Officer of the Company.
(f) Except in connection with compliance with TIA Sections
310 and 311, the Trustee shall only be charged with knowledge of Responsible
Officers.
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become
the owner or pledgee of Notes and may otherwise deal with the Company or any
Affiliate of the Company with the same rights it would have if it were not
Trustee. However, in the event that the Trustee acquires any conflicting
interest it must eliminate such conflict within 90 days, apply to the SEC for
permission to continue as Trustee or resign. Any Agent may do the same with
like rights and duties. The Trustee is also subject to Sections 7.10 and
7.11 hereof.
SECTION 7.04. TRUSTEE'S DISCLAIMER.
The Trustee shall not be responsible for and makes no
representation as to the validity or adequacy of this Indenture or the Notes,
it shall not be accountable for the Company's use of the proceeds from the
Notes or any money paid to the Company or upon the Company's direction under
any provision of this Indenture, it 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 or recital herein or any
statement in the Notes or any other document in connection with the sale of
the Notes or pursuant to this Indenture other than its certificate of
authentication.
SECTION 7.05. NOTICE OF DEFAULTS.
If a Default or Event of Default occurs and is continuing and
if it is known to the Trustee, the Trustee shall mail to Holders a notice of
the Default or Event of Default
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within 90 days after it occurs. The Trustee may withhold from the Holders
notice of any continuing Default (except any Default in payment of principal
of, premium, if any, or interest on the Notes) if the Trustee determines that
withholding such notice is in the Holders' interest.
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS.
Within 60 days after each May 15 beginning with the May 15
following the date of this Indenture, and for so long as Notes remain
outstanding, the Trustee shall mail to the Holders a brief report dated as of
such reporting date that complies with TIA Section 313(a) (but if no event
described in TIA Section 313(a) has occurred within the twelve months
preceding the reporting date, no report need be transmitted). The Trustee
also shall comply with TIA Section 313(b)(2). The Trustee shall also
transmit by mail all reports as required by TIA Section 313(c).
A copy of each report at the time of its mailing to the
Holders shall be mailed to the Company and filed with the SEC and each stock
exchange on which the Notes are listed in accordance with TIA Section
313(d). The Company shall promptly notify the Trustee when the Notes are
listed on any stock exchange.
SECTION 7.07. COMPENSATION AND INDEMNITY.
The Company shall pay to the Trustee from time to time
reasonable compensation for its acceptance of this Indenture and services
hereunder. The Trustee's compensation shall not be limited by any law on
compensation of a trustee of an express trust. The Company shall reimburse
the Trustee promptly upon request for all reasonable disbursements, advances
and expenses incurred or made by it in addition to the compensation for its
services. Such expenses shall include the reasonable compensation,
disbursements and expenses of the Trustee's agents and counsel.
The Company shall indemnify the Trustee against any and all
losses, liabilities or expenses incurred by it arising out of or in
connection with the acceptance or administration of its duties under this
Indenture, including the costs and expenses of enforcing this Indenture
against the Company (including this Section 7.07) and defending itself
against any claim (whether asserted by the Company or any 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 or bad faith. The Trustee
shall notify the Company promptly of any claim for which it may seek
indemnity. Failure by the Trustee to so notify the Company shall not relieve
the Company of its obligations hereunder. The Company shall defend the claim
and the Trustee shall cooperate in the defense. The Trustee may have
separate counsel and the Company shall pay the reasonable fees and expenses
of such counsel. The Company need not pay for any settlement made without
its consent, which consent shall not be unreasonably withheld.
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The obligations of the Company under this Section 7.07 shall
survive the satisfaction and discharge of this Indenture.
To secure the Company's payment obligations in this Section,
the Trustee shall have a Lien prior to the Notes on all money or property
held or collected by the Trustee, except that held in trust to pay principal
and interest on particular Notes. Such Lien shall survive the satisfaction
and discharge of this Indenture.
When the Trustee incurs expenses or renders services after an
Event of Default specified in Section 6.01(vii) or (viii) hereof occurs, the
expenses and the compensation for the services (including the fees and
expenses of its agents and counsel) are intended to constitute expenses of
administration under applicable Bankruptcy Law.
The Trustee shall comply with the provisions of TIA Section
313(b)(2) to the extent applicable.
SECTION 7.08. REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section.
The Trustee may resign in writing at any time and be
discharged from the trust hereby created by so notifying the Company. The
Holders of a majority in principal amount of the then outstanding Notes may
remove the Trustee by so notifying the Trustee and the Company in writing.
The Company may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or
an order for relief is entered with respect to the Trustee under
applicable Bankruptcy Law;
(c) a custodian or public officer takes charge of the
Trustee or its property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in
the office of Trustee for any reason, the Company shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes office,
the Holders of a majority in principal amount of the then outstanding Notes
may appoint a successor Trustee to replace the successor Trustee appointed by
the Company.
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If a successor Trustee does not take office within 60 days
after the retiring Trustee resigns or is removed, the retiring Trustee, the
Company, or the Holders of at least 10% in principal amount of the then
outstanding Notes may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
If the Trustee, after written request by any Holder who has
been a Holder for at least six months, fails to comply with Section 7.10,
such Holder may petition any court of competent jurisdiction for the removal
of the Trustee and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and
the successor Trustee shall have all the rights, powers and duties of the
Trustee under this Indenture. The successor Trustee shall mail a notice of
its succession to the Holders. The retiring Trustee shall promptly transfer
all property held by it as Trustee to the successor Trustee, PROVIDED all
sums owing to the Trustee hereunder have been paid and subject to the Lien
provided for in Section 7.07 hereof. Notwithstanding replacement of the
Trustee pursuant to this Section 7.08, the Company's obligations under
Section 7.07 hereof shall continue for the benefit of the retiring Trustee.
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates, merges or converts into, or
transfers all or substantially all of its corporate trust business to,
another corporation, the successor corporation without any further act shall
be the successor Trustee.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.
There shall at all times be a Trustee hereunder that is a
corporation organized and doing business under the laws of the United States
of America or of any state thereof that is authorized under such laws to
exercise corporate trustee power, that is subject to supervision or
examination by federal or state authorities and that has, or is a direct or
indirect wholly-owned subsidiary of a bank holding company that has, a
combined capital and surplus of at least $100.0 million as set forth in its
most recent published annual report of condition.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a)(1), (2) and (5). The Trustee is subject
to TIA Section 310(b).
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST
COMPANY.
The Trustee is subject to TIA Section 311(a), excluding any
creditor relationship
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listed in TIA Section 311(b). A Trustee who has resigned or been removed
shall be subject to TIA Section 311(a) to the extent indicated therein.
ARTICLE EIGHT
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.01. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT
DEFEASANCE.
The Company may, at the option of the Board of Directors
evidenced by Board Resolutions set forth in an Officers' Certificate, at any
time, elect to have either Section 8.02 or 8.03 hereof be applied to all
outstanding Notes upon compliance with the conditions set forth below in this
Article Eight.
SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE.
Upon the Company's exercise under Section 8.01 hereof of the
option applicable to this Section 8.02, the Company shall, subject to the
satisfaction of the conditions set forth in Section 8.04 hereof, be deemed to
have been discharged from its obligations with respect to all outstanding
Notes on the date the conditions set forth below are satisfied (hereinafter,
"LEGAL DEFEASANCE"). For this purpose, Legal Defeasance means that the
Company shall be deemed to have paid and discharged the entire Indebtedness
represented by the outstanding Notes, which shall thereafter be deemed to be
"outstanding" only for the purposes of Section 8.05 hereof and the other
Sections of this Indenture referred to in (i) below, and to have satisfied
all its other obligations under such Notes and this Indenture (and the
Trustee, on demand of and at the expense of the Company, shall execute proper
instruments acknowledging the same), except for (i) the obligations of the
Company under Sections 2.03, 2.04, 2.06 and 2.07, (ii) the rights, powers,
trusts, duties and immunities of the Trustee and the Company's obligations in
connection therewith and (iii) the Legal Defeasance provisions of this
Indenture. Subject to compliance with this Article Eight, the Company may
exercise its option under this Section 8.02 notwithstanding the prior
exercise of its option under Section 8.03 hereof.
SECTION 8.03. COVENANT DEFEASANCE.
Upon the Company's exercise under Section 8.01 hereof of the
option applicable to this Section 8.03, the Company shall, subject to the
satisfaction of the conditions set forth in Section 8.04 hereof, be released
from its obligations under Sections 3.09, 3.10, 4.03, 4.05, 4.07, 4.08, 4.09,
4.10, 4.11, 4.12, 4.14, 4.15 and 5.01(iii) hereof with respect to the
out-
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standing Notes on and after the date the conditions set forth in Section 8.04
are satisfied (hereinafter, "COVENANT DEFEASANCE"), and the Notes shall
thereafter be deemed not "outstanding" for the purposes of any direction,
waiver, consent or declaration or act of the Holders (and the consequences of
any thereof) in connection with such Sections, but shall continue to be
deemed "outstanding" for all other purposes hereunder (it being understood
that such Notes shall not be deemed outstanding for accounting purposes).
For this purpose, Covenant Defeasance means that, with respect to the
outstanding Notes, the Company may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any
such Section, whether directly or indirectly, by reason of any reference
elsewhere herein to any such covenant or by reason of any reference in any
such covenant to any other provision herein or in any other document and such
omission to comply shall not constitute a Default or an Event of Default
under Section 6.01 hereof, but, except as specified above, the remainder of
this Indenture and such Notes shall be unaffected thereby.
SECTION 8.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.
The following shall be the conditions to the application of
either Section 8.02 or 8.03 hereof to the outstanding Notes:
(i) the Company must irrevocably deposit with the Trustee,
in trust, for the benefit of the Holders, cash in U.S. dollars,
non-callable Government Securities, or a combination thereof, in such
amounts as will be sufficient, in the written opinion of a nationally
recognized firm of independent public accountants delivered to the
Trustee, to pay the principal of, premium, if any, and interest and
Special Interest, if any, on the outstanding Notes on the 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 this Indenture, there has been
a change in the applicable federal income tax law, in either case to the
effect that, and based thereon such Opinion of Counsel shall confirm
that, the Holders 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
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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 effective
date of such defeasance;
(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 this 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, at or
prior to the effective date of such defeasance an Opinion of Counsel to
the effect that at the effective date of such defeasance, 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 shall have delivered to the Trustee an
Opinion of Counsel to the effect that funds deposited under (i) above
(1) will not violate the Investment Company Act of 1940 and (2) subject
to customary qualifications, (a) will not be subject to the effect of
Section 547 of the United States Bankruptcy Code and (b) after the 91st
day following the deposit, will not be part of any "estate" formed by
the bankruptcy or reorganization of the Company or any Subsidiary
Guarantor or subject to the "automatic stay" under the United States
Bankruptcy Code or, in the case of Covenant Defeasance, will be subject
to a first priority Lien in favor of the Trustee for the benefit of the
Holders;
(viii) 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 or any Subsidiary Guarantor with the intent of defeating,
hindering, delaying or defrauding creditors of the Company or any
Subsidiary Guarantor or others; and
(ix) 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
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the Legal Defeasance or the Covenant Defeasance have been complied
with.
SECTION 8.05. DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE
HELD IN TRUST; OTHER MISCELLANEOUS PROVISIONS.
Subject to Section 8.06 hereof, all money and non-callable
Government Securities (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 hereof in respect of
the outstanding Notes shall be held in trust and applied by the Trustee, in
accordance with the provisions of such Notes and this Indenture, to the
payment, either directly or through any Paying Agent (including the Company
acting as Paying Agent) as the Trustee may determine, to the Holders of such
Notes of all sums due and to become due thereon in respect of principal,
premium, if any, and interest, but such money need not be segregated from
other funds except to the extent required by law.
The Company shall pay and indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against the cash or
non-callable Government Securities deposited pursuant to Section 8.04 hereof
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 outstanding Notes.
Anything in this Article Eight to the contrary
notwithstanding, the Trustee shall deliver or pay to the Company from time to
time upon the request of the Company any money or non-callable Government
Securities held by it as provided in Section 8.04 hereof which, in the
opinion of a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the Trustee (which
may be the opinion delivered under Section 8.04(a) hereof), are in excess of
the amount thereof that would then be required to be deposited to effect an
equivalent Legal Defeasance or Covenant Defeasance.
SECTION 8.06. REPAYMENT TO COMPANY.
Any money deposited with the Trustee or any Paying Agent, or
then held by the Company, in trust for the payment of the principal of,
premium, if any, or interest on any Note and remaining unclaimed for two
years after such principal, and premium, if any, or interest has become due
and payable shall be paid to the Company on its request or (if then held by
the Company) shall be discharged from such trust; and the Holder of such Note
shall thereafter, as a secured creditor, look only to the Company for payment
thereof, unless an abandoned property law designates another Person, and all
liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company as trustee thereof, shall thereupon
cease; PROVIDED, HOWEVER, that the Trustee or such Paying Agent, before being
required to make any such repayment, may at the expense of the Company cause
to be pub-
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lished once, in the New York Times and The Wall Street Journal (national
edition), notice that such money remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days from the date of such
notification or publication, any unclaimed balance of such money then
remaining will be repaid to the Company.
SECTION 8.07. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any United
States dollars or non-callable Government Securities in accordance with
Section 8.02 or 8.03 hereof, 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 Company's obligations under
this Indenture and the Notes shall be revived and reinstated as though no
deposit had occurred pursuant to Section 8.02 or 8.03 hereof 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 hereof, as the case may be; PROVIDED,
HOWEVER, that, if the Company makes any payment of principal of, premium, if
any, or interest on any Note following the reinstatement of its obligations,
the Company shall be subrogated to the rights of the Holders of such Notes to
receive such payment from the money held by the Trustee or Paying Agent.
ARTICLE NINE
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.01. WITHOUT CONSENT OF HOLDERS.
Notwithstanding Section 9.02 of this Indenture, the Company,
the Subsidiary Guarantors and the Trustee may amend or supplement this
Indenture, the Guarantees of the Notes or the Notes without the consent of
any Holder:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or in
place of certificated Notes;
(c) to provide for the assumption of the Company's
obligations to Holders in the case of a merger or acquisition pursuant
to Section 5.01 hereof;
(d) to make any change that would not adversely affect the
rights hereunder of any Holder;
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(e) to allow any Subsidiary to execute a supplemental
indenture and/or a Subsidiary Guarantee with respect to the Notes
pursuant to Article Ten hereof; and
(f) to release any Subsidiary Guarantor from any of its
obligations under its Subsidiary Guarantee pursuant to Article Ten
hereof.
SECTION 9.02. WITH CONSENT OF HOLDERS.
Except as provided below in this Section 9.02, the Company,
the Subsidiary Guarantors and the Trustee may amend or supplement this
Indenture (including Sections 3.09, 3.10 and 4.10 hereof), the Guarantees of
the Notes and the Notes with the consent of the Holders of at least a
majority in principal amount of the Notes (including Additional Notes, if
any) then outstanding voting as a single class (including consents obtained
in connection with a tender offer or exchange offer for, or purchase of, the
Notes), and, subject to Sections 6.04 and 6.07 hereof, any existing Default
or Event of Default (other than a Default or Event of Default in the payment
of the principal of, premium, if any, or interest on the Notes, except a
payment default resulting from an acceleration that has been rescinded) or
compliance with any provision of this Indenture, the Guarantees of the Notes
or the Notes may be waived with the consent of the Holders of a majority in
principal amount of the then outstanding Notes (including Additional Notes,
if any) voting as a single class (including consents obtained in connection
with a tender offer or exchange offer for, or purchase of, the Notes),
PROVIDED that:
(A) no such modification or amendment may, without the
consent of the Holders of 75% in aggregate principal amount of such
series of Notes then outstanding, amend or modify the obligation of the
Company under Section 3.10 hereof or in the obligations of the Company
to make a Net Proceeds Offer or the definitions related thereto under
Sections 3.09 and 4.10 hereof that could adversely affect the rights of
any Holder; and
(B) without the consent of each Holder affected, an amendment
or waiver under this Section 9.02 may not (with respect to any Notes
held by a non-consenting Holder): (i) extend the maturity of any Note;
(ii) reduce the amount, extend the due date or otherwise affect the
terms of any scheduled payment of interest (including Special Interest)
on or principal of the Notes; (iii) except as permitted by (A) above,
reduce any premium payable upon optional redemption or acceleration of
the Notes, change the date on which any Notes are subject to redemption
or otherwise alter the provisions with respect to the redemption of the
Notes; (iv) make any Note payable in money or currency other than that
stated in the Notes; (v) take any action that would subordinate the
Notes or the Subsidiary Guarantees to any other Indebtedness of the
Company or any of its Subsidiaries, respectively, except as provided
under Article 11 hereof, or otherwise affect the ranking of the Notes or
the Subsidiary Guarantees;
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(vi) reduce the percentage of Holders necessary to consent to an
amendment, supplement or waiver to this Indenture or the Notes; (vii)
impair the rights of Holders to receive payments of principal of or
premium, if any, or interest (including Special Interest) on the
Notes; (viii) release any Subsidiary Guarantor from any of its
obligations under its Subsidiary Guarantee or this Indenture, except
as permitted by Section 10.16 hereof; or (ix) 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
becomes effective, the Company shall mail to the Holders affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure
of the Company to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such amended or
supplemental Indenture or waiver.
SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment or supplement to this Indenture or the Notes
shall be set forth in an amended or supplemental Indenture that complies with
the TIA as then in effect.
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, supplement or waiver becomes effective, a
consent to it by a Holder is a continuing consent by the Holder and every
subsequent Holder of a Note or a portion of a Note that evidences the same
debt as the consenting Holder, even if notation of the consent is not made on
any Note. However, any such Holder or subsequent Holder may revoke the
consent if the Trustee receives written notice of revocation before the date
the waiver, supplement or amendment becomes effective. An amendment,
supplement or waiver becomes effective in accordance with its terms and
thereafter binds every Holder.
SECTION 9.05. NOTATION ON OR EXCHANGE OF NOTES.
The Trustee may place an appropriate notation about an
amendment, supplement or waiver on any Note thereafter authenticated. The
Company in exchange for all Notes may issue and the Trustee shall, upon
receipt of an Authentication Order, authenticate new Notes that reflect the
amendment, supplement or waiver.
Failure to make the appropriate notation or issue a new Note
shall not affect the validity and effect of such amendment, supplement or
waiver.
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SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amended or supplemental Indenture
authorized pursuant to this Article Nine if the amendment or supplement does
not adversely affect the rights, duties, liabilities or immunities of the
Trustee. The Company may not sign an amendment or supplemental indenture
until the Board of Directors approves it. In executing any amended or
supplemental indenture, the Trustee shall be entitled to receive and (subject
to Section 7.01 hereof) shall be fully protected in relying upon, in addition
to the documents required by Section 11.04 hereof, an Officer's Certificate
and an Opinion of Counsel stating that the execution of such amended or
supplemental indenture is authorized or permitted by this Indenture.
ARTICLE TEN
SUBSIDIARY GUARANTEES
SECTION 10.01. SUBSIDIARY GUARANTEE.
Subject to this Article Ten, each of the Subsidiary Guarantors
hereby, jointly and severally, unconditionally Guarantees to each Holder of a
Note authenticated and delivered by the Trustee and to the Trustee and its
successors and assigns, irrespective of the validity and enforceability of
this Indenture, the Notes or the obligations of the Company hereunder or
thereunder, that: (a) the principal of and interest, including Special
Interest, on the Notes will be promptly paid in full when due, whether at
maturity, by acceleration, redemption or otherwise, and interest on the
overdue principal of and interest on the Notes (including Special Interest),
if any, if lawful, and all other obligations of the Company to the Holders or
the Trustee hereunder or thereunder will be promptly paid in full or
performed, all in accordance with the terms hereof and thereof; and (b) in
case of any extension of time of payment or renewal of any Notes or any of
such other obligations, that same will be promptly paid in full when due or
performed in accordance with the terms of the extension or renewal, whether
at stated maturity, by acceleration or otherwise. Failing payment when due
of any amount so guaranteed or any performance so guaranteed for whatever
reason, the Subsidiary Guarantors shall be jointly and severally obligated to
pay the same immediately. Each Subsidiary Guarantor agrees that this is a
guarantee of payment and not a guarantee of collection.
The Subsidiary Guarantors hereby agree that their obligations
hereunder shall be unconditional, irrespective of the validity, regularity or
enforceability of the Notes or this Indenture, the absence of any action to
enforce the same, any waiver or consent by any Holder of the Notes with respect
to any provisions hereof or thereof, the recovery of any judgment against the
Company, any action to enforce the same or any other circumstance which might
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otherwise constitute a legal or equitable discharge or defense of a
Subsidiary Guarantor. Each Subsidiary Guarantor hereby waives diligence,
presentment, demand of payment, filing of claims with a court in the event of
insolvency or bankruptcy of the Company, any right to require a proceeding
first against the Company, protest, notice and all demands whatsoever and
covenant that this Guarantee shall not be discharged except by complete
performance of the obligations contained in the Notes and this Indenture.
If any Holder or the Trustee is required by any court or
otherwise to return to the Company, the Subsidiary Guarantors or any
custodian, trustee, liquidator or other similar official acting in relation
to the Company or the Subsidiary Guarantors, any amount paid by either to the
Trustee or such Holder, this Guarantee, to the extent theretofore discharged,
shall be reinstated in full force and effect.
Each Subsidiary Guarantor agrees that it shall not be entitled
to any right of subrogation in relation to the Holders in respect of any
obligations Guaranteed hereby until payment in full of all obligations
Guaranteed hereby. Each Subsidiary Guarantor further agrees that, as between
the Subsidiary Guarantors, on the one hand, and the Holders and the Trustee,
on the other hand, (x) the maturity of the obligations Guaranteed hereby may
be accelerated as provided in Article Six hereof for the purposes of this
Guarantee, notwithstanding any stay, injunction or other prohibition
preventing such acceleration in respect of the obligations Guaranteed hereby,
and (y) in the event of any declaration of acceleration of such obligations
as provided in Article Six hereof, such obligations (whether or not due and
payable) shall forthwith become due and payable by the Subsidiary Guarantors
for the purpose of this Guarantee. The Subsidiary Guarantors shall have the
right to seek contribution from any non-paying Subsidiary Guarantor of the
Notes so long as the exercise of such right does not impair the rights of the
Holders under this Guarantee.
SECTION 10.02. AGREEMENT TO SUBORDINATE.
The payment by any Subsidiary Guarantor of principal of, and
premium, if any, and interest (including Special Interest) on the Notes under
its Subsidiary Guarantee (collectively, the "SUBSIDIARY GUARANTEE
INDEBTEDNESS"), will be subordinated to the prior payment in full in cash of
the principal of, and premium, if any, and accrued and unpaid interest on,
and all other amounts owing in respect of, all existing and future Subsidiary
Guarantor Senior Indebtedness.
SECTION 10.03. LIMITATION ON LIABILITY OF SUBSIDIARY GUARANTORS.
Each Subsidiary Guarantor, and by its acceptance of Notes, each
Holder, hereby confirms that it is the intention of all such parties that the
Guarantee of the Notes of such Subsidiary Guarantor not constitute a fraudulent
transfer or conveyance for purposes of
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Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent
Transfer Act or any similar federal or state law to the extent applicable to
any Guarantee. To effectuate the foregoing intention, the Trustee, the
Holders and the Subsidiary Guarantors hereby irrevocably agree that if the
obligations of any Subsidiary Guarantor hereunder otherwise would be subject
to avoidance under any such law, taking into consideration such Subsidiary
Guarantor's (i) rights of reimbursement and indemnity from the Company with
respect to amounts paid by such Subsidiary Guarantor, (ii) rights of
subrogation to the rights of the Holders (including pursuant to Section
10.07), and (iii) rights of contribution from each other Subsidiary Guarantor
(including pursuant to Section 10.01), then such obligations hereby are
reduced to the largest amount that would make them not subject to such
avoidance. Any Person asserting that any Subsidiary Guarantor's obligations
are so avoidable shall have the burden (including the burden of production
and of persuasion) of proving (a) that, without giving effect to this Section
10.03, such Subsidiary Guarantor's obligations hereunder would be avoidable
and (b) the extent to which such obligations are reduced by operation of this
Section 10.03.
SECTION 10.04. LIQUIDATION; DISSOLUTION; BANKRUPTCY.
Upon any distribution to creditors of any Subsidiary Guarantor
of assets of any kind or character of such Subsidiary Guarantor in a total or
partial liquidation or dissolution of such Subsidiary Guarantor or in a
bankruptcy, reorganization, insolvency, receivership or similar proceeding
relating to such Subsidiary Guarantor, whether voluntary or involuntary
(including any assignment for the benefit of creditors and proceedings for
marshaling of assets and liabilities of such Subsidiary Guarantor):
(1) the holders of Subsidiary Guarantor Senior Indebtedness
then outstanding will be entitled to payment in full in cash (including
interest accruing subsequent to the filing of a petition for bankruptcy
or insolvency at the rate specified in the document relating to the
applicable Subsidiary Guarantor Senior Indebtedness, whether or not such
interest is an allowed claim enforceable against such Subsidiary
Guarantor under applicable law) before the Holders are entitled to
receive any payment (other than payments made from a trust previously
established pursuant to Article Eight hereof) on or with respect to the
Subsidiary Guarantee Indebtedness; and
(2) until the holders of all Subsidiary Guarantor Senior
Indebtedness receive payment in full, any distribution to which the
Holders would be entitled will be made to the holders of the Subsidiary
Guarantor Senior Indebtedness.
Regardless of anything to the contrary herein, nothing shall
prevent (a) any payment by the Trustee to the Holders of amounts deposited with
it pursuant to Article Eight or (b) any payment by the Trustee or the Paying
Agent as permitted by Section 10.10 hereof. Nothing contained in this Article
Ten will limit the right of the Trustee or the Holders to take
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action to accelerate the maturity of the Notes pursuant to Section 6.02
hereof, to receive or retain Permitted Junior Securities or to pursue any
rights or remedies hereunder.
SECTION 10.05. SUBSIDIARY GUARANTORS NOT TO MAKE PAYMENTS WITH
RESPECT TO GUARANTEES IN CERTAIN CIRCUMSTANCES.
Upon the occurrence of any default beyond the applicable grace
period in the payment of any principal of or interest on or other amounts due
on any Designated Senior Indebtedness of any Subsidiary Guarantor (a "PAYMENT
DEFAULT"), no payment of any kind or character shall be made by such
Subsidiary Guarantor (or by any other Person on its or their behalf) with
respect to the Subsidiary Guarantee Indebtedness unless and until (i) such
Payment Default shall have been cured or waived in accordance with the
instruments governing such Indebtedness or shall have ceased to exist, (ii)
such Designated Senior Indebtedness has been discharged or paid in full in
cash in accordance with the instruments governing such Indebtedness or (iii)
the benefits of this sentence have been waived by the holders of such
Designated Senior Indebtedness or their Representative immediately after
which the Company must resume making any and all required payments, including
missed payments, in respect of its obligations under the Notes.
Upon (1) the occurrence and continuance of an event of default
(other than a Payment Default) relating to Designated Senior Indebtedness, as
such event of default is defined therein or in the instrument or agreement
under which it is outstanding, which event of default, pursuant to the
instruments governing such Designated Senior Indebtedness, entitles the
holders (or a specified portion of the holders) of such Designated Senior
Indebtedness or their Representatives to immediately accelerate without
further notice (except such notice as may be required to effect such
acceleration) the maturity of such Designated Senior Indebtedness (a
"NON-PAYMENT DEFAULT") and (2) the receipt by the Trustee and the Company
from the trustee or other Representative of holders of such Designated Senior
Indebtedness of written notice (a "PAYMENT BLOCKAGE NOTICE") of such
occurrence, no payment is permitted to be made by any Subsidiary Guarantor
(or by any other Person on its or their behalf) in respect of the Subsidiary
Guarantee Indebtedness for a period (a "PAYMENT BLOCKAGE PERIOD") commencing
on the date of receipt by the Trustee of such notice and ending on the
earliest to occur of the following events (subject to any blockage of
payments that may then be in effect due to a Payment Default on Designated
Senior Indebtedness): (w) such Non-payment Default has been cured or waived
or has ceased to exist; (x) a period of 179 consecutive days, commencing on
the date such Payment Blockage Notice is received by the Trustee, has
elapsed; (y) such Payment Blockage Period has been terminated by written
notice to the Trustee from the trustee or other Representative of holders of
such Designated Senior Indebtedness, whether or not such Non-payment Default
has been cured or waived or has ceased to exist; and (z) such Designated
Senior Indebtedness has been discharged or paid in full in cash, immediately
after which, in the case of clause (w), (x), (y) or (z), the Subsidiary
Guarantor must
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resume making any and all required payments, including missed payments, in
respect of its obligations under the Notes. Notwithstanding the foregoing,
(i) not more than one Payment Blockage Period may be commenced in any period
of 365 consecutive days and (ii) no default or event of default with respect
to the Designated Senior Indebtedness of the Subsidiary Guarantor that was
the subject of a Payment Blockage Notice which existed or was continuing on
the date of the giving of any Payment Blockage Notice shall be or serve as
the basis for the giving of a subsequent Payment Blockage Notice whether or
not within a period of 365 consecutive days unless such default or event of
default shall have been cured or waived for a period of at least 90
consecutive days after such date.
Regardless of anything to the contrary herein, nothing shall
prevent (a) any payment by the Trustee to the Holders of amounts deposited
with it pursuant to Article Eight or (b) any payment by the Trustee or the
Paying Agent as permitted by Section 10.10 hereof. Nothing contained in this
Article Ten will limit the right of the Trustee or the Holders to take action
to accelerate the maturity of the Notes pursuant to Section 6.02 hereof, to
receive or retain Permitted Junior Securities or to pursue any rights or
remedies hereunder.
SECTION 10.06. WHEN DISTRIBUTION MUST BE PAID OVER.
In the event that any payment or distribution of assets of any
Subsidiary Guarantor, whether in cash, property or securities, shall be
received by the Trustee or the Holders at a time when such payment or
distribution is prohibited by Section 10.04 or 10.05 hereof, such payment or
distribution shall be segregated from other funds or assets and held in trust
for the benefit of the holders of Subsidiary Guarantor Senior Indebtedness of
such Subsidiary Guarantor and shall be paid or delivered by the Trustee or
such Holders, as the case may be, to the holders of the Subsidiary Guarantor
Senior Indebtedness of such Subsidiary Guarantor remaining unpaid or
unprovided for or their Representative or Representatives, or to the trustee
or trustees under any indenture pursuant to which any instruments evidencing
any of such Subsidiary Guarantor Senior Indebtedness of such Subsidiary
Guarantor may have been issued, ratably according to the aggregate amounts
remaining unpaid on account of the Subsidiary Guarantor Senior Indebtedness
of such Subsidiary Guarantor held or represented for application to the
payment of all Subsidiary Guarantor Senior Indebtedness of such Subsidiary
Guarantor remaining unpaid, to the extent necessary to pay or to provide for
the payment in full in cash of all such Subsidiary Guarantor Senior
Indebtedness after giving effect to any concurrent payment or distribution to
the holders of such Subsidiary Guarantor Senior Indebtedness.
SECTION 10.07. SUBROGATION.
After, but not before, all Subsidiary Guarantor Senior
Indebtedness is paid in full in cash and until the Notes are paid in full,
Holders shall be subrogated to the rights of
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holders of Subsidiary Guarantor Senior Indebtedness to receive distributions
applicable to Subsidiary Guarantor Senior Indebtedness to the extent that
distributions otherwise payable to the Holders have been applied to the
payment of Subsidiary Guarantor Senior Indebtedness. A distribution made
under this Article to holders of Subsidiary Guarantor Senior Indebtedness
which otherwise would have been made to Holders is not, as between any
Subsidiary Guarantor and Holders, a payment by any Subsidiary Guarantor on
Subsidiary Guarantor Senior Indebtedness.
SECTION 10.08. SUBORDINATION MAY NOT BE IMPAIRED BY
SUBSIDIARY GUARANTORS.
No right of any holder of Subsidiary Guarantor Senior
Indebtedness to enforce the subordination of the indebtedness evidenced by
the Notes and the Guarantees of the Notes shall be impaired by any act or
failure to act by any Subsidiary Guarantor or by its or their failure to
comply with this Indenture.
SECTION 10.09. DISTRIBUTION OR NOTICE TO REPRESENTATIVE.
Whenever a distribution is to be made or a notice given to
holders of Subsidiary Guarantor Senior Indebtedness, the distribution may be
made and the notice given to their Representatives.
SECTION 10.10. RIGHTS OF TRUSTEE AND PAYING AGENT.
The Trustee or Paying Agent may continue to make payments on
the Notes and the related Guarantees of the Notes until it receives written
notice of facts that would cause a payment of principal of or interest on the
Notes and the Guarantees of the Notes to violate this Article. Only a
Subsidiary Guarantor, a Representative or a holder of an issue of Subsidiary
Guarantor Senior Indebtedness that has no Representative may give the notice.
The Trustee shall be entitled to rely on the delivery to it of
a written notice by a person representing himself to be a holder of
Subsidiary Guarantor Senior Indebtedness (or a Representative on behalf of
such holder) to establish that such notice has been given by a holder of
Subsidiary Guarantor Senior Indebtedness or a Representative on behalf of any
such holder. In the event that the Trustee determines in good faith that
further evidence is required with respect to the right of any person who is a
holder of Subsidiary Guarantor Senior Indebtedness to participate in any
payment or distribution pursuant to this Article, the Trustee may request
such person to furnish evidence to the reasonable satisfaction of the Trustee
as to the amount of Subsidiary Guarantor Senior Indebtedness held by such
person, the extent to which such person is entitled to participate in such
payment or distribution and any other facts pertinent to the rights of such
person under this Article, and if such evidence is not furnished the
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Trustee may defer any payment to such person pending judicial determination
as to the right of such person to receive such payment or until such time as
the Trustee shall be otherwise satisfied as to the right of such person to
receive such payment.
The Trustee in its individual or any other capacity may hold
Subsidiary Guarantor Senior Indebtedness with the same rights it would have
if it were not Trustee. Any Agent may do the same with like rights.
The Trustee shall not be deemed to owe any fiduciary duty to
the holders of Subsidiary Guarantor Senior Indebtedness and shall not be
liable to any such holder if it shall mistakenly pay over or distribute to
Holders, any Subsidiary Guarantor or any other person money or assets to
which any holders of Subsidiary Guarantor Senior Indebtedness shall be
entitled by virtue of this Article or otherwise.
SECTION 10.11. OFFICERS' CERTIFICATE.
If there occurs an event referred to in Section 10.04 or
10.05, the relevant Subsidiary Guarantor shall promptly give to the Trustee
an Officers' Certificate (on which the Trustee may conclusively rely)
identifying all holders of Subsidiary Guarantor Senior Indebtedness or their
Representatives and the principal amount of Subsidiary Guarantor Senior
Indebtedness then outstanding held by each such holder and stating the
reasons why such Officers' Certificate is being delivered to the Trustee.
SECTION 10.12. OBLIGATION OF SUBSIDIARY GUARANTORS
UNCONDITIONAL.
Nothing contained in this Article Ten or elsewhere in this
Indenture, in any Note or in any Guarantee of a Note is intended to or shall
impair, as between the Subsidiary Guarantors, their respective creditors
other than holders of Subsidiary Guarantor Senior Indebtedness and the
Holders, the obligation of the Subsidiary Guarantors, which is absolute and
unconditional, to pay to the Holders the principal of and interest on the
Notes as and when the same shall become due and payable in accordance with
the terms of the Guarantees with respect to the Notes, or is intended to or
shall affect the relative rights of the Holders and creditors of the
Subsidiary Guarantors other than the holders of the Subsidiary Guarantor
Senior Indebtedness, nor shall anything herein or therein prevent the Trustee
or the Holder of any Note from exercising all remedies otherwise permitted by
applicable law upon default under this Indenture, subject to the rights, if
any, under this Article Ten of the holders of Subsidiary Guarantor Senior
Indebtedness in respect of cash, property or securities of the Subsidiary
Guarantors received upon the exercise of any such remedy. Upon any
distribution of assets of any Subsidiary Guarantor referred to in this
Article Ten, the Trustee, subject to the provisions of Sections 7.01 and
7.02, and the Holders shall be entitled to rely upon any order
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or decree by any court of competent jurisdiction in which such dissolution,
winding up, liquidation or reorganization proceedings are pending, or a
certificate of the liquidating trustee or agent or other person making any
distribution to the Trustee or the Holders, for the purpose of ascertaining
the persons entitled to participate in such distribution, the holders of the
Subsidiary Guarantor Senior Indebtedness and other indebtedness of the
Subsidiary Guarantors, the amount thereof or payable thereon, the amount or
amounts paid or distributed thereon and all other facts pertinent thereto or
to this Article Ten. Nothing contained in this Article Ten or elsewhee in
this Indenture, in any Note or in any Guarantee of any Note is intended to or
shall affect the obligation of the Subsidiary Guarantors to make, or prevent
the Subsidiary Guarantors from making, at any time except during the pendency
of any dissolution, winding up, liquidation or reorganization proceeding, and
except during the continuance of any default specified in Section 10.05 (not
cured or waived), payments at any time of the principal or of interest on the
Notes.
SECTION 10.13. ARTICLE TEN NOT TO PREVENT EVENTS OF DEFAULT.
The failure to make a payment of principal of or interest on
the Notes by reason of any provision of this Article shall not be construed
as preventing the occurrence of an Event of Default under Section 6.01.
SECTION 10.14. EXECUTION AND DELIVERY OF GUARANTEE.
To evidence its Guarantee of the Notes set forth in Section
10.01, each Subsidiary Guarantor hereby agrees that a notation of such
Guarantee substantially in the form included in Exhibit E shall be endorsed
by an Officer of such Subsidiary Guarantor, as applicable, on each Note
authenticated and delivered by the Trustee and that this Indenture shall be
executed on behalf of such Subsidiary Guarantor by its respective President
or one of its respective Vice Presidents.
Each Subsidiary Guarantor hereby agrees that its Guarantee of
the Notes set forth in Section 10.01 shall remain in full force and effect
notwithstanding any failure to endorse on each Note a notation of such
Guarantee.
If an Officer whose signature is on this Indenture or on the
Guarantee no longer holds that office at the time the Trustee authenticates
the Note on which a Guarantee is endorsed, the Guarantee shall be valid
nevertheless.
The delivery of any Note by the Trustee, after the
authentication thereof hereunder, shall constitute due delivery of the
Guarantee set forth in this Indenture on behalf of the Subsidiary Guarantors.
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In the event that the Company creates or acquires any new
Subsidiaries subsequent to the date of this Indenture, if required by Section
4.16 hereof, the Company shall cause such Subsidiaries to execute
supplemental indentures to this Indenture and Guarantees of the Notes in
accordance with Section 4.16 hereof and this Article Ten, to the extent
applicable.
SECTION 10.15. SUBSIDIARY GUARANTORS MAY CONSOLIDATE, ETC.,
ON CERTAIN TERMS.
No Subsidiary Guarantor may consolidate with or merge with or
into (whether or not such Subsidiary Guarantor is the surviving Person)
another Person whether or not affiliated with such Subsidiary Guarantor
unless:
(a) subject to Section 10.16 hereof, the Person formed by
or surviving any such consolidation or merger (if other than such
Subsidiary Guarantor) assumes all the obligations of such Subsidiary
Guarantor, pursuant to a supplemental indenture, in form and substance
reasonably satisfactory to the Trustee, under the Notes, this
Indenture and the Registration Rights Agreement on the terms set forth
herein or therein;
(b) immediately after giving effect to such transaction, no
Default exists; and
(c) immediately after giving effect to such transaction, the
Coverage Ratio Incurrence Condition would be met.
In case of any such consolidation, merger, sale or conveyance
and upon the assumption by the successor Person, by supplemental indenture,
executed and delivered to the Trustee and satisfactory in form to the
Trustee, of the Guarantee endorsed upon the Notes and the due and punctual
performance of all of the covenants and conditions of the Notes, this
Indenture and the Registration Rights Agreement to be performed by the
Subsidiary Guarantor, such successor Person shall succeed to and be
substituted for the Subsidiary Guarantor with the same effect as if it had
been named herein as a Subsidiary Guarantor. Such successor Person thereupon
may cause to be signed any or all of the Guarantees to be endorsed upon all
of the Notes issuable hereunder which theretofore shall not have been signed
by the Company and delivered to the Trustee. All the Guarantees so issued
shall in all respects have the same legal rank and benefit under this
Indenture as the Guarantees theretofore and thereafter issued in accordance
with the terms of this Indenture as though all of such Guarantees had been
issued at the date of the execution hereof.
Except as set forth in Articles Four and Five hereof, and
notwithstanding clause (a) above, nothing contained in this Indenture or in any
of the Notes shall prevent any
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consolidation or merger of a Subsidiary Guarantor with or into the Company or
another Subsidiary Guarantor, or shall prevent any sale or conveyance of the
property of a Subsidiary Guarantor as an entirety or substantially as an
entirety to the Company or another Subsidiary Guarantor.
SECTION 10.16. RELEASES FOLLOWING SALE OF ASSETS, ETC.
In the event of a sale or other disposition of all of the
assets of any Subsidiary Guarantor, by way of merger, consolidation or
otherwise, or a sale or other disposition of all of the Capital Stock of any
Subsidiary Guarantor then held by the Company and its Restricted
Subsidiaries, then such Subsidiary Guarantor will be released and relieved of
any obligations under its Subsidiary Guarantee; PROVIDED that the Net Cash
Proceeds of such sale or other disposition are applied in accordance with
Section 4.10 hereof. In addition, any Subsidiary Guarantor that is
designated as an Unrestricted Subsidiary or that otherwise ceases to be a
Subsidiary, in each case in accordance with the provisions of this Indenture,
will be released from its Subsidiary Guarantee upon effectiveness of such
designation or when it first ceases to be a Subsidiary, as the case may be.
Upon delivery by the Company to the Trustee of an Officers'
Certificate and an Opinion of Counsel to the effect that such sale, other
disposition or designation was made by the Company in accordance with the
applicable provisions of this Indenture, including without limitation Section
4.10 hereof, the Trustee shall execute any documents reasonably required in
order to evidence the release of any Subsidiary Guarantor from its
obligations under its Guarantee.
Any Subsidiary Guarantor not released from its obligations
under its Guarantee shall remain liable for the full amount of principal of
and interest on the Notes and for the other obligations of any Subsidiary
Guarantor under this Indenture as provided in this Article Ten.
ARTICLE ELEVEN
SUBORDINATION
SECTION 11.01. AGREEMENT TO SUBORDINATE.
The payment by the Company of principal of, and premium, if
any, and interest (including Special Interest) on the Notes (collectively,
the "NOTE INDEBTEDNESS"), will be subordinated to the prior payment in full
in cash of the principal of, and premium, if any, and accrued and unpaid
interest on, and all other amounts owing in respect of, all existing and
future
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Senior Indebtedness.
Money and securities held in trust pursuant to Article Eight
are not subject to the subordination provisions of this Article Eleven.
SECTION 11.02. LIQUIDATION; DISSOLUTION; BANKRUPTCY.
Upon any distribution to creditors of the Company of assets of
any kind or character of the Company in a total or partial liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company, whether voluntary
or involuntary (including any assignment for the benefit of creditors and
proceedings for marshaling of assets and liabilities of the Company):
(1) the holders of Senior Indebtedness then outstanding will
be entitled to payment in full in cash (including interest accruing
subsequent to the filing of a petition for bankruptcy or insolvency at
the rate specified in the document relating to the applicable Senior
Indebtedness, whether or not such interest is an allowed claim
enforceable against the Company under applicable law) before the Holders
are entitled to receive any payment (other than payments made from a
trust previously established pursuant to Article Eight hereof) on or
with respect to the Note Indebtedness; and
(2) until the holders of all Senior Indebtedness receive
payment in full, any distribution to which the Holders would be entitled
will be made to the holders of the Senior Indebtedness.
Regardless of anything to the contrary herein, nothing shall
prevent (a) any payment by the Trustee to the Holders of amounts deposited
with it pursuant to Article Eight or (b) any payment by the Trustee or the
Paying Agent as permitted by Section 11.10 hereof. Nothing contained in this
Article Eleven will limit the right of the Trustee or the Holders to take
action to accelerate the maturity of the Notes pursuant to Section 6.02
hereof, to receive or retain Permitted Junior Securities or to pursue any
rights or remedies hereunder.
SECTION 11.03. COMPANY NOT TO MAKE PAYMENTS WITH RESPECT TO
NOTES IN CERTAIN CIRCUMSTANCES.
Upon the occurrence of any default beyond the applicable grace
period in the payment of any principal of or interest on or other amounts due
on any Designated Senior Indebtedness of the Company (a "PAYMENT DEFAULT"),
no payment of any kind or character shall be made by the Company (or by any
other Person on its behalf) with respect to the Note Indebtedness unless and
until (i) such Payment Default shall have been cured or waived in accordance
with the instruments governing such Indebtedness or shall have ceased to
exist,
<PAGE>
-106-
(ii) such Designated Senior Indebtedness has been discharged or paid in full
in cash in accordance with the instruments governing such Indebtedness or
(iii) the benefits of this sentence have been waived by the holders of such
Designated Senior Indebtedness or their Representative immediately after
which the Company must resume making any and all required payments, including
missed payments, in respect of its obligations under the Notes.
Upon (1) the occurrence and continuance of an event of default
(other than a Payment Default) relating to Designated Senior Indebtedness, as
such event of default is defined therein or in the instrument or agreement
under which it is outstanding, which event of default, pursuant to the
instruments governing such Designated Senior Indebtedness, entitles the
holders (or a specified portion of the holders) of such Designated Senior
Indebtedness or their Representatives to immediately accelerate without
further notice (except such notice as may be required to effect such
acceleration) the maturity of such Designated Senior Indebtedness (a
"NON-PAYMENT DEFAULT") and (2) the receipt by the Trustee and the Company
from the trustee or other Representative of holders of such Designated Senior
Indebtedness of written notice (a "PAYMENT BLOCKAGE NOTICE") of such
occurrence, no payment is permitted to be made by the Company (or by any
other Person on its behalf) in respect of the Note Indebtedness for a period
(a "PAYMENT BLOCKAGE PERIOD") commencing on the date of receipt by the
Trustee of such notice and ending on the earliest to occur of the following
events (subject to any blockage of payments that may then be in effect due to
a Payment Default on Designated Senior Indebtedness): (w) such Non-payment
Default has been cured or waived or has ceased to exist; (x) a period of 179
consecutive days, commencing on the date such Payment Blockage Notice is
received by the Trustee, has elapsed; (y) such Payment Blockage Period has
been terminated by written notice to the Trustee from the trustee or other
Representative of holders of such Designated Senior Indebtedness, whether or
not such Non-payment Default has been cured or waived or has ceased to exist;
and (z) such Designated Senior Indebtedness has been discharged or paid in
full in cash, immediately after which, in the case of clause (w), (x), (y) or
(z), the Company must resume making any and all required payments, including
missed payments, in respect of its obligations under the Notes.
Notwithstanding the foregoing, (i) not more than one Payment Blockage Period
may be commenced in any period of 365 consecutive days and (ii) no default or
event of default with respect to the Designated Senior Indebtedness of the
Company that was the subject of a Payment Blockage Notice which existed or
was continuing on the date of the giving of any Payment Blockage Notice shall
be or serve as the basis for the giving of a subsequent Payment Blockage
Notice whether or not within a period of 365 consecutive days unless such
default or event of default shall have been cured or waived for a period of
at least 90 consecutive days after such date.
Regardless of anything to the contrary herein, nothing shall
prevent (a) any payment by the Trustee to the Holders of amounts deposited
with it pursuant to Article Eight or (b) any payment by the Trustee or the
Paying Agent as permitted by Section 11.10 hereof.
<PAGE>
-107-
Nothing contained in this Article Eleven will limit the right of the Trustee
or the Holders to take action to accelerate the maturity of the Notes
pursuant to Section 6.02 hereof, to receive or retain Permitted Junior
Securities or to pursue any rights or remedies hereunder.
Nothing contained in this Article Eleven will limit the right
of the Trustee or the Holders to take any action to accelerate the maturity
of the Notes pursuant to Section 6.02 or to pursue any rights or remedies
hereunder.
SECTION 11.04. ACCELERATION OF NOTES.
If payment of the Notes is accelerated because of an Event of
Default, the Company shall promptly notify holders of Senior Indebtedness of
the acceleration.
SECTION 11.05. WHEN DISTRIBUTION MUST BE PAID OVER.
In the event that any payment or distribution of assets of the
Company, whether in cash, property or securities, shall be received by the
Trustee or the Holders at a time when such payment or distribution is
prohibited by Section 11.02 or 11.03 hereof, such payment or distribution
shall be segregated from other funds or assets and held in trust for the
benefit of the holders of Senior Indebtedness of the Company and shall be
paid or delivered by the Trustee or such Holders, as the case may be, to the
holders of the Senior Indebtedness of the Company remaining unpaid or
unprovided for or their Representative or Representatives, or to the trustee
or trustees under any indenture pursuant to which any instruments evidencing
any of such Senior Indebtedness of the Company may have been issued, ratably
according to the aggregate amounts remaining unpaid on account of the Senior
Indebtedness of the Company held or represented by each, for application to
the payment of all Senior Indebtedness of the Company remaining unpaid, to
the extent necessary to pay or to provide for the payment in full in cash of
all such Senior Indebtedness after giving effect to any concurrent payment or
distribution to the holders of such Senior Indebtedness.
SECTION 11.06. NOTICE BY COMPANY.
The Company shall promptly notify the Trustee and the Paying
Agent in writing of any facts known to the Company that would cause a payment
of principal of or interest on Notes to violate this Article, but failure to
give such notice shall not affect the subordination of the Notes to the
Senior Indebtedness provided in this Article.
SECTION 11.07. SUBROGATION.
After, but not before, all Senior Indebtedness is paid in full
in cash and until the Notes are paid in full, Holders shall be subrogated to
the rights of holders of Senior Indebtedness to receive distributions
applicable to Senior Indebtedness to the extent that distri-
<PAGE>
-108-
butions otherwise payable to the Holders have been applied to the payment of
Senior Indebtedness. A distribution made under this Article to holders of
Senior Indebtedness which otherwise would have been made to Holders is not,
as between the Company and Holders, a payment by the Company on Senior
Indebtedness.
SECTION 11.08. SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY.
No right of any holder of Senior Indebtedness to enforce the
subordination of the indebtedness evidenced by the Notes shall be impaired by
any act or failure to act by the Company or by its failure to comply with
this Indenture.
SECTION 11.09. DISTRIBUTION OR NOTICE TO REPRESENTATIVE.
Whenever a distribution is to be made or a notice given to
holders of Senior Indebtedness, the distribution may be made and the notice
given to their Representatives.
SECTION 11.10. RIGHTS OF TRUSTEE AND PAYING AGENT.
The Trustee or Paying Agent may continue to make payments on
the Notes until it receives written notice of facts that would cause a
payment of principal of or interest on the Notes to violate this Article.
Only the Company, a Representative or a holder of an issue of Senior
Indebtedness that has no Representative may give the notice.
The Trustee shall be entitled to rely on the delivery to it of
a written notice by a Person representing himself to be a holder of Senior
Indebtedness (or a Representative on behalf of such holder) to establish that
such notice has been given by a holder of Senior Indebtedness or a
Representative on behalf of any such holder. In the event that the Trustee
determines in good faith that further evidence is required with respect to
the right of any Person who is a holder of Senior Indebtedness to participate
in any payment or distribution pursuant to this Article, the Trustee may
request such Person to furnish evidence to the reasonable satisfaction of the
Trustee as to the amount of Senior Indebtedness held by such Person, the
extent to which such Person is entitled to participate in such payment or
distribution and any other facts pertinent to the rights of such Person under
this Article, and if such evidence is not furnished the Trustee may defer any
payment to such Person pending judicial determination as to the right of such
Person to receive such payment or until such time as the Trustee shall be
otherwise satisfied as to the right of such Person to receive such payment.
The Trustee in its individual or any other capacity may hold
Senior Indebtedness with the same rights it would have if it were not
Trustee. Any Agent may do the same with like rights.
The Trustee shall not be deemed to owe any fiduciary duty to
the holders of
<PAGE>
-109-
Senior Indebtedness and shall not be liable to any such holder if it shall
mistakenly pay over or distribute to Holders or the Company or any other
Person money or assets to which any holders of Senior Indebtedness shall be
entitled by virtue of this Article or otherwise.
SECTION 11.11. OFFICERS' CERTIFICATE.
If there occurs an event referred to in Section 11.02 or
11.03, the Company shall promptly give to the Trustee an Officers'
Certificate (on which the Trustee may conclusively rely) identifying all
holders of Senior Indebtedness or their Representatives and the principal
amount of Senior Indebtedness then outstanding held by each such holder and
stating the reasons why such Officers' Certificate is being delivered to the
Trustee.
SECTION 11.12. OBLIGATION OF COMPANY UNCONDITIONAL.
Nothing contained in this Article Eleven or elsewhere in this
Indenture or in any Note is intended to or shall impair, as between the
Company, its creditors other than holders of Senior Indebtedness and the
Holders, the obligation of the Company, which is absolute and unconditional,
to pay to the Holders the principal of and interest on the Notes as and when
the same shall become due and payable in accordance with their terms, or is
intended to or shall affect the relative rights of the Holders and creditors
of the Company other than the holders of the Senior Indebtedness, nor shall
anything herein or therein prevent the Trustee or any Holder of any Note from
exercising all remedies otherwise permitted by applicable law upon default
under this Indenture, subject to the rights, if any, under this Article
Eleven of the holders of Senior Indebtedness in respect of cash, property or
securities of the Company received upon the exercise of any such remedy.
Upon any distribution of assets of the Company referred to in this Article
Eleven, the Trustee, subject to the provisions of Sections 7.01 and 7.02, and
the Holders shall be entitled to rely upon any order or decree by any court
of competent jurisdiction in which such dissolution, winding up, liquidation
or reorganization proceedings are pending, or a certificate of the
liquidating trustee or agent or other Person making any distribution to the
Trustee or the Holders, for the purpose of ascertaining the Persons entitled
to participate in such distribution, the holders of the Senior Indebtedness
and other indebtedness of the Company, the amount thereof or payable thereon,
the amount or amounts paid or distributed thereon and all other facts
pertinent thereto or to this Article Eleven. Nothing contained in this
Article Eleven or elsewhere in this Indenture or in any Note is intended to
or shall affect the obligation of the Company to make, or prevent the Company
from making, at any time except during the pendency of any dissolution,
winding up, liquidation or reorganzation proceeding, and except during the
continuance of any default specified in Section 11.03 (not cured or waived),
payments at any time of the principal or of interest on the Notes.
<PAGE>
-110-
SECTION 11.13. ARTICLE ELEVEN NOT TO PREVENT EVENTS OF DEFAULT.
The failure to make a payment of principal of or interest on
the Notes by reason of any provision of this Article shall not be construed
as preventing the occurrence of an Event of Default under Section 6.01.
ARTICLE TWELVE
MISCELLANEOUS
SECTION 12.01. TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies or
conflicts with the duties imposed by TIA Section 318(c), the imposed duties
shall control.
SECTION 12.02. NOTICES.
Any notice or communication by the Company, any Subsidiary
Guarantor or the Trustee to the others is duly given if in writing and
delivered in Person or mailed by first class mail (registered or certified,
return receipt requested), telex, telecopier or overnight air courier
guaranteeing next day delivery, to the others' address
If to the Company and/or any Subsidiary Guarantor:
NCI Building Systems, Inc.
7301 Fairview
Houston, Texas 77041
Telecopier No.: (713) 856-8109
Attention: Chief Financial Officer
With a copy to:
Gardere & Wynne, L.L.P.
3000 Thanksgiving Town
1601 Elm Street
Dallas, Texas 75201
Telecopier No.: (214) 999-4667
Reference: NCI Building Systems, #061908
If to the Trustee:
<PAGE>
-111-
Harris Trust Company of New York
Wall Street Plaza
88 Pine Street, 19th Floor
New York, New York 10005
Telecopier No.: (212) 701-7698
Attention: Corporate Trust Administration
The Company, any Subsidiary Guarantor or the Trustee, by
notice to the others may designate additional or different addresses for
subsequent notices or communications.
All notices and communications (other than those sent to
Holders) shall be deemed to have been duly given: at the time delivered by
hand, if personally delivered; five Business Days after being deposited in
the mail, postage prepaid, if mailed; when answered back, if telexed; when
receipt acknowledged, if telecopied; and the next Business Day after timely
delivery to the courier, if sent by overnight air courier guaranteeing next
day delivery.
Any notice or communication to a Holder shall be mailed by
first class mail, certified or registered, return receipt requested, or by
overnight air courier guaranteeing next day delivery to its address shown on
the register kept by the Registrar. Any notice or communication shall also
be so mailed to any Person described in TIA Section 313(c), to the extent
required by the TIA. Failure to mail a notice or communication to a Holder or
any defect in it shall not affect its sufficiency with respect to other
Holders.
If a notice or communication is mailed in the manner provided
above within the time prescribed, it is duly given, whether or not the
addressee receives it.
If the Company mails a notice or communication to Holders, it
shall mail a copy to the Trustee and each Agent at the same time.
SECTION 12.03. COMMUNICATION BY HOLDERS WITH OTHER HOLDERS.
Holders may communicate pursuant to TIA Section 312(b) with
other Holders with respect to their rights under this Indenture or the Notes.
The Company, the Trustee, the Registrar and anyone else shall have the
protection of TIA Section 312(c).
SECTION 12.04. CERTIFICATE AND OPINION AS TO CONDITIONS
PRECEDENT.
Upon any request or application by the Company to the Trustee
to take any action under this Indenture, the Company shall furnish to the
Trustee:
<PAGE>
-112-
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set
forth in Section 12.05 hereof) stating that, in the opinion of the
signers, all conditions precedent and covenants, if any, provided for in
this Indenture relating to the proposed action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set
forth in Section 12.05 hereof) stating that, in the opinion of such
counsel, all such conditions precedent and covenants have been
satisfied.
SECTION 12.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than a certificate
provided pursuant to TIA Section 314(a)(4)) shall comply with the provisions
of TIA Section 314(e) and shall include:
(a) a statement that the Person making such certificate or
opinion has read such covenant or condition;
(b) 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;
(c) a statement that, in the opinion of such Person, he or
she has made such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such covenant or
condition has been satisfied; and
(d) a statement as to whether or not, in the opinion of such
Person, such condition or covenant has been satisfied.
SECTION 12.06. RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or at a
meeting of Holders. The Registrar or Paying Agent may make reasonable rules
and set reasonable requirements for its functions.
SECTION 12.07. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS,
EMPLOYEES AND STOCKHOLDERS.
No past, present or future director, officer, employee,
incorporator or stockholder of the Company or any Subsidiary Guarantor, as
such, shall have any liability for any obligations of the Company or such
Subsidiary Guarantor under the Notes, the Guarantees of
<PAGE>
-113-
the Notes, this Indenture or for any claim based on, in respect of, or by
reason of, such obligations or their creation. Each Holder by accepting a
Note waives and releases all such liability. The waiver and release are part
of the consideration for issuance of the Notes.
SECTION 12.08. GOVERNING LAW.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE
USED TO CONSTRUE THIS INDENTURE, THE NOTES AND THE GUARANTEES WITHOUT GIVING
EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE
APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
SECTION 12.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret any other
indenture, loan or debt agreement of the Company or its Subsidiaries or of
any other Person. Any such indenture, loan or debt agreement may not be used
to interpret this Indenture.
SECTION 12.10. SUCCESSORS.
All agreements of the Company in this Indenture and the Notes
shall bind its successors. All agreements of the Trustee in this Indenture
shall bind its successors.
SECTION 12.11. SEVERABILITY.
In case any provision in this Indenture or in the Notes shall
be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
SECTION 12.12. COUNTERPART ORIGINALS.
The parties may sign any number of copies of this Indenture.
Each signed copy shall be an original, but all of them together represent the
same agreement.
SECTION 12.13. TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table and Headings of
the Articles and Sections of this Indenture have been inserted for
convenience of reference only, are not to be considered a part of this
Indenture and shall in no way modify or restrict any of the terms or
provisions hereof.
[SIGNATURES ON FOLLOWING PAGE]
<PAGE>
-114-
SIGNATURES
Dated as of May 5, 1999
NCI BUILDING SYSTEMS, INC., a Delaware
corporation
By: /s/ Robert J. Medlock
-----------------------------------
Name: Robert J. Medlock
Title: Executive Vice President
NCI OPERATING CORP., a Nevada
corporation
By: /s/ Robert J. Medlock
-----------------------------------
Name: Robert J. Medlock
Title: Executive Vice President
NCI HOLDING CORP., a Delaware
corporation
By: /s/ Robert J. Medlock
-----------------------------------
Name: Robert J. Medlock
Title: Executive Vice President
A&S BUILDING SYSTEMS, L.P., a Texas
limited partnership
By: NCI Operating Corp., a Nevada
corporation, its General Partner
By: /s/ Robert J. Medlock
-----------------------------------
Name: Robert J. Medlock
Title: Executive Vice President
<PAGE>
-115-
NCI BUILDING SYSTEMS, L.P., a Texas
limited partnership
By: NCI Operating Corp., a Nevada
corporation, its General Partner
By: /s/ Robert J. Medlock
-----------------------------------
Name: Robert J. Medlock
Title: Executive Vice President
METAL BUILDING COMPONENTS, L.P., a Texas
limited partnership
By: NCI Operating Corp., a Nevada
corporation, its General Partner
By: /s/ Robert J. Medlock
-----------------------------------
Name: Robert J. Medlock
Title: Executive Vice President
METAL COATERS OPERATING, L.P., a
Texas limited partnership
By: NCI Operating Corp., a Nevada
corporation, its General Partner
By: /s/ Robert J. Medlock
-----------------------------------
Name: Robert J. Medlock
Title: Executive Vice President
METAL BUILDING COMPONENTS
HOLDING, INC., a Delaware corporation
By: /s/ Robert J. Medlock
-----------------------------------
Name: Robert J. Medlock
Title: Executive Vice President
<PAGE>
-116-
METAL COATERS HOLDING, INC., a
Delaware corporation
By: /s/ Robert J. Medlock
-----------------------------------
Name: Robert J. Medlock
Title: Executive Vice President
METAL COATERS OF CALIFORNIA, INC., a
Texas corporation
By: /s/ Robert J. Medlock
-----------------------------------
Name: Robert J. Medlock
Title: Vice President
HARRIS TRUST COMPANY OF NEW YORK
By: /s/ Amy Roberts
-----------------------------------
Name: Amy Roberts
Title: Vice President
<PAGE>
EXHIBIT A-1
(FACE OF NOTE)
==============================================================================
CUSIP/CINS ________________
9-1/4% Series Senior Subordinated Notes due 2009
No. ____ $_______________
NCI BUILDING SYSTEMS, INC.
promises to pay to _________________, or registered assigns, the principal sum
of $_____________, or such other amount as is set forth on the Schedule of
Exchanges of Interests on the reverse side of this Security, on ______________,
2009.
Interest Payment Dates: and
Record Dates: and
Dated: , 1999
NCI BUILDING SYSTEMS, INC.
By:
-----------------------------------
Name:
Title:
By:
-----------------------------------
Name:
Title:
(SEAL)
This is one of the Notes referred
to in the within-mentioned Indenture:
Harris Trust Company of New York,
as Trustee
By:
---------------------------------
==============================================================================
A-1-1
<PAGE>
(BACK OF NOTE)
9-1/4% SENIOR SUBORDINATED NOTES DUE 2009
THE SECURITY (OR ITS PREDECESSOR) EVIDENCED BY THIS CERTIFICATE WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE U.S.
SECURITIES ACT OF 1933, AND THE SECURITY EVIDENCED BY THIS CERTIFICATE MAY NOT
BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF
REGISTRATION OR AN APPLICABLE EXEMPTION FROM THE SECURITIES ACT. EACH PURCHASER
OF THE SECURITY EVIDENCED BY THIS CERTIFICATE (1) BY ITS ACQUISITION OF THE
SECURITY REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED
IN RULE 144A UNDER THE SECURITIES ACT), (B) IT IS NOT A U.S. PERSON AND IS
ACQUIRING THE SECURITY EVIDENCED BY THIS CERTIFICATE IN AN OFFSHORE TRANSACTION
IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, (C) IT IS AN
"ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) OR (7)
UNDER THE SECURITIES ACT (AN "INSTITUTIONAL ACCREDITED INVESTOR") THAT IS
ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF AN
INSTITUTIONAL ACCREDITED INVESTOR OR (D) IS AN "ACCREDITED INVESTOR" WITHIN THE
MEANING OF RULE 501(a)(4) AND EITHER RULE 501(a)(5) OR (6) UNDER THE SECURITIES
ACT WHO IS ACQUIRING THE SECURITY FOR HIS OWN ACCOUNT (AN "AFFILIATE ACCREDITED
INVESTOR") AND (2) 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 OR ANOTHER EXEMPTION UNDER THE SECURITIES ACT. THE HOLDER OF THE
SECURITY EVIDENCED BY THIS CERTIFICATE AGREES FOR THE BENEFIT OF THE ISSUER THAT
(X) THIS 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) IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A, (B) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, IF AVAILABLE, (C) OUTSIDE
THE UNITED STATES TO A PERSON THAT IS NOT A U.S. PERSON (AS DEFINED IN RULE 902
UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904
UNDER THE SECURITIES ACT, (D) TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT IS
PURCHASING AT LEAST $100,000 OF NOTES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF
AN INSTITUTIONAL ACCREDITED INVESTOR (AND BASED UPON AN OPINION OF COUNSEL IF
THE COMPANY SO REQUESTS) OR (E) TO AN AFFILIATE ACCREDITED INVESTOR WHO IS
PURCHASING NOTES FOR HIS OWN ACCOUNT (AND BASED UPON AN OPINION
A-1-2
<PAGE>
OF COUNSEL IF THE COMPANY SO REQUESTS), (2) TO THE COMPANY OR ANY OF ITS
SUBSIDIARIES OR (3) UNDER AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH
CASE, IN COMPLIANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (Y) THE HOLDER WILL,
AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF
THE SECURITY, EVIDENCED BY THIS CERTIFICATE OF THE RESALE RESTRICTIONS
DESCRIBED IN (X) ABOVE. IN CONNECTION WITH ANY TRANSFER OF THIS SECURITY
WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY, IF THE
PROPOSED TRANSFEREE IS AN ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH
TRANSFER, FURNISH TO THE TRUSTEE AND THE COMPANY SUCH CERTIFICATIONS, LEGAL
OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO
CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN
A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT.
THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS 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 TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED
PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE
EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE,
(III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT
TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO
A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF NCI BUILDING SYSTEMS,
INC.
Capitalized terms used herein shall have the meanings assigned to
them in the Indenture referred to below unless otherwise indicated.
1. INTEREST. NCI Building Systems, Inc., a Delaware
corporation (the "Company"), promises to pay interest on the principal amount of
this Note at 9-1/4% per annum from May 1, 1999 until maturity, and shall pay the
Special Interest payable pursuant to Section 5 of the Registration Rights
Agreement referred to below if the circumstances therein described shall occur.
The Company will pay interest and Special Interest, if any, semi-annually on May
1 and November 1 of each year, or if any such day is not a Business Day, on the
next succeeding Business Day (each an "INTEREST PAYMENT DATE"). Interest on the
Notes will accrue from the most recent date to which interest has been paid or,
if no interest has been paid, from the date of issuance; PROVIDED that if there
is no existing Default in the payment of
A-1-3
<PAGE>
interest, and if this Note is authenticated between a record date referred to
on the face hereof and the next succeeding Interest Payment Date, interest
shall accrue from such next succeeding Interest Payment Date; PROVIDED,
FURTHER, that the first Interest Payment Date shall be November 1, 1999. The
Company shall pay interest (including Post-Petition Interest in any
proceeding under any Bankruptcy Law) on overdue principal and premium, if
any, from time to time on demand at a rate that is 1% per annum in excess of
the rate then in effect; it shall pay interest (including Post-Petition
Interest in any proceeding under any Bankruptcy Law) on overdue installments
of interest and Special Interest (without regard to any applicable grace
periods) from time to time on demand at the same rate to the extent lawful.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months.
2. METHOD OF PAYMENT. The Company will pay interest on the
Notes (except defaulted interest) and Special Interest, if any, to the Persons
who are registered Holders at the close of business on April 15 and October 15
of each year, even if such Notes are canceled after such record date and on or
before the subsequent Interest Payment Date, except as provided in Section 2.12
of the Indenture with respect to defaulted interest. The Notes will be payable
as to principal, premium and Special Interest, if any, and interest at the
office or agency of the Company maintained for such purpose within or without
the City and State of New York, or, at the option of the Company, payment of
interest and Special Interest may be made by check mailed to the Holders at
their addresses set forth in the register of Holders, and provided that payment
by wire transfer of immediately available funds will be required with respect to
principal of and interest, premium and Special Interest, if any, on, all Global
Notes and all other Notes the Holders of which shall have provided wire transfer
instructions to the Company or the Paying Agent. Such payment shall be in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, Harris Trust
Company of New York, the Trustee under the Indenture, will act as Paying Agent
and Registrar. The Company may change any Paying Agent or Registrar without
notice to any Holder. The Company or any of its Subsidiaries may act in any
such capacity.
4. INDENTURE. The Company issued the Notes under an
Indenture dated as of May 5, 1999 ("INDENTURE") among the Company, certain
Guarantors and the Trustee. The terms of the Notes include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939, as amended (15 U.S. Code Sections 77aaa-77bbbb). The
Notes are subject to all such terms, and Holders are referred to the Indenture
and such Act for a statement of such terms. To the extent any provision of this
Note conflicts with the express provisions of the Indenture, the provisions of
the Indenture shall govern and be controlling. The Notes are obligations of the
Company, of which a principal amount of $125.0 million was issued on the date of
the Indenture. After the date of the Indenture, Additional Notes may be issued
from time to time subject to the limitations set
A-1-4
<PAGE>
forth in Section 4.09 of the Indenture.
5. SUBORDINATION. The Notes are subordinated in right of
payment, in the manner and to the extent set forth in the Indenture, to the
prior payment in full in cash of all Senior Indebtedness of the Company, whether
outstanding on the date of the Indenture or thereafter created, incurred,
assumed or guaranteed. The Guarantees in respect of the Notes will be
subordinated in right of payment, in the manner and to the extent set forth in
the Indenture, to the prior payment in full in cash of all Subsidiary Guarantor
Senior Indebtedness of each Subsidiary Guarantor, whether outstanding on the
date of the Indenture or thereafter created, incurred, assumed or guaranteed.
Each Holder by its acceptance hereof agrees to be bound by such provisions and
authorizes and expressly directs the Trustee, on its behalf, to take such action
as may be necessary or appropriate to effectuate the subordination provided for
in the Indenture and appoints the Trustee its attorney-in-fact for such
purposes.
6. OPTIONAL REDEMPTION.
(a) The Notes may not be redeemed prior to May 1, 2004, but will
be redeemable at the option of the Company, in whole or in part, at any time on
or after
May 1, 2004, at the redemption prices (expressed as percentages of principal
amount) set forth below, together with accrued and unpaid interest thereon,
including Special Interest, if any, to the redemption date, if redeemed during
the 12-month period beginning May 1 of the years indicated:
<TABLE>
<CAPTION>
YEAR OPTIONAL REDEMPTION PRICE
---- -------------------------
<S> <C>
2004............................ 104.625%
2005............................ 103.083%
2006............................ 101.542%
2007 and thereafter............. 100.000%
</TABLE>
(b) Notwithstanding the foregoing, at any time prior to May 1,
2002, the Company may redeem up to 35% of the sum of (i) the initial aggregate
principal amount of the Notes and (ii) the initial aggregate principal amount of
any Additional Notes with the net cash proceeds of one or more Equity Offerings
at a redemption price equal to 109.250% of the principal amount thereof, plus
accrued and unpaid interest thereon (including Special Interest), if any, to the
redemption date; PROVIDED that (a) 65% of the sum of (i) the initial aggregate
principal amount of Notes issued on the Issue Date and (ii) the initial
aggregate principal amount of any Additional Notes remains outstanding
immediately after the occurrence of such redemption and (b) such redemption
occurs within 90 days of the date of the closing of any such Equity Offering.
A-1-5
<PAGE>
7. MANDATORY REDEMPTION.
The Company shall not be required to make mandatory redemption
payments with respect to the Notes.
8. REPURCHASE AT OPTION OF HOLDER.
Sections 3.09, 3.10 and 4.10 of the Indenture provide that, after
certain Asset Sales and upon the occurrence of a Change of Control, and subject
to further limitations contained therein, the Company will make an offer to
purchase certain amounts of the Notes in accordance with the procedures set
forth in the Indenture.
9. NOTICE OF REDEMPTION. Notice of redemption will be
mailed at least 30 days but not more than 60 days before the redemption date to
each Holder whose Notes are to be redeemed at its registered address. Notes in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000, unless all of the Notes held by a Holder are to be
redeemed. On and after the redemption date interest ceases to accrue on Notes
or portions thereof called for redemption.
10. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in
registered form in denominations of $1,000 and integral multiples of $1,000.
The transfer of Notes may be registered and Notes may be exchanged as provided
in 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 need not exchange or register the
transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part. Also, the Company
need not exchange or register the transfer of any Notes for a period of 15 days
before a selection of Notes to be redeemed or during the period between a record
date and the corresponding Interest Payment Date.
11. PERSONS DEEMED OWNERS. The registered Holder may be
treated as its owner for all purposes.
12. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain
exceptions, the Indenture, the Guarantees of the Notes or the Notes may be
amended or supplemented with the consent of the Holders of at least a majority
in principal amount of the then outstanding Notes and Additional Notes, if any,
voting as a single class and any existing default or compliance with any
provision of the Indenture, the Guarantees of the Notes or the Notes may be
waived with the consent of the Holders of a majority in principal amount of the
then outstanding Notes and Additional Notes, if any, voting as a single class.
Without the consent of any Holder, the Indenture, the Guarantees of the Notes or
the Notes may be amended or supplemented 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
A-1-6
<PAGE>
or a Subsidiary Guarantor's obligations to Holders in case of a merger or
consolidation, to make any change that would provide any additional rights or
benefits to the Holders or that does not adversely affect the legal rights
under the Indenture of any such Holder, to comply with the requirements of
the Commission in order to effect or maintain the qualification of the
Indenture under the TIA, to provide for the issuance of Additional Notes in
accordance with the limitations set forth in the Indenture or to allow any
Subsidiary Guarantor to execute a supplemental indenture to the Indenture
and/or a Guarantee with respect to the Notes.
13. DEFAULTS AND REMEDIES. Each of the following constitutes
an "EVENT OF DEFAULT" (whatever the reason for such Event of Default and whether
it shall be voluntary or involuntary or be effected by operation of law or
pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body and whether or not by
operation of Section 10.05 or 11.05 of the Indenture): (i) failure by the
Company to pay interest (including Special Interest) on any of the Notes when it
becomes due and payable and the continuance of any such failure for 30 days;
(ii) failure by the Company to pay the principal or premium, if any, on any of
the Notes when it becomes due and payable, whether at stated maturity, upon
redemption, upon repurchase, upon acceleration or otherwise; (iii) failure by
the Company to comply with Sections 3.09, 3.10, 4.10, and 5.01 of the Indenture,
respectively; (iv) failure by the Company to comply with any other covenant in
the Indenture and continuance of such failure for 30 days after notice of such
failure has been given to the Company by the Trustee or by the Holders of at
least 25% of the aggregate principal amount of the Notes then outstanding;
(v) failure by either the Company or any of its Restricted Subsidiaries to make
any payment when due after the expiration of any applicable grace period, in
respect of any Indebtedness of the Company or any of such Subsidiaries, or the
acceleration of the maturity of such Indebtedness by the holders thereof because
of a default, PROVIDED that the aggregate amount unpaid or accelerated, for all
such Indebtedness under this clause (v), equals $20.0 million or more; (vi) one
or more judgments or orders that exceed $20.0 million in the aggregate (net of
amounts covered by insurance or bonded) for the payment of money have been
entered by a court or courts of competent jurisdiction against the Company or
any Subsidiary of the Company and such judgment or judgments have not been
satisfied, stayed, annulled or rescinded within 60 days of being entered;
(vii) the Company or any of its Significant Subsidiaries: (1) commences a
voluntary case, (2) consents to the entry of an order for relief against it in
an involuntary case, (3) consents to the appointment of a custodian of it or for
all or substantially all of its property, (4) makes a general assignment for the
benefit of its creditors, or (5) generally is not paying its debts as they
become due; or (viii) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that: (1) is for relief against the Company or
any of its Significant Subsidiaries; (2) appoints a custodian of the Company or
any of its Significant Subsidiaries or for all or substantially all of the
property of the Company or any of its Significant Subsidiaries; or (3) orders
the liquidation of the Company or any of its Significant Subsidiaries; and the
order or decree remains unstayed and in effect for 60 consecutive days.
(ix) except as permitted by Section 10.16 hereof, any Subsidiary Guarantee of
any Significant Subsidiary ceases to be in full force and effect or any
A-1-7
<PAGE>
Subsidiary Guarantor repudiates its obligations under any Subsidiary Guarantee.
If any Event of Default occurs and is continuing, the Trustee or
the Holders of at least 25% in principal amount of the then outstanding Notes
may declare all the Notes to be due and payable. Notwithstanding the foregoing,
in the case of an Event of Default arising from the events of bankruptcy or
insolvency described in clauses (vii) or (viii) of the preceding paragraph, all
outstanding Notes will become due and payable without further action or notice.
Holders 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. The Trustee may withhold from Holders notice of any
continuing Default or Event of Default (except a Default or Event of Default
relating to the payment of principal or interest) if it determines that
withholding notice is in their interest. The Holders of a majority in aggregate
principal amount 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.
14. TRUSTEE DEALINGS WITH COMPANY. The Trustee in its
individual or any other capacity may become the owner or pledgee of Notes and
may otherwise deal with the Company or any Affiliate of the Company with the
same rights it would have if it were not Trustee. However, in the event that
the Trustee acquires any conflicting interest it must eliminate such conflict
within 90 days, apply to the SEC for permission to continue as Trustee or
resign. Any Agent may do the same with like rights and duties. The Trustee is
also subject to Sections 7.10 and 7.11 of the Indenture.
15. NO RECOURSE AGAINST OTHERS. A director, Officer,
employee, incorporator or stockholder, of the Company, as such, shall not have
any liability for any obligations of the Company under the Notes or the
Indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder by accepting a Note waives and
releases all such liability. The waiver and release are part of the
consideration for the issuance of the Notes.
16. AUTHENTICATION. This Note shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating agent.
17. ABBREVIATIONS. Customary abbreviations may be used in
the name of a Holder or an assignee, such as: TEN COM (= tenants in common),
TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A
(= Uniform Gifts to Minors Act).
A-1-8
<PAGE>
18. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES
AND RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to Holders
under the Indenture, Holders of Restricted Global Notes and Restricted
Definitive Notes (other than Affiliate Accredited Investors and their
transferees) shall have all the rights set forth in the Registration Rights
Agreement dated as of the Issue Date, among the Company, the Subsidiary
Guarantors and the Initial Purchasers (the "REGISTRATION RIGHTS AGREEMENT").
19. CUSIP NUMBERS. Pursuant to a recommendation promulgated
by the Committee on Uniform Security Identification Procedures, the Company has
caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP
numbers in notices of redemption as a convenience to Holders. No representation
is made as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to:
NCI Building Systems, Inc.
7301 Fairview
Houston, Texas 77041
Attention: Chief Financial Officer
A-1-9
<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and transfer
this Note to
- --------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint ________________________________________________________
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
Date: ____________
Your Signature: ___________________
(Sign exactly as your name appears
on the face of this Note)
Signature Guarantee: ______________________________________
A-1-10
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company
pursuant to Section 3.10 or 4.10 of the Indenture, check the box below:
/ / Section 3.10 / / Section 4.10
If you want to elect to have only part of the Note purchased by
the Company pursuant to Section 3.10 or Section 4.10 of the Indenture, state the
amount you elect to have purchased: $________
Date: _____________ Your Signature: ______________________________
(Sign exactly as your name appears on the Note)
Tax Identification No: _______________________
Signature Guarantee: _______________________________
A-1-11
<PAGE>
SCHEDULE OF EXCHANGES OF INTERESTS
The following exchanges of a part of this Global Note for an
interest in another Global Note or for a Definitive Note, or exchanges of a part
of another Global Note or Definitive Note for an interest in this Global Note,
have been made:
<TABLE>
<CAPTION>
Principal Amount
Amount of decrease Amount of increase of this Global Note Signature of
in Principal in Principal following such authorized officer
Amount of this Amount of this decrease (or of Trustee or
Date of Exchange Global Note Global Note increase) Paying Agent
---------------- ------------------- ---------------- --------- ------------
<S> <C> <C> <C> <C>
</TABLE>
A-1-12
<PAGE>
[EXHIBIT A-2]
(FACE OF REGULATION S TEMPORARY GLOBAL NOTE)
================================================================================
CUSIP/CINS ________________
9-1/4% Series _ Senior Subordinated Notes due 2009
No. ____ $_______________
NCI BUILDING SYSTEMS, INC.
promises to pay to _________________, or registered assigns, the principal
sum of $_____________, or such other amount as is set forth on the Schedule
of Exchanges of Interests on the reverse side of this Security, on
______________, 2009.
Interest Payment Dates: and
Record Dates: and
Dated: , 1999
NCI BUILDING SYSTEMS, INC.
By:
-------------------------------------
Name:
Title:
By:
-------------------------------------
Name:
Title:
(SEAL)
This is one of the Notes referred
to in the within-mentioned Indenture:
Harris Trust Company of New York,
as Trustee
By:
-------------------------------------
================================================================================
A-2-1
<PAGE>
(BACK OF REGULATION S TEMPORARY GLOBAL NOTE)
9-1/4% SENIOR SUBORDINATED NOTES DUE 2009
THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE
CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES, ARE
AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR
THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE
ENTITLED TO RECEIVE PAYMENT OF INTEREST HEREON.
THE SECURITY (OR ITS PREDECESSOR) EVIDENCED BY THIS CERTIFICATE WAS
ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5
OF THE U.S. SECURITIES ACT OF 1933, AND THE SECURITY EVIDENCED BY THIS
CERTIFICATE MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF REGISTRATION OR AN APPLICABLE EXEMPTION FROM THE SECURITIES ACT.
EACH PURCHASER OF THE SECURITY EVIDENCED BY THIS CERTIFICATE (1) BY ITS
ACQUISITION OF THE SECURITY REPRESENTS THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT), (B)
IT IS NOT A U.S. PERSON AND IS ACQUIRING THE SECURITY EVIDENCED BY THIS
CERTIFICATE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER
THE SECURITIES ACT, (C) IT IS AN "ACCREDITED INVESTOR" WITHIN THE MEANING OF
RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT (AN "INSTITUTIONAL
ACCREDITED INVESTOR") THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT OR
FOR THE ACCOUNT OF AN INSTITUTIONAL ACCREDITED INVESTOR OR (D) IS AN
"ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 501(a)(4) AND EITHER RULE
501(a)(5) OR (6) UNDER THE SECURITIES ACT WHO IS ACQUIRING THE SECURITY FOR
HIS OWN ACCOUNT (AN "AFFILIATE ACCREDITED INVESTOR") AND (2) 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 OR ANOTHER EXEMPTION
UNDER THE SECURITIES ACT. THE HOLDER OF THE SECURITY EVIDENCED BY THIS
CERTIFICATE AGREES FOR THE BENEFIT OF THE ISSUER THAT (X) THIS 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) IN A TRANSACTION MEETING THE REQUIREMENTS
OF RULE 144A, (B) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144
UNDER THE SECURITIES ACT, IF AVAILABLE, (C) OUTSIDE THE UNITED STATES TO A
PERSON THAT IS NOT A U.S. PERSON (AS DEFINED IN RULE 902 UNDER THE
A-2-2
<PAGE>
SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER
THE SECURITIES ACT, (D) TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT IS
PURCHASING AT LEAST $100,000 OF NOTES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT
OF AN INSTITUTIONAL ACCREDITED INVESTOR (AND BASED UPON AN OPINION OF COUNSEL
IF THE COMPANY SO REQUESTS) OR (E) TO AN AFFILIATE ACCREDITED INVESTOR WHO
IS PURCHASING NOTES FOR HIS OWN ACCOUNT (AND BASED UPON AN OPINION OF COUNSEL
IF THE COMPANY SO REQUESTS), (2) TO THE COMPANY OR ANY OF ITS SUBSIDIARIES OR
(3) UNDER AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN
COMPLIANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES OR ANY OTHER APPLICABLE JURISDICTION AND (Y) THE HOLDER WILL, AND EACH
SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE
SECURITY, EVIDENCED BY THIS CERTIFICATE OF THE RESALE RESTRICTIONS DESCRIBED
IN (X) ABOVE. IN CONNECTION WITH ANY TRANSFER OF THIS SECURITY WITHIN TWO
YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY, IF THE PROPOSED
TRANSFEREE IS AN ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH
TRANSFER, FURNISH TO THE TRUSTEE AND THE COMPANY SUCH CERTIFICATIONS, LEGAL
OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO
CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN
A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT.
Capitalized terms used herein shall have the meanings assigned
to them in the Indenture referred to below unless otherwise indicated.
1. INTEREST. NCI Building Systems, Inc., a Delaware
corporation (the "Company"), promises to pay interest on the principal amount
of this Note at 9-1/4% per annum from May 1, 1999 until maturity, and shall
pay the Special Interest payable pursuant to Section 5 of the Registration
Rights Agreement referred to below if the circumstances therein described
shall occur. The Company will pay interest and Special Interest, if any,
semi-annually on May 1 and November 1 of each year, or if any such day is not
a Business Day, on the next succeeding Business Day (each an "INTEREST
PAYMENT DATE"). Interest on the Notes will accrue from the most recent date
to which interest has been paid or, if no interest has been paid, from the
date of issuance; PROVIDED that if there is no existing Default in the
payment of interest, and if this Note is authenticated between a record date
referred to on the face hereof and the next succeeding Interest Payment Date,
interest shall accrue from such next succeeding Interest Payment Date;
PROVIDED, FURTHER, that the first Interest Payment Date shall be November 1,
1999. The Company shall pay interest (including Post-Petition Interest in
any proceeding under any Bankruptcy Law) on overdue principal and premium, if
any, from time to time on demand at a rate that is 1% per annum in excess of
the rate then in effect; it shall pay
A-2-3
<PAGE>
interest (including Post-Petition Interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest and Special Interest
(without regard to any applicable grace periods) from time to time on demand
at the same rate to the extent lawful. Interest will be computed on the
basis of a 360-day year of twelve 30-day months.
Until this Regulation S Temporary Global Note is exchanged for
one or more Regulation S Permanent Global Notes, the Holder hereof shall not
be entitled to receive payments of interest hereon; until so exchanged in
full, this Regulation S Temporary Global Note shall in all other respects be
entitled to the same benefits as other Senior Subordinated Notes under the
Indenture.
2. METHOD OF PAYMENT. The Company will pay interest on
the Notes (except defaulted interest) and Special Interest, if any, to the
Persons who are registered Holders at the close of business on April 15 and
October 15 of each year, even if such Notes are canceled after such record
date and on or before the subsequent Interest Payment Date, except as
provided in Section 2.12 of the Indenture with respect to defaulted interest.
The Notes will be payable as to principal, premium and Special Interest, if
any, and interest at the office or agency of the Company maintained for such
purpose within or without the City and State of New York, or, at the option
of the Company, payment of interest and Special Interest may be made by check
mailed to the Holders at their addresses set forth in the register of
Holders, and provided that payment by wire transfer of immediately available
funds will be required with respect to principal of and interest, premium and
Special Interest, if any, on, all Global Notes and all other Notes the
Holders of which shall have provided wire transfer instructions to the
Company or the Paying Agent. Such payment shall be in such coin or currency
of the United States of America as at the time of payment is legal tender for
payment of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, Harris Trust
Company of New York, the Trustee under the Indenture, will act as Paying
Agent and Registrar. The Company may change any Paying Agent or Registrar
without notice to any Holder. The Company or any of its Subsidiaries may act
in any such capacity.
4. INDENTURE . The Company issued the Notes under an
Indenture dated as of May 5, 1999 ("INDENTURE") among the Company, certain
Guarantors and the Trustee. The terms of the Notes include those stated in
the Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939, as amended (15 U.S. Code Sections 77aaa-77bbbb). The
Notes are subject to all such terms, and Holders are referred to the
Indenture and such Act for a statement of such terms. To the extent any
provision of this Note conflicts with the express provisions of the
Indenture, the provisions of the Indenture shall govern and be controlling.
The Notes are obligations of the Company, of which a principal amount of
$125.0 million was issued on the date of the Indenture. After the date of
the Indenture, Additional Notes may be issued from time to time subject to
the limitations set
A-2-4
<PAGE>
forth in Section 4.09 of the Indenture.
5. SUBORDINATION. The Notes are subordinated in right of
payment, in the manner and to the extent set forth in the Indenture, to the
prior payment in full in cash of all Senior Indebtedness of the Company,
whether outstanding on the date of the Indenture or thereafter created,
incurred, assumed or guaranteed. The Guarantees in respect of the Notes will
be subordinated in right of payment, in the manner and to the extent set
forth in the Indenture, to the prior payment in full in cash of all
Subsidiary Guarantor Senior Indebtedness of each Subsidiary Guarantor,
whether outstanding on the date of the Indenture or thereafter created,
incurred, assumed or guaranteed. Each Holder by its acceptance hereof agrees
to be bound by such provisions and authorizes and expressly directs the
Trustee, on its behalf, to take such action as may be necessary or
appropriate to effectuate the subordination provided for in the Indenture and
appoints the Trustee its attorney-in-fact for such purposes.
6. OPTIONAL REDEMPTION.
(a) The Notes may not be redeemed prior to May 1, 2004, but
will be redeemable at the option of the Company, in whole or in part, at any
time on or after May 1, 2004, at the redemption prices (expressed as
percentages of principal amount) set forth below, together with accrued and
unpaid interest thereon, including Special Interest, if any, to the
redemption date, if redeemed during the 12-month period beginning May 1 of
the years indicated:
<TABLE>
<CAPTION>
YEAR OPTIONAL REDEMPTION PRICE
---- -------------------------
<S> <C>
2004......................... 104.625%
2005......................... 103.083%
2006......................... 101.542%
2007 and thereafter.......... 100.000%
</TABLE>
(b) Notwithstanding the foregoing, at any time prior to May 1,
2002, the Company may redeem up to 35% of the sum of (i) the initial
aggregate principal amount of the Notes and (ii) the initial aggregate
principal amount of any Additional Notes with the net cash proceeds of one or
more Equity Offerings at a redemption price equal to 109.250% of the
principal amount thereof, plus accrued and unpaid interest thereon (including
Special Interest), if any, to the redemption date; PROVIDED that (a) 65% of
the sum of (i) the initial aggregate principal amount of Notes issued on the
Issue Date and (ii) the initial aggregate principal amount of any Additional
Notes remains outstanding immediately after the occurrence of such redemption
and (b) such redemption occurs within 90 days of the date of the closing of
any such Equity Offering.
A-2-5
<PAGE>
7. MANDATORY REDEMPTION.
The Company shall not be required to make mandatory redemption
payments with respect to the Notes.
8. REPURCHASE AT OPTION OF HOLDER.
Sections 3.09, 3.10 and 4.10 of the Indenture provide that,
after certain Asset Sales and upon the occurrence of a Change of Control, and
subject to further limitations contained therein, the Company will make an
offer to purchase certain amounts of the Notes in accordance with the
procedures set forth in the Indenture.
9. NOTICE OF REDEMPTION. Notice of redemption will be
mailed at least 30 days but not more than 60 days before the redemption date
to each Holder whose Notes are to be redeemed at its registered address.
Notes in denominations larger than $1,000 may be redeemed in part but only in
whole multiples of $1,000, unless all of the Notes held by a Holder are to be
redeemed. On and after the redemption date interest ceases to accrue on
Notes or portions thereof called for redemption.
10. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in
registered form in denominations of $1,000 and integral multiples of $1,000.
The transfer of Notes may be registered and Notes may be exchanged as
provided in 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 need not exchange
or register the transfer of any Note or portion of a Note selected for
redemption, except for the unredeemed portion of any Note being redeemed in
part. Also, the Company need not exchange or register the transfer of any
Notes for a period of 15 days before a selection of Notes to be redeemed or
during the period between a record date and the corresponding Interest
Payment Date.
This Regulation S Temporary Global Note is exchangeable in
whole or in part for one or more Global Notes only (i) on or after the
termination of the 40-day Distribution Compliance Period (as defined in
Regulation S) and (ii) upon presentation of certificates (accompanied by an
Opinion of Counsel, if applicable) required by Article 2 of the Indenture.
Upon exchange of this Regulation S Temporary Global Note for one or more
Global Notes, the Trustee shall cancel this Regulation S Temporary Global
Note.
11. PERSONS DEEMED OWNERS. The registered Holder may be
treated as its owner for all purposes.
12. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain
exceptions, the Indenture, the Guarantees of the Notes or the Notes may be
amended or supplemented with the consent of the Holders of at least a
majority in principal amount of the then outstanding
A-2-6
<PAGE>
Notes and Additional Notes, if any, voting as a single class and any existing
default or compliance with any provision of the Indenture, the Guarantees of
the Notes or the Notes may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Notes and Additional
Notes, if any, voting as a single class. Without the consent of any Holder,
the Indenture, the Guarantees of the Notes or the Notes may be amended or
supplemented 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 or a Subsidiary Guarantor's
obligations to Holders in case of a merger or consolidation, to make any
change that would provide any additional rights or benefits to the Holders or
that does not adversely affect the legal rights under the Indenture of any
such Holder, to comply with the requirements of the Commission in order to
effect or maintain the qualification of the Indenture under the TIA, to
provide for the issuance of Additional Notes in accordance with the
limitations set forth in the Indenture or to allow any Subsidiary Guarantor
to execute a supplemental indenture to the Indenture and/or a Guarantee with
respect to the Notes.
13. DEFAULTS AND REMEDIES. Each of the following
constitutes an "EVENT OF DEFAULT" (whatever the reason for such Event of
Default and whether it shall be voluntary or involuntary or be effected by
operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body and
whether or not by operation of Section 10.05 or 11.05 of the Indenture): (i)
failure by the Company to pay interest (including Special Interest) on any of
the Notes when it becomes due and payable and the continuance of any such
failure for 30 days; (ii) failure by the Company to pay the principal or
premium, if any, on any of the Notes when it becomes due and payable, whether
at stated maturity, upon redemption, upon repurchase, upon acceleration or
otherwise; (iii) failure by the Company to comply with Sections 3.09, 3.10,
4.10, and 5.01 of the Indenture, respectively; (iv) failure by the Company to
comply with any other covenant in the Indenture and continuance of such
failure for 30 days after notice of such failure has been given to the
Company by the Trustee or by the Holders of at least 25% of the aggregate
principal amount of the Notes then outstanding; (v) failure by either the
Company or any of its Restricted Subsidiaries to make any payment when due
after the expiration of any applicable grace period, in respect of any
Indebtedness of the Company or any of such Subsidiaries, or the acceleration
of the maturity of such Indebtedness by the holders thereof because of a
default, PROVIDED that the aggregate amount unpaid or accelerated, for all
such Indebtedness under this clause (v), equals $20.0 million or more; (vi)
one or more judgments or orders that exceed $20.0 million in the aggregate
(net of amounts covered by insurance or bonded) for the payment of money have
been entered by a court or courts of competent jurisdiction against the
Company or any Subsidiary of the Company and such judgment or judgments have
not been satisfied, stayed, annulled or rescinded within 60 days of being
entered; (vii) the Company or any of its Significant Subsidiaries: (1)
commences a voluntary case, (2) consents to the entry of an order for relief
against it in an involuntary case, (3) consents to the appointment of a
custodian of it or for all or substantially all of its property, (4) makes a
general assignment for the benefit of its creditors, or (5) generally is not
paying its debts as they become due; or (viii)
A-2-7
<PAGE>
a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that: (1) is for relief against the Company or any of its
Significant Subsidiaries; (2) appoints a custodian of the Company or any of
its Significant Subsidiaries or for all or substantially all of the property
of the Company or any of its Significant Subsidiaries; or (3) orders the
liquidation of the Company or any of its Significant Subsidiaries; and the
order or decree remains unstayed and in effect for 60 consecutive days. (ix)
except as permitted by Section 10.16 hereof, any Subsidiary Guarantee of any
Significant Subsidiary ceases to be in full force and effect or any
Subsidiary Guarantor repudiates its obligations under any Subsidiary
Guarantee.
If any Event of Default occurs and is continuing, the Trustee
or the Holders of at least 25% in principal amount of the then outstanding
Notes may declare all the Notes to be due and payable. Notwithstanding the
foregoing, in the case of an Event of Default arising from the events of
bankruptcy or insolvency described in clauses (vii) or (viii) of the
preceding paragraph, all outstanding Notes will become due and payable
without further action or notice. Holders 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. The Trustee may withhold from Holders notice of any continuing Default
or Event of Default (except a Default or Event of Default relating to the
payment of principal or interest) if it determines that withholding notice is
in their interest. The Holders of a majority in aggregate principal amount
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.
14. TRUSTEE DEALINGS WITH COMPANY. The Trustee in its
individual or any other capacity may become the owner or pledgee of Notes and
may otherwise deal with the Company or any Affiliate of the Company with the
same rights it would have if it were not Trustee. However, in the event that
the Trustee acquires any conflicting interest it must eliminate such conflict
within 90 days, apply to the SEC for permission to continue as Trustee or
resign. Any Agent may do the same with like rights and duties. The Trustee
is also subject to Sections 7.10 and 7.11 of the Indenture.
15. NO RECOURSE AGAINST OTHERS. A director, Officer,
employee, incorporator or stockholder, of the Company, as such, shall not
have any liability for any obligations of the Company under the Notes or the
Indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder by accepting a Note waives and
releases all such liability. The waiver and release are part of the
consideration for the issuance of the Notes.
A-2-8
<PAGE>
16. AUTHENTICATION. This Note shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating
agent.
17. ABBREVIATIONS. Customary abbreviations may be used in
the name of a Holder or an assignee, such as: TEN COM (= tenants in common),
TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A
(= Uniform Gifts to Minors Act).
18. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES
AND RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to
Holders under the Indenture, Holders of Restricted Global Notes and
Restricted Definitive Notes (other than Affiliate Accredited Investors and
their transferees) shall have all the rights set forth in the Registration
Rights Agreement dated as of the Issue Date, among the Company, the
Subsidiary Guarantors and the Initial Purchasers (the "REGISTRATION RIGHTS
AGREEMENT").
19. CUSIP NUMBERS. Pursuant to a recommendation
promulgated by the Committee on Uniform Security Identification Procedures,
the Company have caused CUSIP numbers to be printed on the Notes and the
Trustee may use CUSIP numbers in notices of redemption as a convenience to
Holders. No representation is made as to the accuracy of such numbers either
as printed on the Notes or as contained in any notice of redemption and
reliance may be placed only on the other identification numbers placed
thereon.
The Company will furnish to any Holder upon written request
and without charge a copy of the Indenture and/or the Registration Rights
Agreement. Requests may be made to:
NCI Building Systems, Inc.
7301 Fairview
Houston, Texas 77041
Attention: Chief Financial Officer
A-2-9
<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and transfer
this Note to
- --------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint _______________________________________________________
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
Date: Your Signature:
---------------- --------------------------
(Sign exactly as your name
appears on the face of
this Note)
Signature Guarantee
----------------------------------------
A-2-10
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the
Company pursuant to Section 3.10 or 4.10 of the Indenture, check the box
below:
/ / Section 3.10 / / Section 4.10
If you want to elect to have only part of the Note purchased by
the Company pursuant to Section 3.10 or Section 4.10 of the Indenture, state the
amount you elect to have purchased: $________
- --------------------------------------------------------------------------------
Date: Your Signature:
--------------------- ------------------------------------
(Sign exactly as your name appears
on the Note)
Tax Identification No:
-----------------------------
Signature Guarantee
----------------------------------------
A-2-11
<PAGE>
SCHEDULE OF EXCHANGES OF INTERESTS
The following exchanges of a part of this Global Note for an
interest in another Global Note or for a Definitive Note, or exchanges of a
part of another Global Note or Definitive Note for an interest in this Global
Note, have been made:
<TABLE>
<CAPTION>
Principal Amount
Amount of de- Amount of increase of this Global Note Signature of
crease in in Principal following such authorized officer
Principal Amount Amount of decrease (or of Trustee or
Date of Exchange of this Global Note this Global Note increase) Paying Agent
- ---------------- ------------------- ------------------ ------------------- ------------------
<S> <C> <C> <C> <C>
</TABLE>
A-2-12
<PAGE>
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
NCI Building Systems, Inc.
7301 Fairview
Houston, Texas 77041
Harris Trust Company of New York
Wall Street Plaza
88 Pine Street, 19th Floor
New York, New York 10005
Re: NCI Building Systems, Inc.
9-1/4% SENIOR SUBORDINATED NOTES DUE 2009
Reference is hereby made to the Indenture, dated May 5, 1999 (the
"INDENTURE"), between NCI Building Systems, Inc. (the "COMPANY") and Harris
Trust Company of New York, as Trustee. Capitalized terms used but not
defined herein shall have the meanings given to them in the Indenture.
______________ (the "TRANSFEROR") owns and proposes to transfer the
Note[s] or interest in such Note[s] specified in Annex A hereto, in the
principal amount of $___________ in such Note[s] or interest (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 NOTE OR A DEFINITIVE NOTE 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 Note is being transferred to a Person that the
Transferor reasonably believed and believes is purchasing the beneficial
interest or Definitive Note 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 Indenture, the
transferred beneficial interest or Definitive Note will be subject
B-1
<PAGE>
to the restrictions on transfer enumerated in the Private Placement Legend
printed on the 144A Global Note and/or the Definitive Note and in the
Indenture and the Securities Act.
2. / / CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN
THE TEMPORARY REGULATION S GLOBAL NOTE, THE REGULATION S GLOBAL NOTE OR A
DEFINITIVE NOTE 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(b) or Rule 904(b) 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.
3. / / CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL
INTEREST IN THE IAI GLOBAL NOTE OR A DEFINITIVE NOTE 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 Notes and Restricted
Definitive Notes 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
(d) / / such Transfer is being effected to an Institutional
Accredited In-
B-2
<PAGE>
vestor or an Affiliate 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 Note
or Restricted Definitive Notes 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-1 or D-2, as appropriate, to the
Indenture and (2) if such Transfer is in respect of a principal amount of
Notes at the time of transfer of less than $250,000, 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 Indenture, the transferred
beneficial interest or Definitive Note will be subject to the restrictions on
transfer enumerated in the Private Placement Legend printed on the IAI Global
Note and/or the Definitive Notes and in the Indenture and the Securities Act.
4. / / CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN
AN UNRESTRICTED GLOBAL NOTE OR OF AN UNRESTRICTED DEFINITIVE NOTE.
(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 Indenture and any applicable blue sky securities laws of any state of
the United States and (ii) the restrictions on transfer contained in the
Indenture 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 Indenture, the
transferred beneficial interest or Definitive Note will no longer be subject
to the restrictions on transfer enumerated in the Private Placement Legend
printed on the Restricted Global Notes, on Restricted Definitive Notes and/or
in the Indenture.
(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 Indenture and any applicable blue sky
securities laws of any state of the United States and (ii) the restrictions
on transfer contained in the Indenture 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
Indenture, the transferred beneficial interest or Definitive Note will no
longer be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the Restricted Global Notes, on Restricted
Definitive Notes and/or in the Indenture.
(c) / / CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPTION. (i) The
B-3
<PAGE>
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 Indenture and any applicable blue sky securities laws of any
State of the United States and (ii) the restrictions on transfer contained in
the Indenture 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 Indenture, the
transferred beneficial interest or Definitive Note will not be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed
on the Restricted Global Notes or Restricted Definitive Notes and/or in the
Indenture.
This certificate and the statements contained herein are made for
your benefit and the benefit of the Company.
---------------------------------------
[Name of Transferor]
By:
------------------------------------
Name:
Title:
Dated:
----------------------------
B-4
<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 Note (CUSIP __________), or
(ii) / / Regulation S Global Note (CUSIP __________), or
(iii) / / IAI Global Note (CUSIP __________); or
(b) / / a Restricted Definitive Note.
2. After the Transfer the Transferee will hold:
CHECK ONE
(a) / / a beneficial interest in the:
(i) / / 144A Global Note (CUSIP __________), or
(ii) / / Regulation S Global Note (CUSIP __________), or
(iii) / / IAI Global Note (CUSIP __________); or
(iv) / / Unrestricted Global Note (CUSIP __________); or
(b) / / a Restricted Definitive Note; or
(c) / / an Unrestricted Definitive Note,
in accordance with the terms of the Indenture.
B-5
<PAGE>
EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
NCI Building Systems, Inc.
7301 Fairview
Houston, Texas 77041
Harris Trust Company of New York
Wall Street Plaza
88 Pine Street, 19th Floor
New York, New York 10005
Re: NCI Building Systems, Inc.
9-1/4% Senior Subordinated Notes due 2009
(CUSIP______________)
Reference is hereby made to the Indenture, dated as of May 5, 1999
(the "INDENTURE"), between NCI Building Systems, Inc. (the "COMPANY") and
Harris Trust Company of New York, as trustee. Capitalized terms used but not
defined herein shall have the meanings given to them in the Indenture.
____________ (the "OWNER") owns and proposes to exchange the Note[s]
or interest in such Note[s] specified herein, in the principal amount of
$____________ in such Note[s] or interest (the "EXCHANGE"). In connection
with the Exchange, the Owner hereby certifies that:
1. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN A
RESTRICTED GLOBAL NOTE FOR UNRESTRICTED DEFINITIVE NOTES OR BENEFICIAL
INTERESTS IN AN UNRESTRICTED GLOBAL NOTE
(a) / / CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A
RESTRICTED GLOBAL NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE.
In connection with the Exchange of the Owner's beneficial interest in a
Restricted Global Note for a beneficial interest in an Unrestricted Global
Note in an equal principal 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 Notes 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
Indenture 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 Note 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 NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with
the Exchange of the Owner's beneficial interest in a Restricted Global Note
for an Unrestricted Definitive Note, the Owner hereby certifies (i) the
Definitive Note 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 Notes and pursuant
to and in accordance with the Securities Act, (iii) the restrictions on
transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
Definitive Note 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 NOTE TO
BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the
Owner's Exchange of a Restricted Definitive Note for a beneficial interest in
an Unrestricted Global Note, 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 Notes and pursuant to and in accordance
with the Securities Act, (iii) the restrictions on transfer contained in the
Indenture 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 NOTE TO
UNRESTRICTED DEFINITIVE NOTE. In connection with the Owner's Exchange of a
Restricted Definitive Note for an Unrestricted Definitive Note, the Owner
hereby certifies (i) the Unrestricted Definitive Note 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 Notes and pursuant to and in accordance with the
Securities Act, (iii) the restrictions on transfer contained in the Indenture
and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act and (iv) the Unrestricted Definitive Note
is being acquired in compliance with any applicable blue sky securities laws
of any state of the United States.
2. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN
RESTRICTED GLOBAL NOTES FOR RESTRICTED DEFINITIVE NOTES OR BENEFICIAL
INTERESTS IN RESTRICTED GLOBAL NOTES
(a) / / CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED
GLOBAL NOTE TO RESTRICTED DEFINITIVE NOTE. In connection with the Exchange
of the Owner's beneficial interest in a Restricted Global Note for a
Restricted Definitive Note with an equal principal amount, the Owner hereby
certifies that the Restricted Definitive Note is being acquired for the
Owner's own account without transfer. Upon consummation of the proposed
Exchange in
C-2
<PAGE>
accordance with the terms of the Indenture, the Restricted Definitive Note
issued will continue to be subject to the restrictions on transfer enumerated
in the Private Placement Legend printed on the Restricted Definitive Note and
in the Indenture and the Securities Act.
(b) / / CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO
BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE. In connection with the
Exchange of the Owner's Restricted Definitive Note for a beneficial interest
in the [CHECK ONE] __ 144A Global Note, __ Regulation S Global Note, __ IAI
Global Note with an equal principal 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 Notes 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
Indenture, the beneficial interest issued will be subject to the restrictions
on transfer enumerated in the Private Placement Legend printed on the
Restricted Global Note and in the Indenture 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.
---------------------------------------
[Name of Owner]
By:
------------------------------------
Name:
Title:
Dated:
----------------------------
C-4
<PAGE>
EXHIBIT D-1
FORM OF CERTIFICATE FROM
ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
NCI Building Systems, Inc.
7301 Fairview
Houston, Texas 77041
Harris Trust Company of New York
Wall Street Plaza
88 Pine Street, 19th Floor
New York, New York 10005
Re: NCI Building Systems, Inc.
9-1/4% Senior Subordinated Notes due 2009
Reference is hereby made to the Indenture, dated as of May 5,
1999 (the "INDENTURE"), between NCI Building Systems, Inc. (the "COMPANY") and
Harris Trust Company of New York, as trustee. Capitalized terms used but not
defined herein shall have the meanings given to them in the Indenture.
In connection with our proposed purchase of $____________
aggregate principal amount of:
(a) / / a beneficial interest in a Global Note, or
(b) / / a Definitive Note,
we confirm that:
1. We are an "accredited investor" within the meaning of
Rules 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 Rules 501(a)(1), (2), (3), or (7) under the
Securities Act (an "Institutional Accredited Investor");
2. any purchase of Notes by us will be for our own account
or for the account of one or more Institutional Accredited Investors;
3. if we purchase any Notes, we will acquire Notes having a
minimum purchase price of at least $100,000 for our own account and for each
separate account for which we are acting;
D-1-1
<PAGE>
4. we have sufficient knowledge and experience in financial
and business matters that we are capable of evaluating the merits and risks of
purchasing Notes;
5. we are not acquiring Notes with a view to any
distribution of the Notes in a transaction that would violate the Securities Act
or the securities laws of any State of the United States or any other applicable
jurisdiction; provided that the disposition of our property and the property of
any accounts for which we are acting as fiduciary shall remain at all times
within our control; and
6. we acknowledge that we have had access to financial and
other information, and have been afforded the opportunity to ask questions of
representatives of the Company and receive answers thereto, as we deem necessary
in connection with our decision to purchase Notes.
We understand that the Notes are being offered in a transaction
not involving any public offering within the meaning of the Securities Act and
that the Notes have not been registered under the Securities Act, and we agree,
on our own behalf and on behalf of any accounts for which we acquire any Notes,
that the Notes may be offered, resold, pledged or otherwise transferred only (1)
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, outside the United States in a transaction meeting the
requirements of Rule 903 or 904 under the Securities Act, or in compliance with
another exemption from the registration requirements of the Securities Act
(based on opinion of counsel if the Company so requests), (2) to the Company or
(3) under an effective registration statement, and, in each case, in compliance
with any applicable securities laws of any State of the United States or any
other applicable jurisdiction. We understand that the registrar will not be
required to accept for registration of transfer any Notes, except upon
presentation of evidence satisfactory to the Company that the foregoing
restrictions on transfer have been complied with. We further understand that
the Notes purchased by us may be in the form of definitive physical certificates
and that the certificates will bear a legend reflecting the substance of this
paragraph.
We acknowledge that the Company and others will rely upon our
confirmations, acknowledgments and agreements in this letter, and we agree to
notify the Company promptly in writing if any of those representations or
warranties cease to be accurate and complete.
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.
THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED UNDER, THE LAWS OF THE
STATE OF NEW YORK.
D-1-2
<PAGE>
--------------------------------------
(Name of Purchaser)
By:-----------------------------------
Name:---------------------------------
Title:--------------------------------
Address:------------------------------
--------------------------------------
--------------------------------------
Dated: ---------
D-1-3
<PAGE>
EXHIBIT D-2
FORM OF CERTIFICATE FROM
ACQUIRING AFFILIATE ACCREDITED INVESTOR
NCI Building Systems, Inc.
7301 Fairview
Houston, Texas 77041
Harris Trust Company of New York
Wall Street Plaza
88 Pine Street, 19th Floor
New York, New York 10005
Re: NCI Building Systems, Inc.
9-1/4% Senior Subordinated Notes due 2009
Reference is hereby made to the Indenture, dated as of May 5, 1999 (the
"INDENTURE"), between NCI Building Systems, Inc. (the "COMPANY") and Harris
Trust Company of New York, as trustee. Capitalized terms used but not defined
herein shall have the meanings given to them in the Indenture.
In connection with my proposed purchase of $____ aggregate principal
amount of:
(a) / / a beneficial interest in a Global Note, or
(b) / / a Definitive Note,
I confirm that:
1. I am a natural person who is a director or executive officer of
the Company and, at this time, I have an individual net worth or joint net worth
with my spouse that exceeds $1,000,000 or had individual income in excess of
$200,000 in each of the two most recent years or joint income with my spouse in
excess of $300,000 in each of those years and have a reasonable expectation of
reaching the same income level in the current year (an "Affiliate Accredited
Investor");
2. any purchase of Notes by me will be only for my own account,
3. I have sufficient knowledge and experience in financial and
business matters that I am capable of evaluating the merits and risks of
purchasing Notes;
D-2-1
<PAGE>
4. I am not acquiring Notes with a view to any distribution of the
Notes in a transaction that would violate the Securities Act or the securities
laws of any State of the United States or any other applicable jurisdiction; and
5. I have had access to financial and other information, and have
been afforded the opportunity to ask questions of representatives of NCI and
receive answers thereto, as I deem necessary in connection with my decision to
purchase Notes.
I understand that the Notes are being offered in a transaction not
involving any public offering within the meaning of the Securities Act and that
the Notes have not been registered under the Securities Act, and I agree, on my
own behalf that the Notes may be offered, resold, pledged or otherwise
transferred only (1) to a person whom I reasonably believe to be a qualified
institutional buyer (as defined in Rule 144A under the Securities Act), in a
transaction meeting the requirements of Rule 144A, in a transaction meeting the
requirements of Rule 144, outside the United States in a transaction meeting the
requirements of Rule 903 or 904 under the Securities Act, or in compliance with
another exemption from the registration requirements of the Securities Act (and
based upon an opinion of counsel if the Company so requests), (2) to the Company
or (3) under an effective registration statement, and, in each case, in
compliance with any applicable securities laws of any State of the United States
or any other applicable jurisdiction. I understand that the registrar will not
be required to accept for registration of transfer any Notes, except upon
presentation of evidence satisfactory to the Company that the foregoing
restrictions on transfer have been complied with. I further understand that the
Notes purchased by me will be in the form of definitive physical certificates
and that the certificates will bear a legend reflecting the substance of this
paragraph.
I understand that the person from whom or which I propose to purchase
Notes (or one or more of his or its transferors), on behalf of his or its
estate, heirs, representatives, legatees, transfers and assigns, has agreed to
forego and has waived any and all rights to exchange the Notes that I propose to
purchase for identical Notes in an exchange transaction registered under the
Securities Act, and any and all rights to have the resale of those Notes by me
registered under the Securities Act. I agree to be bound by such waiver and
forbearance agreement, and understand that neither I nor my estate, heirs,
representatives, legatees, transfers and assigns shall have any right to
register the Notes I propose to purchase or to exchange those Notes for
registered Notes.
I acknowledge that the Company and others will rely upon my
confirmations, acknowledgments and agreements in this letter, and I agree to
notify the Company promptly in writing if any of those representations or
warranties cease to be accurate and complete.
D-2-2
<PAGE>
THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED UNDER, THE LAWS OF THE
STATE OF NEW YORK.
INDIVIDUAL PURCHASER
--------------------------------------
(Print Name of Purchaser)
--------------------------------------
(Signature of Purchaser)
Title at NCI:-------------------------
Address:------------------------------
--------------------------------------
--------------------------------------
Social Security Number:
--------------------------------------
D-2-3
<PAGE>
EXHIBIT E
FORM OF NOTATION OF SENIOR SUBORDINATED GUARANTEE
GUARANTEE
9-1/4% Senior Subordinated Notes due 2009
of NCI Building Systems, Inc.
For value received, each Subsidiary Guarantor (which term
includes any successor Person under the Indenture) has, jointly and severally,
unconditionally guaranteed, on a senior subordinated basis, to the extent set
forth in the Indenture and subject to the provisions in the Indenture dated as
of May 5, 1999 (the "INDENTURE") among NCI Building Systems, Inc., the
Subsidiary Guarantors listed on the signature pages thereto and Harris Trust
Company of New York, as trustee (the "TRUSTEE"), (a) the due and punctual
payment of the principal of, premium, if any, and interest on the Notes (as
defined in the Indenture), whether at maturity, by acceleration, redemption or
otherwise, the due and punctual payment of interest on overdue principal and
premium, and, to the extent permitted by law, interest, and the due and punctual
performance of all other obligations of the Company to the Holders or the
Trustee all in accordance with the terms of the Indenture and (b) in case of any
extension of time of payment or renewal of any Notes or any of such other
obligations, that the same will be promptly paid in full when due or performed
in accordance with the terms of the extension or renewal, whether at stated
maturity, by acceleration or otherwise. The obligations of each Subsidiary
Guarantor to the Holders and to the Trustee pursuant to the Guarantee of the
Notes and the Indenture are expressly subordinated and subject in right of
payment to the prior payment in full of all Subsidiary Guarantor Senior
Indebtedness of such Subsidiary Guarantor, to the extent and in the manner
provided in Article Ten of the Indenture and reference is hereby made to the
Indenture for the precise terms of the Guarantee. Each Holder, by accepting the
same, (a) agrees to and shall be bound by such provisions, (b) authorizes and
directs the Trustee, on behalf of such Holder, to take such action as may be
necessary or appropriate to effectuate the subordination as provided in the
Indenture and (c) appoints the Trustee attorney-in-fact of such Holder for such
purpose; PROVIDED, HOWEVER, that the Indebtedness evidenced by this Guarantee
shall cease to be so subordinated and subject in right of payment upon any
defeasance of this Note in accordance with the provisions of the Indenture.
E-1
<PAGE>
NCI OPERATING CORP., a Nevada
corporation
By:-----------------------------------
Name:
Title:
NCI HOLDING CORP., a Delaware
corporation
By:-----------------------------------
Name:
Title:
A&S BUILDING SYSTEMS, L.P., a Texas
limited partnership
By: NCI Operating Corp., a Nevada
corporation, its General Partner
By:-----------------------------------
Name:
Title:
NCI BUILDING SYSTEMS, L.P., a Texas
limited partnership
By: NCI Operating Corp., a Nevada
corporation, its General Partner
By:-----------------------------------
Name:
Title:
E-2
<PAGE>
METAL BUILDING COMPONENTS, L.P., a Texas
limited partnership
By: NCI Operating Corp., a Nevada
corporation, its General Partner
By:-----------------------------------
Name:
Title:
METAL COATERS OPERATING, L.P., a Texas
limited partnership
By: NCI Operating Corp., a Nevada
corporation, its General Partner
By:-----------------------------------
Name:
Title:
METAL BUILDING COMPONENTS HOLDING, INC.,
a Delaware corporation
By:-----------------------------------
Name:
Title:
METAL COATERS HOLDING, INC., a Delaware
corporation
By:-----------------------------------
Name:
Title:
E-3
<PAGE>
METAL COATERS OF CALIFORNIA, INC., a
Texas corporation
By:-----------------------------------
Name:
Title:
HARRIS TRUST COMPANY OF NEW YORK, as
Trustee
By:-----------------------------------
Name:
Title:
E-4
<PAGE>
EXHIBIT F
FORM OF SUPPLEMENTAL INDENTURE
TO BE DELIVERED BY SUBSEQUENT GUARANTORS
SUPPLEMENTAL INDENTURE (this "SUPPLEMENTAL INDENTURE"), dated as
of ________________, among __________________ (the "SUBSIDIARY GUARANTOR"), a
subsidiary of NCI Building Systems, Inc., a Delaware corporation (the
"COMPANY"), the Company, the other Subsidiary Guarantors (as defined in the
Indenture referred to herein) and Harris Trust Company of New York, as trustee
under the indenture referred to herein (the "TRUSTEE").
W I T N E S S E T H :
WHEREAS, the Company and the other Subsidiary Guarantors have
heretofore executed and delivered to the Trustee an indenture (the "INDENTURE"),
dated as May 5, 1999 providing for the issuance of 9-1/4% Senior Subordinated
Notes due 2009 (the "NOTES");
WHEREAS, the Indenture provides that under certain circumstances
the Subsidiary Guarantor shall execute and deliver to the Trustee a supplemental
indenture pursuant to which the Subsidiary Guarantor shall unconditionally
guarantee, on a senior subordinated basis, all of the Company's Obligations
under the Notes and the Indenture on the terms and conditions set forth herein
(the "GUARANTEE"); and
WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee
is authorized to execute and deliver this Supplemental Indenture.
NOW THEREFORE, in consideration of the foregoing and for other
good and valuable consideration, the receipt of which is hereby acknowledged,
the Subsidiary Guarantor and the Trustee mutually covenant and agree for the
equal and ratable benefit of the Holders as follows:
1. CAPITALIZED TERMS. Capitalized terms used herein without
definition shall have the meanings assigned to them in the Indenture.
2. AGREEMENT TO GUARANTEE. The Subsidiary Guarantor hereby
agrees as follows:
(a) Along with all Subsidiary Guarantors named in the
Indenture, to jointly and severally Guarantee to each
Holder of Notes authenticated and delivered by the
Trustee and to the Trustee and its successors and
assigns, irrespective of the validity and enforceability
of the Indenture, the Notes or the obligations of the
Company hereunder or thereunder, that:
(i) the principal of and interest on the Notes will be
promptly paid
F-1
<PAGE>
in full when due, whether at maturity, by
acceleration, redemption or otherwise, and interest
on the overdue principal of and interest on the
Notes, if any, if lawful, and all other obligations
of the Company to the Holders or the Trustee
hereunder or thereunder will be promptly paid in
full or performed, all in accordance with the terms
hereof and thereof; and
(ii) in case of any extension of time of payment or
renewal of any Notes or any of such other
obligations, that same will be promptly paid in
full when due or performed in accordance with the
terms of the extension or renewal, whether at
stated maturity, by acceleration or otherwise.
Failing payment when due of any amount so
guaranteed or any performance so guaranteed for
whatever reason, the Subsidiary Guarantors shall be
jointly and severally obligated to pay the same
immediately.
(b) The Subsidiary Guarantor will constitute a Subsidiary
Guarantor for all purposes of the Indenture, Registration
Rights Agreement and the Offering Memorandum, and will
comply with and be bound by the provisions of the
Indenture, the Registration Rights Agreement and the
Offering Memorandum applicable to the Subsidiary
Guarantors at all times after the date hereof, in each
case until released from the Guarantee pursuant to
Section 10.16 of the Indenture.
3. REPRESENTATIONS AND WARRANTIES. The undersigned
Subsidiary Guarantor hereby represents and warrants as follows:
(a) The undersigned has been duly organized, is validly
existing and in good standing (or the functional
equivalent to the concept of good standing for
non-corporate entities) under the laws of its
jurisdiction of organization and has all requisite power
and authority, and all necessary authorizations,
approvals, orders, licenses, certificates and permits of
and from regulatory or governmental officials, bodies and
tribunals, except where the failure to obtain such
authorizations, approvals, orders, licenses, certificates
and permits would not reasonably be expected to have a
Material Adverse Effect (as defined herein), to (A) carry
on its business as it is currently being conducted and
(B) own, lease, license and operate its respective
properties in accordance with its business as currently
conducted. The undersigned is duly qualified and in good
standing (or the functional equivalent to the concept of
good standing for non-corporate entities) as a foreign
organization authorized to do business in each
jurisdiction in which the nature of its business or its
F-2
<PAGE>
ownership or leasing of property requires such
qualification, except where the failure to be so
qualified would not, either individually or in the
aggregate, result in a Material Adverse Effect. A
"Material Adverse Effect" means any material adverse
effect on the business, condition (financial or other),
properties, results of operations or prospects of the
Company and the Subsidiary Guarantors (including the
undersigned) taken as a whole.
(b) The undersigned has all requisite power and authority to
execute, deliver and perform all of its obligations under
this Supplemental Indenture or the Indenture, to the
extent the undersigned becomes or is deemed to be a party
thereto.
(c) The execution, delivery and performance by the
undersigned of this Supplemental Indenture, or the
Indenture to the extent the undersigned becomes or is
deemed to be a party thereto, does not or will not
violate, conflict with or constitute a breach of any of
the terms or provisions of, or constitute a Default under
(or an event that with notice or the lapse of time, or
both, would constitute a Event of Default), or require
consent under, or result in the creation or imposition of
a lien, charge or encumbrance on any property or assets
of the undersigned or an acceleration of any indebtedness
of the undersigned pursuant to, (i) the charter, bylaws
or other constituent documents of the undersigned, (ii)
any law, statute, rule or regulation applicable to the
undersigned or its respective assets or properties or
(iii) any judgment, order or decree of any domestic or
foreign court or governmental agency or authority being
applicable to or having jurisdiction over the undersigned
or its respective assets or properties. No consents or
waivers from any other person or entity are required for
the execution, delivery and performance of this
Supplemental Indenture other than such consents and
waivers as have been obtained.
(d) This Supplemental Indenture and each other relevant
document to which the undersigned is, will become or is
or will be deemed a party in connection with the
Indenture have been duly and validly authorized, executed
and delivered by the undersigned.
(e) This Supplemental Indenture constitutes the legal, valid
and binding obligation of the undersigned, enforceable
against the undersigned in accordance with its terms,
except as enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or similar laws affecting the
enforcement of creditors'
F-3
<PAGE>
rights generally and by general principles of equity and
the discretion of the court before which any proceedings
therefor may be brought.
4. EXECUTION AND DELIVERY. Each Subsidiary Guarantor agrees
that the Subsidiary Guarantees shall remain in full force and effect
notwithstanding any failure to endorse on each Note a notation of such
Subsidiary Guarantee.
5. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF
NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE BUT
WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT
THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED
THEREBY.
6. COUNTERPARTS. The parties may sign any number of copies
of this Supplemental Indenture. Each signed copy shall be an original, but all
of them together represent the same agreement.
7. EFFECT OF HEADINGS. The Section headings herein are for
convenience only and shall not affect the construction hereof.
8. THE TRUSTEE. The Trustee shall not be responsible in any
manner whatsoever for or in respect of the validity or sufficiency of this
Supplemental Indenture or for or in respect of the recitals contained herein,
all of which recitals are made solely by the Subsidiary Guarantor and the
Company.
F-4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Supplemental Indenture to be duly executed and attested, all as of the date
first above written.
Dated: ------------
NCI BUILDING SYSTEMS, INC., a Delaware
corporation
By:-----------------------------------
Name:
Title:
NCI OPERATING CORP., a Nevada
corporation
By:-----------------------------------
Name:
Title:
NCI HOLDING CORP., a Delaware
corporation
By:-----------------------------------
Name:
Title:
A&S BUILDING SYSTEMS, L.P., a Texas
limited partnership
By: NCI Operating Corp., a Nevada
Corporation, its General Partner
By:-----------------------------------
Name:
Title:
NCI BUILDING SYSTEMS, L.P., a Texas
limited partnership
By: NCI Operating Corp., a Nevada
F-5
<PAGE>
Corporation, its General Partner
By:-----------------------------------
Name:
Title:
METAL BUILDING COMPONENTS, L.P., a Texas
limited partnership
By: NCI Operating Corp., a Nevada
Corporation, its General Partner
By:-----------------------------------
Name:
Title:
METAL COATERS OPERATING, L.P., a Texas
limited partnership
By: NCI Operating Corp., a Nevada
Corporation, its General Partner
By:-----------------------------------
Name:
Title:
METAL BUILDING COMPONENTS HOLDING, INC.,
a Delaware corporation
By:-----------------------------------
Name:
Title:
METAL COATERS HOLDING, INC., a Delaware
corporation
By:-----------------------------------
Name:
F-6
<PAGE>
Title:
METAL COATERS OF CALIFORNIA, INC., a
Texas corporation
By:-----------------------------------
Name:
Title:
Harris Trust Company of New York, as
Trustee
By:-----------------------------------
Name:
Title:
F-7
<PAGE>
SCHEDULE I
AFFILIATE TRANSACTIONS PURSUANT TO AGREEMENTS ENTERED INTO
OR IN EFFECT ON THE ISSUE DATE
- ------------------------------------------------------------------------------
None.
F-1
<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 (i) our reports dated December 8, 1998 with respect to the
consolidated financial statements of NCI Building Systems, Inc., and August 5,
1998 with respect to the consolidated financial statements of Amatek
Holdings, Inc. and subsidiaries, in the Registration Statement (Form S-4) and
related Prospectus of NCI Building Systems, Inc. for the registration of its
$125 million Senior Subordinated Notes due 2009.
We also consent to the incorporation by reference therein of our report
dated December 8, 1998 with respect to the financial statement schedule of
NCI Building Systems, Inc. for the years ended October 31, 1998, 1997 and
1996 included in the Annual Report (Form 10-K) for 1998 filed with the
Securities and Exchange Commission.
/s/ ERNST & YOUNG LLP
Ernst & Young LLP
Houston, Texas
June 3, 1999
<PAGE>
NCI BUILDING SYSTEMS, INC.
LETTER OF TRANSMITTAL
FOR
TENDER OF ALL OUTSTANDING
9 1/4% SERIES A SENIOR SUBORDINATED NOTES DUE 2009
IN EXCHANGE FOR
9 1/4% SERIES B SENIOR SUBORDINATED NOTES DUE 2009
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON , 1999, UNLESS EXTENDED (THE "EXPIRATION DATE")
OUTSTANDING NOTES TENDERED IN THE EXCHANGE OFFER MAY BE WITHDRAWN
AT ANY TIME BEFORE 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE
DELIVER TO THE EXCHANGE AGENT:
HARRIS TRUST COMPANY OF NEW YORK
<TABLE>
<S> <C> <C>
BY MAIL: BY FACSIMILE TRANSMISSION: BY HAND OR
Wall Street Station (FOR ELIGIBLE INSTITUTIONS OVERNIGHT COURIER:
P.O. Box 1023 ONLY) Receive Window
New York, NY 10268-1023 (212) 701-7636 or 7637 Wall Street Plaza
88 Pine Street, 19th Floor
New York, NY 10005
FOR INFORMATION BY TELEPHONE
(CALL COLLECT):
(212) 701-7624
</TABLE>
Delivery of this Letter of Transmittal to an address other than as set forth
above or transmission of instructions via a facsimile number other than the one
listed above will not constitute a valid delivery. The instructions accompanying
this Letter of Transmittal should be read carefully before this Letter of
Transmittal is completed.
The undersigned hereby acknowledges receipt and review of the prospectus
dated , 1999 of NCI Building Systems, Inc. ("NCI") and this Letter of
Transmittal, which together describe NCI's offer (the "Exchange Offer") to
exchange its 9 1/4% Series B Senior Subordinated Notes due 2009 (the "Exchange
Notes"), which have been registered under the Securities Act of 1933, pursuant
to a registration statement of which the prospectus is a part, for an equal
principal amount of its issued and outstanding 9 1/4% Series A Senior
Subordinated Notes due 2009 (the "Outstanding Notes"). Capitalized terms used
but not defined herein have the respective meaning given to them in the
prospectus.
NCI reserves the right, at any time or from time to time, to extend the
Exchange Offer at its discretion. "Expiration Date" shall then mean the latest
date to which the Exchange Offer is extended. NCI shall notify the holders of
the Outstanding Notes of any extension by announcement thereof, before 9:00
a.m., New York City time, on the next business day after the previously
scheduled Expiration Date.
This Letter of Transmittal is to be used by a holder of Outstanding Notes if
original Outstanding Notes are to be forwarded with this Letter of Transmittal
or if an Agent's Message is to be used if delivery of Outstanding Notes is to be
made by book-entry transfer to the account maintained by the Exchange Agent 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 Your Notes." Holders of Outstanding Notes whose
Outstanding Notes are not immediately available, or who are unable to deliver
their Outstanding Notes and all other documents required by this Letter of
Transmittal to the Exchange Agent on or before the Expiration Date, or who are
unable to complete the procedure for book-entry transfer on a timely basis, must
tender their Outstanding Notes according to the guaranteed delivery procedures
set forth in the prospectus under the caption "The Exchange Offer--Guaranteed
<PAGE>
Delivery Procedures." See Instructions 1 and 2. Delivery of documents to the
Book-Entry Transfer Facility does not constitute delivery to the Exchange Agent.
The term "holder" with respect to the Exchange Offer means any person in
whose name Outstanding Notes are registered on the books of NCI or any other
person who has obtained a properly completed bond power from the registered
holder. 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 Outstanding Notes must
complete this Letter of Transmittal in its entirety.
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS CAREFULLY
BEFORE CHECKING ANY BOX BELOW.
THE INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED.
QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS
AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT.
List below the Outstanding Notes to which this Letter of Transmittal
relates. If the space below is inadequate, list the registered numbers and
principal amounts on a separate signed schedule and affix the list to this
Letter of Transmittal.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
DESCRIPTION OF OUTSTANDING NOTES TENDERED
-------------------------------------------------------------------------------------------
AGGREGATE
PRINCIPAL TOTAL PRINCIPAL
NAME(S) AND ADDRESS(ES) OF REGISTERED CERTIFICATE AMOUNT AMOUNT OF
HOLDERS EXACTLY NUMBER(S) OF REPRESENTED BY OUTSTANDING
AS NAMES(S) APPEAR(S) ON OUTSTANDING NOTES OUTSTANDING OUTSTANDING NOTES
(PLEASE FILL IN IF BLANK) NOTES* NOTES TENDERED**
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------
-----------------------------------------------
-----------------------------------------------
-----------------------------------------------
-----------------------------------------------
-----------------------------------------------
-----------------------------------------------
-----------------------------------------------
- ---------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed by book-entry holders.
** Unless otherwise indicated, any tendering holder of Outstanding Notes will
be deemed to have tendered the entire aggregate principal amount represented
by the Outstanding Notes. All tenders must be in integral multiples of
$1,000.
/ / Check here if tendered Outstanding Notes are enclosed herewith.
/ / Check here if tendered Outstanding 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(s) of Tendering Institution: __________________________________________
Account Number: ____________________________________________________________
Transaction Code Number: ___________________________________________________
/ / Check here if tendered Outstanding Notes are being delivered pursuant to a
notice of guaranteed delivery enclosed herewith and complete the following:
Name(s) of Registered holder(s) of Outstanding Notes: ______________________
Date of Execution of Notice of Guaranteed Delivery: ________________________
Window Ticket Number (if available): _______________________________________
<PAGE>
Name of Eligible Institution that Guaranteed Delivery: _____________________
Account Number (if delivered by book-entry transfer): ______________________
/ / Check here if you are a broker-dealer and wish to receive 10 additional
copies of the prospectus and 10 copies of any amendments or supplements
thereto:
Name: ______________________________________________________________________
Address: ___________________________________________________________________
SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Subject to the terms and conditions of the Exchange Offer, the undersigned
hereby tenders to NCI for exchange the principal amount of Outstanding Notes
indicated above. Subject to and effective upon the acceptance for exchange of
the principal amount of Outstanding Notes tendered in accordance with this
Letter of Transmittal, the undersigned hereby exchanges, assigns and transfers
to NCI all right, title and interest in and to the Outstanding Notes tendered
for exchange hereby. The undersigned hereby irrevocably constitutes and appoints
the Exchange Agent, the agent and attorney-in-fact of the undersigned (with full
knowledge that the Exchange Agent also acts as the agent of NCI in connection
with the Exchange Offer) with respect to the tendered Outstanding Notes with
full power of substitution to (1) deliver the Outstanding Notes, or transfer
ownership of the Outstanding Notes on the account books maintained by the
Book-Entry Transfer Facility, to NCI and deliver all accompanying evidences of
transfer and authenticity, and (2) present the Outstanding Notes for transfer on
the books of NCI and receive all benefits and otherwise exercise all rights of
beneficial ownership of the Outstanding Notes, all in accordance with the terms
of the Exchange Offer. The power of attorney granted in this paragraph shall be
deemed to be irrevocable and coupled with an interest.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, exchange, assign and transfer the Outstanding
Notes tendered hereby and to acquire the Exchange Notes issuable upon the
exchange of the tendered Outstanding Notes, and that NCI will acquire good and
unencumbered title thereto, free and clear of all liens, restrictions, charges
and encumbrances and not subject to any adverse claim, when the same are
accepted for exchange by NCI.
The undersigned acknowledge(s) that this Exchange Offer is being made in
reliance upon interpretations contained in no-action letters issued to third
parties by the staff of the SEC, including Exxon Capital Holdings Corporation,
SEC No-Action Letter (available April 13, 1989), Morgan Stanley & Co. Inc., SEC
No-Action Letter (available June 5, 1991) (the "Morgan Stanley Letter") and Mary
Kay Cosmetics, Inc., SEC No-Action Letter (available June 5, 1991), that the
Exchange Notes issued in exchange for the Outstanding Notes pursuant to the
Exchange Offer may be offered for resale, resold and otherwise transferred by
holders thereof (other than (1) a broker-dealer who purchased Outstanding Notes
exchanged for the Exchange Notes directly from NCI to resell pursuant to Rule
144A or any other available exemption under the Securities Act and (2) an
affiliate of NCI), without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that the Exchange Notes are
acquired in the ordinary course of the holders' business and the holders are not
participating in, and have no arrangement with any person to participate in, the
distribution of the Exchange Notes. The undersigned specifically represent(s) to
NCI that (1) any Exchange Notes acquired in exchange for Outstanding Notes
tendered hereby are being acquired in the ordinary course of business of the
person receiving the Exchange Notes, whether or not the undersigned, (2) the
undersigned is not participating in, and has no arrangement with any person to
participate in, the distribution of Exchange Notes, and (3) neither the
undersigned nor any other person is an "affiliate" (as defined in Rule 405 under
the Securities Act) of NCI or a broker-dealer tendering Outstanding Notes
acquired directly from NCI for its own account.
If the undersigned or the person receiving the Exchange Notes is a
broker-dealer that is receiving Exchange Notes for its own account pursuant to
the Exchange Offer, the undersigned acknowledges that it or the other person
will deliver a prospectus in connection with any resale of the Exchange Notes.
The undersigned acknowledges that if the undersigned is participating in the
Exchange Offer for the purpose of
<PAGE>
distributing the Exchange Notes (1) the undersigned cannot rely on the position
of the staff of the SEC in the Morgan Stanley Letter and similar SEC 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 a secondary resale transaction of the Exchange Notes, in which
case the registration statement must contain the selling security holder
information required by Item 507 or Item 508, as applicable, of Regulation S-K
of the SEC, and (2) a broker-dealer that delivers a prospectus to purchasers in
connection with the resales will be subject to certain of the civil liability
provisions under the Securities Act and will be bound by the provisions of the
Registration Rights Agreement with respect to the Outstanding Notes (including
certain indemnification rights and obligations).
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Exchange Agent or NCI to be necessary or desirable to
complete the exchange, assignment and transfer of the Outstanding Notes tendered
hereby, including the transfer of the Outstanding Notes on the account books
maintained by the Book-Entry Transfer Facility.
For purposes of the Exchange Offer, NCI shall be deemed to have accepted for
exchange validly tendered Outstanding Notes when, as and if NCI gives oral or
written notice thereof to the Exchange Agent. Any tendered Outstanding Notes
that are not accepted for exchange pursuant to the Exchange Offer for any reason
will be returned, without expense, to the undersigned at the address shown below
or at a different address as may be indicated herein 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
representatives, successors and assigns.
The undersigned acknowledges that NCI's acceptance of properly tendered
Outstanding Notes pursuant to the procedures described under the caption "The
Exchange Offer--Procedures for Tendering Your Notes" in the prospectus and in
the instructions hereto will constitute a binding agreement between the
undersigned and NCI upon the terms and subject to the conditions of the Exchange
Offer. The undersigned further acknowledges its obligations under the
Registration Rights Agreement as applicable to the Exchange Offer and the
Registration Statement of which the prospectus is a part.
Unless otherwise indicated under "Special Issuance Instructions," please
issue the Exchange Notes issued in exchange for the Outstanding Notes accepted
for exchange and return any Outstanding Notes not tendered or not exchanged, in
the name(s) of the undersigned. Similarly, unless otherwise indicated under
"Special Delivery Instructions," please mail or deliver the Exchange Notes
issued in exchange for the Outstanding Notes accepted for exchange and any
Outstanding Notes not tendered or not exchanged (and accompanying documents, as
appropriate) to the undersigned at the address shown below the undersigned's
signature(s). If both the "Special Issuance Instructions" and "Special Delivery
Instructions" are completed, please issue the Exchange Notes issued in exchange
for the Outstanding Notes accepted for exchange in the name(s) of, and return
any Outstanding Notes not tendered or not exchanged to, the person(s) so
indicated. The undersigned recognizes that NCI has no obligation pursuant to the
"Special Issuance Instructions" and "Special Delivery Instructions" to transfer
any Outstanding Notes from the name of the registered holder(s) thereof if NCI
does not accept for exchange any of the Outstanding Notes tendered for exchange.
<PAGE>
- -------------------------------------------
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 5 AND 6)
To be completed ONLY if (1) Outstanding Notes in a principal amount not
tendered, or Exchange Notes issued in exchange for Outstanding Notes
accepted for exchange, are to be issued in the name of someone other than
the undersigned or (2) Outstanding Notes tendered by book-entry transfer
that are not exchanged are to be reissued by credit to an account maintained
at the Book-Entry Transfer Facility.
Issue Exchange Notes And/or Outstanding Notes to:
Name: ______________________________________________________________________
(PLEASE TYPE OR PRINT)
Address: ___________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
(INCLUDE ZIP CODE)
__________________________________________________________________________
(COMPLETE SUBSTITUTE FORM W-9 BELOW)
__________________________________________________________________________
(TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER)
- ------------------------------------------------------
- ------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 5 AND 6)
To be completed ONLY if Outstanding Notes in a principal amount not
tendered, or Exchange Notes issued in exchange for Outstanding Notes
accepted for exchange, are to be mailed or delivered to someone other than
the undersigned, or to the undersigned at an address other than that shown
below the undersigned's signature.
Mail or deliver Exchange Notes and/or Outstanding Notes to:
Name: ______________________________________________________________________
(PLEASE TYPE OR PRINT)
Address: ___________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
(INCLUDE ZIP CODE)
_________________________________________________________________________
(TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER)
- -----------------------------------------------------
<TABLE>
<C> <S> <C>
- --------------------------------------------------------------------------------------------------------------
SUBSTITUTE Part 1--PLEASE PROVIDE YOUR TIN Social Security Number
FORM W-9 IN THE BOX AT RIGHT AND CERTIFY or
BY SIGNING AND DATING BELOW
Employer Identification Number
-------------------------
--------------------------------------------------------------------
Part 2--Certification--Under penalties of perjury , I certify that:
(1) The number shown on this form is my correct Taxpayer
Department of the Treasury Identification Number (or I am waiting for a number to be issued to
Internal Revenue Service me) and
(2) I am not subject to backup withholding either because I am
exempt from backup withholding, I have not been notified by the
Internal Revenue Service ("IRS") that I am subject to backup
withholding as a result of failure to report all interest or
dividends, or the IRS has notified me that I am no longer subject to
backup withholding.
--------------------------------------------------------------------
Certification Instructions--You Part 3--Awaiting TIN / /
Payer's Request for Taxpayer must cross out item (2) in Part 2 Please complete the Certificate
Identification Number ("TIN") above if you have been notified of Awaiting Taxpayer
by the IRS that you are currently Identification below
subject to backup withholding as
a result of failure to report all
interest or dividends on your tax
return.
Signature --------------------------------- Date
------------------
- --------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE EXCHANGE OFFER. PLEASE
REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
<PAGE>
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3
OF THE SUBSTITUTE FORM W-9
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or
(b) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a taxpayer identification number to the
payer within 60 days, 31% of all reportable payments made to me thereafter
will be withheld until I provide a number.
Signature
--------------------------------------------------------- Date
---------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CERTIFICATE FOR FOREIGN RECORD HOLDERS
Under penalties of perjury, I certify that I am not a United States
citizen or resident (or I am signing for a foreign corporation, partnership,
estate or trust).
Signature
--------------------------------------------------------- Date
---------------------
- --------------------------------------------------------------------------------
<PAGE>
/ / Credit unexchanged Outstanding Notes delivered by book-entry transfer to
the Book-Entry Transfer Facility account set forth below:
Book-Entry Transfer Facility Account Number: _______________________________
IMPORTANT
PLEASE SIGN HERE WHETHER OR NOT
OUTSTANDING NOTES ARE BEING PHYSICALLY TENDERED HEREBY
(COMPLETE ACCOMPANYING SUBSTITUTE FORM W-9)
X ______________________________________________________________________________
X ______________________________________________________________________________
(SIGNATURE(S) OF REGISTERED HOLDERS OF OUTSTANDING NOTES)
Dated: _____________________ , 1999
(The above lines must be signed by the registered holder(s) of Outstanding
Notes as name(s) appear(s) on the Outstanding Notes or on a security position
listing, 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 Outstanding Notes to which this
Letter of Transmittal relate are held of record by two or more joint holders,
then all the holders must sign this Letter of Transmittal. If signature is by a
trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
then the person must (1) set forth his or her full title below and (2) unless
waived by NCI, submit evidence satisfactory to NCI of the person's authority so
to act. See Instruction 5 regarding the completion of this Letter of
Transmittal, printed below.)
Name(s): _______________________________________________________________________
________________________________________________________________________________
(PLEASE TYPE OR PRINT)
Capacity: ______________________________________________________________________
Address: _______________________________________________________________________
________________________________________________________________________________
(INCLUDE ZIP CODE)
Area Code and Telephone Number: ________________________________________________
<PAGE>
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)
Dated: _____________________ , 1999
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND OUTSTANDING NOTES OR
BOOK-ENTRY CONFIRMATION. All physically delivered Outstanding Notes or any
confirmation of a book-entry transfer to the Exchange Agent's account at the
Book-Entry Transfer Facility of Outstanding Notes tendered by book-entry
transfer (a "Book-Entry Confirmation"), as well as a properly completed and duly
executed copy of this Letter of Transmittal or facsimile hereof or Agent's
Message, and any other documents required by this Letter of Transmittal, must be
received by the Exchange Agent at its address set forth herein before 5:00 p.m.,
New York City time, on the Expiration Date. The method of delivery of the
tendered Outstanding Notes, this Letter of Transmittal and all other required
documents to the Exchange Agent is at the election and risk of the holder and,
except as otherwise provided below, the delivery will be deemed made only when
actually received or confirmed by the Exchange Agent. Instead of delivery by
mail, it is recommended that the holder use an 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
Outstanding Notes should be sent to NCI.
2. GUARANTEED DELIVERY PROCEDURES. Holders who wish to tender their
Outstanding Notes and whose Outstanding Notes are not immediately available or
who cannot deliver their Outstanding Notes, this Letter of Transmittal or any
other documents required hereby to the Exchange Agent before the Expiration Date
or who cannot complete the procedure for book-entry transfer on a timely basis
and deliver an Agent's Message, must tender their Outstanding Notes according to
the guaranteed delivery procedures set forth in the prospectus. Pursuant to
those procedures: (1) the 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., a commercial bank or a trust company
having an office or correspondent in the United States or an "eligible guarantor
institution" within the meaning of Rule 17Ad-15 under the Securities Exchange
Act of 1934 (an "Eligible Institution"); (2) before the Expiration Date, the
Exchange Agent must have received from 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 of the Outstanding Notes, the registration number(s) of the Outstanding
Notes and the total principal amount of Outstanding 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, this Letter of
Transmittal (or facsimile hereof) together with the Outstanding Notes in proper
form for transfer (or a Book-Entry Confirmation) and any other documents
required hereby, must be deposited by the Eligible Institution with the Exchange
Agent within three New York Stock Exchange trading days after the Expiration
Date; and (3) the certificates for all physically tendered shares of Outstanding
Notes, in proper form for transfer (or a Book-Entry Confirmation, as the case
may be) and all other documents required hereby are received by the Exchange
Agent within three New York Stock Exchange trading days after the Expiration
Date.
Any holder of Outstanding Notes who wishes to tender Outstanding Notes
pursuant to the guaranteed delivery procedures described above must ensure that
the Exchange Agent receives the Notice of Guaranteed Delivery before 5:00 p.m.,
New York City time, on the Expiration Date. Upon request of the Exchange Agent,
a Notice of Guaranteed Delivery will be sent to holders who wish to tender their
Outstanding Notes according to the guaranteed delivery procedures set forth
above.
See "The Exchange Offer--Guaranteed Delivery Procedures" section of the
prospectus.
3. TENDER OF HOLDER. Only a holder of Outstanding Notes may tender the
Outstanding Notes in the Exchange Offer. Any beneficial holder of Outstanding
Notes who is not the registered holder and who wishes to tender should arrange
with the registered holder to execute and deliver this Letter of Transmittal on
the beneficial holder's behalf or must, before completing and executing this
Letter of Transmittal and delivering his Outstanding Notes, either make
appropriate arrangements to register ownership of the Outstanding Notes in the
holder's name or obtain a properly completed bond power from the registered
holder.
<PAGE>
4. PARTIAL TENDERS. Tenders of Outstanding Notes will be accepted only in
integral multiples of $1,000. If less than the entire principal amount of any
Outstanding Notes is tendered, the tendering holder should fill in the total
principal amount tendered in the fourth column of the box entitled "Description
of Outstanding Notes Tendered" above. The entire principal amount of Outstanding
Notes delivered to the Exchange Agent will be deemed to have been tendered
unless otherwise indicated. If the entire principal amount of all Outstanding
Notes is not tendered, then Outstanding Notes for the principal amount of
Outstanding Notes not tendered and Exchange Notes issued in exchange for any
Outstanding Notes accepted 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, promptly after the Outstanding Notes are accepted for
exchange.
5. SIGNATURES ON THIS LETTER OF TRANSMITTAL; BOND POWERS AND ENDORSEMENTS;
MEDALLION GUARANTEE OF SIGNATURES. If this Letter of Transmittal (or facsimile
hereof) is signed by the record holder(s) of the Outstanding Notes tendered
hereby, the signature must correspond with the name(s) as written on the face of
the Outstanding Notes without alteration, enlargement or any change whatsoever.
If this Letter of Transmittal (or facsimile hereof) is signed by a participant
in the Book-Entry Transfer Facility, the signature must correspond with the name
as it appears on the security position listing as the holder of the Outstanding
Notes.
If this Letter of Transmittal (or facsimile hereof) is signed by the
registered holder or holders of Outstanding Notes listed and tendered hereby and
the Exchange Notes issued in exchange therefor are to be issued (or any
untendered principal amount of Outstanding Notes is to be reissued) to the
registered holder, the holder need not and should not endorse any tendered
Outstanding Notes, nor provide a separate bond power. In any other case, the
holder must either properly endorse the Outstanding Notes tendered or transmit a
properly completed separate bond power with this Letter of Transmittal, with the
signatures on the endorsement or bond power guaranteed by an Eligible
Institution.
If this Letter of Transmittal (or facsimile hereof) is signed by a person
other than the registered holder or holders of any Outstanding Notes listed, the
Outstanding Notes must be endorsed or accompanied by appropriate bond powers, in
each case signed as the name of the registered holder or holders appears on the
Outstanding Notes.
If this Letter of Transmittal (or facsimile hereof) or any Outstanding 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, those persons should so indicate when signing, and,
unless waived by NCI, evidence satisfactory to NCI of their authority to act
must be submitted with this Letter of Transmittal.
Endorsements on Outstanding Notes or signatures on bond powers required by
this Instruction 5 must be guaranteed by an Eligible Institution.
No signature guarantee is required if (1) this Letter of Transmittal (or
facsimile hereof) is signed by the registered holder(s) of the Outstanding Notes
tendered herein (or by a participant in the Book-Entry Transfer Facility whose
name appears on a security position listing as the owner of the tendered
Outstanding Notes) and the Exchange Notes are to be issued directly to the
registered holder(s) (or, if signed by a participant in the Book-Entry Transfer
Facility, deposited to the participant's account at the Book-Entry Transfer
Facility) and neither the box entitled "Special Delivery Instructions" nor the
box entitled "Special Registration Instructions" has been completed, or (2) the
Outstanding Notes are tendered for the account of an Eligible Institution. In
all other cases, all signatures on this Letter of Transmittal (or facsimile
hereof) must be guaranteed by an Eligible Institution.
6. SPECIAL REGISTRATION AND DELIVERY INSTRUCTIONS. Tendering holders
should indicate, in the applicable box or boxes, the name and address (or
account at the Book-Entry Transfer Facility) to which Exchange Notes or
substitute Outstanding Notes for principal amounts not tendered or not accepted
for exchange are to be issued or sent, if different from the name and address of
the person signing this Letter of Transmittal. In the case of issuance in a
different name, the taxpayer identification or social security number of the
person named must also be indicated.
<PAGE>
7. TRANSFER TAXES. NCI will pay all transfer taxes, if any, applicable to
the exchange of Outstanding Notes pursuant to the Exchange Offer. If, however,
Exchange Notes or Outstanding Notes for principal amounts not tendered or
accepted for exchange are to be delivered to, or are to be registered or issued
in the name of, any person other than the registered holder of the Outstanding
Notes tendered hereby, or if tendered Outstanding Notes are registered in the
name of any person other than the person signing this Letter of Transmittal, or
if a transfer tax is imposed for any reason other than the exchange of
Outstanding Notes pursuant to the Exchange Offer, then the amount of any
transfer taxes (whether imposed on the registered holder or any other persons)
will be payable by the tendering holder. If satisfactory evidence of payment of
the taxes or exemption therefrom is not submitted with this Letter of
Transmittal, the amount of the transfer taxes will be billed directly to the
tendering holder.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 7, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE OUTSTANDING NOTES LISTED IN THIS LETTER
OF TRANSMITTAL.
8. TAX IDENTIFICATION NUMBER. Federal income tax law requires that a
holder of any Outstanding Notes which are accepted for exchange must provide NCI
(as payer) 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 NCI 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 others, all corporations and certain foreign individuals) are not subject
to these backup withholding and reporting requirements. See the enclosed
"Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9" for additional instructions.
To prevent backup withholding, each tendering holder must provide the
holder's correct TIN by completing the Substitute Form W-9 set forth herein,
certifying that the TIN provided is correct (or that the holder is awaiting a
TIN), and that (1) the holder has not been notified by the Internal Revenue
Service that the holder is subject to backup withholding as a result of failure
to report all interest or dividends or (2) the Internal Revenue Service has
notified the holder that the holder is no longer subject to backup withholding.
If the Outstanding 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.
NCI reserves the right in its sole discretion to take whatever steps are
necessary to comply with NCI's obligations regarding backup withholding.
9. VALIDITY OF TENDERS. All questions as to the validity, form,
eligibility (including time of receipt), acceptance and withdrawal of tendered
Outstanding Notes will be determined by NCI in its sole discretion, which
determination will be final and binding. NCI reserves the absolute right to
reject any and all Outstanding Notes not properly tendered or any Outstanding
Notes NCI's acceptance of which would, in the opinion of NCI or its counsel, be
unlawful. NCI also reserves the absolute right to waive any conditions of the
Exchange Offer or defects or irregularities in tenders as to particular
Outstanding Notes. NCI's interpretation of the terms and conditions of the
Exchange Offer (including this Letter of Transmittal and the instructions
hereto) shall be final and binding on all parties. Unless waived, any defects or
irregularities in connection with tenders of Outstanding Notes must be cured
within such time as NCI shall determine. Neither NCI, the Exchange Agent nor any
person shall be under any duty to give notification of defects or irregularities
with regard to tenders of Outstanding Notes nor shall any of them incur any
liability for failure to give notification.
10. WAIVER OF CONDITIONS. NCI reserves the absolute right to waive, in
whole or part, any of the conditions to the Exchange Offer set forth in the
prospectus.
11. NO CONDITIONAL TENDER. No alternative, conditional, irregular, or
contingent tender of Outstanding Notes on transmittal of this Letter of
Transmittal will be accepted.
12. MUTILATED, LOST, STOLEN OR DESTROYED OUTSTANDING NOTES. Any holder
whose Outstanding Notes have been mutilated, lost, stolen or destroyed should
contact the Exchange Agent at the address indicated above for further
instructions.
<PAGE>
13. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Requests for assistance
or for additional copies of the prospectus or this Letter of Transmittal may be
directed to the Exchange Agent at the address or telephone number set forth on
the cover 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. WITHDRAWAL. Tenders may be withdrawn only pursuant to the limited
withdrawal rights set forth in the prospectus under the caption "The Exchange
Offer--Withdrawal Rights."
IMPORTANT: THIS MANUALLY SIGNED LETTER OF TRANSMITTAL OR A MANUALLY SIGNED
FACSIMILE HEREOF (TOGETHER WITH THE OUTSTANDING NOTES DELIVERED BY
BOOK-ENTRY TRANSFER OR IN ORIGINAL HARD COPY FORM) MUST BE RECEIVED
BY THE EXCHANGE AGENT, OR THE NOTICE OF GUARANTEED DELIVERY MUST BE
RECEIVED BY THE EXCHANGE AGENT, BEFORE THE EXPIRATION DATE.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
(SECTION REFERENCES ARE TO THE INTERNAL REVENUE CODE)
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER.
Social Security Numbers have nine digits separated by two hyphens (I.E.,
000-00-0000). Employer Identification Numbers have nine digits separated by only
one hyphen (I.E., 00-0000000). The table below will help determine the type of
number to give the payer.
<TABLE>
<C> <S> <C>
- ------------------------------------------------------------------
GIVE THE SOCIAL
SECURITY NUMBER OF:
FOR THIS TYPE OF ACCOUNT:
- ------------------------------------------------------------------
</TABLE>
<TABLE>
<C> <S> <C>
1. Individual the individual
2. Two or more individuals (joint the actual owner of
account) the account or, if
combined funds, the
first individual on
the account (1)
3. Custodian account of a minor the minor (2)
(Uniform Gift to Minors Act)
4. a. The usual revocable savings the grantor-trustee
trust (grantor is also (1)
trustee
b. So-called trust account that the actual owner (1)
is not a legal or valid trust
under state law
5. Sole Proprietorship the owner (3)
6. A valid trust, estate or the legal entity (4)
pension trust
7. Corporate the corporation
8. Association, club, religious, the organization
charitable, educational or
other tax exempt organization
9. Partnership the partnership
10. A broker or registered nominee the broker or nominee
11. Account with the Department of the public entity
Agriculture in the name of a
public entity (such as a state
or local government, school
district or prison) that
receives agricultural program
payments
</TABLE>
<TABLE>
<C> <S> <C>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Show your individual name. You may also enter your business name. You may
use either your SSN or EIN.
(4) List first and circle the name of the valid trust, estate or pension trust.
Do not furnish the identifying number of the personal representative or
trustee unless the legal entity is not designated in the account title.
NOTE: IF NO NAME IS CIRCLED WHEN THERE IS MORE THAN ONE NAME, THE NUMBER WILL
BE CONSIDERED TO BE THAT OF THE FIRST
NAME LISTED.
NAME. If you are an individual, you must generally provide the name shown on
your social security card. However, if you have changed your last name, for
instance, due to marriage, without informing the Social Security Administration
of the name change, please enter your first name, the last name shown on your
social security card, and your new last name.
OBTAINING A NUMBER. If you don't have a TIN, apply for one immediately. To
apply, obtain Form SS-5, Application for a Social Security Card, from your local
office of the Social Security Administration, or Form SS-4, Application for
Employer Identification Number, from your local IRS office.
PAYEES AND PAYMENTS EXEMPT FROM BACKUP WITHHOLDING. The following is a list of
payees generally exempt from backup withholding and or which no information
reporting is required. For interest and dividends, all listed payees are exempt
except the payee in item (9). For broker transactions, payees listed in (1)
through (13) and a person registered under the Investment Advisers Act of 1940
who regularly acts as a broker are exempt. Payments subject to reporting under
sections 6041 and 6041A are generally exempt from backup withholding only if
made to payees described in items (1) through (7), except that a corporation
(except certain hospitals described in Regulations section 1.6041-3(c)) that
provides medical and health care services or bills and collects payments for
those services is not exempt from backup withholding or information reporting.
(1) A corporation.
(2) An organization exempt from tax under section 501(a), or an IRA, or a
custodial account under section 403(b)(7) if the account satisfies the
requirements of section 401(f)(2).
(3) The United States or any of its agencies or instrumentalities.
(4) A state, the District of Columbia, a possession of the United States, or
any of their political subdivision or instrumentalities.
(5) A foreign government or any of its political subdivisions, agencies or
instrumentalities.
(6) An international organization or any of its agencies or
instrumentalities.
(7) A foreign central bank of issue.
(8) A dealer in securities or commodities required to register in the U.S.,
the District of Columbia or a possession of the U.S.
<PAGE>
(9) A futures commission merchant registered with the Commodity Futures
Trading Commission.
(10) A real estate investment trust.
(11) An entity registered at all times during the tax year under the
Investment Company Act of 1940.
(12) A common trust fund operated by a bank under section 584(a).
(13) A financial institution.
(14) A middleman known in the investment community as a nominee or who is
listed in the most recent publication of the American Society of
Corporate Secretaries, Inc., Nominee List.
(15) A trust exempt from tax under section 664(c) or described in section
4947(a)(1).
Payments of dividends generally not subject to backup withholding include
the following:
- Payments to nonresident aliens subject to withholding under section 1441.
- Payments to partnerships not engaged in a trade or business in the U.S.
and that have a least one nonresident alien partner.
- Payments made by certain foreign organizations.
- Payments of patronage dividends not paid in money.
- Section 404(k) payments made by an ESOP.
Payments of interest generally not subject to backup withholding include the
following:
- Payments of interest on obligations issued by individuals. Note: You may
be subject to backup withholding if this interest is $600 or more and is
paid in the course of the payer(1)s trade or business and you have not
provided your correct TIN to the payer.
- Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
- Payments described in section 6049(b)(5) to nonresident aliens.
- Payments on tax-free covenant bonds under section 1451.
- Payments made by certain foreign organizations.
- Mortgage interest paid by you.
Payments that are not subject to information reporting are generally also not
subject to backup withholding. For details, see sections 6041, 6041A(a), 6042,
6044, 6045, 6049, 6050A, and 6050N, and the regulations under those sections.
PRIVACY ACT NOTICE. Section 6109 requires you to furnish your correct TIN to
persons who must file information returns with the IRS to report interest,
dividends, and certain other income paid to you, mortgage interest you paid, the
acquisition or abandonment of secured property, cancellation of debt, or
contributions you made to an IRA. The IRS uses the numbers for identification
purposes and to help verify the accuracy of your tax return. The IRS may also
provide this information to the Department of Justice for civil and criminal
litigation and to cities, states and the District of Columbia to carry out their
tax laws. You must provide your TIN whether or not you are required to file a
tax return. Payers must generally withhold 31% of taxable interest, dividend,
and certain other payments to a payee who does not furnish a TIN to a payer.
Certain penalties may also apply.
PENALTIES.
(1) FAILURE TO FURNISH TIN. If you fail to furnish your correct TIN to a
requester (the person asking you to furnish your TIN), you are subject to a
penalty of $50 for each failure unless your failure is due to reasonable cause
and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. If you
make a false statement with no reasonable basis that results in no backup
withholding, you are subject to a $500 penalty.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
(4) MISUSE OF TINS. If the requester discloses or uses TINs in violation of
Federal law, the requester may be subject to civil and criminal penalties.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE IRS
<PAGE>
NOTICE OF GUARANTEED DELIVERY
FOR THE EXCHANGE OFFER
BY
NCI BUILDING SYSTEMS, INC.
OF
9 1/4% SERIES B SENIOR SUBORDINATED NOTES DUE 2009
FOR
ALL OUTSTANDING
9 1/4% SERIES A SENIOR SUBORDINATED NOTES DUE 2009
PURSUANT TO THE PROSPECTUS DATED JUNE , 1999
THIS EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON , 1999, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERED
OUTSTANDING NOTES MAY BE WITHDRAWN AT ANY TIME BEFORE THE EXPIRATION DATE.
As set forth in the prospectus dated June , 1999 under the caption "The
Exchange Offer-- Guaranteed Delivery Procedures" and the accompanying Letter of
Transmittal (the "Letter of Transmittal") and Instruction 2 thereto, this form,
or one substantially equivalent hereto, must be used to accept the Exchange
Offer if certificates representing the 9 1/4% Series A Senior Subordinated Notes
due 2009 (the "Outstanding Notes") of NCI Building Systems, Inc. ("NCI") are not
immediately available or if the procedure for book-entry transfer cannot be
completed in a timely basis or time will not permit a holder's certificates or
other required documents to reach the Exchange Agent before the Expiration Date.
The form may be delivered by hand or transmitted by facsimile transmission or
mail to the Exchange Agent and must include a guarantee by an Eligible
Institution unless the form is submitted on behalf of an Eligible Institution.
Capitalized terms used and not defined herein have the meanings given to them in
the prospectus.
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
HARRIS TRUST COMPANY OF NEW YORK
<TABLE>
<S> <C> <C>
BY MAIL: BY FACSIMILE TRANSMISSION: BY HAND OR
Wall Street Station (FOR ELIGIBLE INSTITUTIONS OVERNIGHT COURIER:
P.O. Box 1023 ONLY) Receive Window
New York, NY 10268-1023 (212) 701-7636 or 7637 Wall Street Plaza
88 Pine Street, 19th Floor
New York, NY 10005
FOR INFORMATION BY TELEPHONE
(CALL COLLECT):
(212) 701-7624
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OR TRANSMISSION VIA A FACSIMILE
NUMBER OTHER THAN THE ONES LISTED ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an "Eligible Institution"
under the instructions thereto, the signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.
<PAGE>
Ladies and Gentlemen:
Upon the terms and subject to the conditions set forth in the prospectus and
accompanying Letter of Transmittal, receipt of which is hereby acknowledged, the
undersigned hereby tenders to NCI the principal amount of Outstanding Notes
listed below pursuant to the guaranteed delivery procedures set forth in the
prospectus and accompanying Letter of Transmittal.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
CERTIFICATE NUMBERS PRINCIPAL AMOUNT TENDERED
(IF AVAILABLE) (MUST BE IN INTEGRAL MULTIPLES OF $1,000)
<S> <C>
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
</TABLE>
If Outstanding Notes will be tendered by book entry transfer:
Name of Tendering Institution: _________________________________________________
Account Number: ________________________________________________________________
Sign Here:
________________________________________________________________________________
SIGNATURE(S)
________________________________________________________________________________
NAME(S) (PLEASE TYPE OR PRINT)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
ADDRESS
________________________________________________________________________________
ZIP CODE
________________________________________________________________________________
AREA CODE AND TELEPHONE NO.
________________________________________________________________________________
Dated: _____________________ , 1999
<PAGE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEES)
The undersigned, a member firm of a registered national securities exchange
or of the National Association of Securities Dealers, Inc., or a commercial bank
or trust company having an office in the United States, hereby (a) represents
that the above-named person(s) has a net long position in the Outstanding Notes
tendered hereby within the meaning of Rule 14e-4 under the Securities Exchange
Act of 1934, (b) represents that the tender of Outstanding Notes complies with
Rule 14e-4 and (c) guarantees delivery to the Exchange Agent of certificates
representing the Outstanding Notes tendered hereby, in proper form for transfer,
or confirmation of book-entry transfer of the Outstanding Notes into the
Exchange Agent's account at the Book-Entry Transfer Facility (as defined in the
Letter of Transmittal), in each case, together with a properly completed and
duly executed Letter of Transmittal with any required signature guarantees and
any other documents required by the Letter of Transmittal, within three New York
Stock Exchange trading days after the date hereof.
________________________________________________________________________________
NAME OF FIRM
________________________________________________________________________________
AUTHORIZED SIGNATURE
________________________________________________________________________________
________________________________________________________________________________
ADDRESS
________________________________________________________________________________
TITLE
________________________________________________________________________________
NAME (PLEASE TYPE OR PRINT)
________________________________________________________________________________
AREA CODE AND TELEPHONE NO.
Dated: _____________________ , 1999
NOTE: DO NOT SEND CERTIFICATES REPRESENTING OUTSTANDING NOTES WITH THIS FORM.
CERTIFICATES FOR OUTSTANDING NOTES MUST BE SENT WITH YOUR LETTER OF
TRANSMITTAL.
