SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-2
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
___________________
SWING-N-SLIDE CORP.
(Exact name of registrant as specified in its charter)
Delaware 3949 36-3808989
(State of (Primary Standard Industrial (I.R.S. Employer
incorporation) Classification Code Number) Identification
No.)
1212 Barberry Drive
Janesville, WI 53545
(608) 755-4777
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
Richard G. Mueller
Chairman, President and Chief Executive Officer
SWING-N-SLIDE CORP.
1212 Barberry Drive
Janesville, WI 54545
(608) 755-4777
Facsimile (608) 755-4773
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
Joseph P. Hildebrandt, Esq.
Foley & Lardner
150 East Gilman Street
Madison, Wisconsin 53703
(608) 258-4232
Facsimile: (608) 258-4258
____________________________
Approximate date of commencement of proposed sale to the public: As
soon as practicable after the effective date of this Registration
Statement.
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. [_]
If the registrant elects to deliver its latest annual report to
security holders or a complete and legible facsimile thereof, pursuant to
Item 11(a)(1) of this Form, check the following box. [X]
____________________________
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
Proposed Proposed
Title of Each Class of Amount to be Offering Price Aggregate Offering Amount of
Securities to be Registered Registered Per Security Price Registration Fee
<S> <C> <C> <C> <C>
10% Convertible Subordinated
Debentures due October 15, 2004 $3,333,333 100% $3,333,333 $1,149.43
10% Convertible Subordinated
Debentures due October 15, 2004(1) $ 973,389 100% $973,389 $ 335.65
Common Stock, $.01 par value(2) (3) --- --- (3)
<FN>
(1) Represents the maximum amount of Debentures that may be issued as
interest under the Indenture.
(2) Represents shares issuable upon conversion of the Debentures.
(3) Such indeterminable number of shares of Common Stock as may be
issuable upon conversion of the Debentures. No additional
consideration will be received for the shares of Common Stock upon
exercise of the conversion privilege and therefore no registration
fee is required pursuant to Rule 457(i).
</TABLE>
______________________
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states that
this Registration Statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933 or until the
Registration Statement shall become effective on such date as the
Commission, acting pursuant to said Section 8(a), may determine.
SWING-N-SLIDE CORP.
Cross Reference Sheet
Shows Location in Prospectus of Information
Required by Items of Form S-2
Registration Statement Item Location in Prospectus
1. Forepart of the Registration Outside Front Cover Page
Statement and Outside Front
Cover Page of Prospectus
2. Inside Front and Outside Back Inside Front and Outside Back
Cover Pages of Prospectus Cover Pages of Prospectus;
Available Information;
Incorporation of Certain
Documents by Reference
3. Summary Information, Risk Prospectus Summary; Risk Factors;
Factors and Ratio of Earnings Selected Financial Information
to Fixed Charges
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Background of the Offering
6. Dilution Risk Factors
7. Selling Security Holders Not Applicable
8. Plan of Distribution Outside Front Cover Page; Plan of
Distribution
9. Description of Securities to be Description of Debentures;
Registered Description of Capital Stock
10. Interests of Named Experts and Legal Matters; Experts
Counsel
11. Information with Respect to the Prospectus Summary; Incorporation
Registrant of Certain Documents by
Reference; Selected Financial
Information; Background of the
Offering
12. Incorporation of Certain Incorporation of Certain
Information by Reference Documents by Reference
13. Disclosure of Commission Not Applicable
Position on Indemnification for
Securities Act Liabilities
PROSPECTUS [INSERT COMPANY LOGO]
_______________, 1996
$3,333,333
(plus additional amounts paid in lieu of cash interest)
SWING-N-SLIDE CORP.
10% Convertible Subordinated Debentures Due October 15, 2004
The Debentures are convertible into Common Stock of Swing-N-
Slide Corp. ("Swing-N-Slide") at any time prior to maturity at a
conversion price of $4.70 per share, subject to adjustment under certain
circumstances. Interest on the Debentures is payable semi-annually on
October 15 and April 15, commencing on October 15, 1996. Until October
15, 1999, interest on the Debentures may, at the option of Swing-N-Slide,
be paid in the form of additional Debentures in a principal amount equal
to the interest. It is Swing-N-Slide's intent to exercise its option to
pay interest in the form of additional Debentures. Swing-N-Slide's Common
Stock is traded on the American Stock Exchange ("AMEX") under the symbol
"SWG." Swing-N-Slide has applied to list on AMEX the shares of Common
Stock, registered hereunder, into which Debentures may be converted. On
May 13, 1996, the last sale price of the Common Stock as reported on AMEX
was 3 and 7/8 per share. While Swing-N-Slide does not presently intend to
apply for the listing on AMEX or any other exchange of the Debentures,
Swing-N-Slide will use its reasonable efforts to arrange for one or more
firms to make a market in the Debentures, subject to an adequate amount of
the Debentures being purchased by stockholders to permit the development
of an adequate market. There can be no assurance, however, that such a
market will develop. See "Risk Factors--Market for Debentures."
The Debentures are redeemable at any time, in whole or in part,
at the option of Swing-N-Slide, at a redemption price equal to 100% of the
principal amount, plus accrued and unpaid interest. Upon the occurrence
of any Contingent Event (defined to include certain changes of control of
Swing-N-Slide, see "Description of Debentures"), each holder of a
Debenture may, subject to certain conditions, require Swing-N-Slide to
repurchase, in whole or in part, such Debentures at a price equal to the
principal amount of such Debentures plus accrued and unpaid interest. See
"Description of Debentures."
The Debentures are unsecured general obligations of Swing-N-
Slide, subordinated in right of payment to all existing and future Senior
Indebtedness (as defined). See "Description of Debentures--
Subordination." The Indenture does not restrict the incurrence of
additional indebtedness, including Senior Indebtedness, by Swing-N-Slide
or its subsidiaries. As of March 31, 1996, the Senior Indebtedness
consisted primarily of Swing-N-Slide's guaranty of approximately
$44,191,000 borrowed by Newco, Inc., its wholly-owned subsidiary.
See "Risk Factors" on page 9 for a discussion of certain matters
that should be considered by prospective purchasers of the Debentures.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Price Estimated Proceeds
to Expenses to
Public (1) Swing-N-Slide
Per Debenture........ 100% 2% 98%
Total................ $3,333,333 $77,000 $3,256,333
(1) Expenses payable by Swing-N-Slide include registration, trustee's,
printing, postage, legal and accounting fees and miscellaneous
expenses. The Debentures are being offered and sold directly by
Swing-N-Slide, and no commissions or other remuneration will be paid
to any person for soliciting purchases of the Debentures.
This Prospectus is dated _______________, 1996.
AVAILABLE INFORMATION
Swing-N-Slide is subject to the informational requirements of
the Securities Exchange Act of 1934 (the "Exchange Act") and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy
statements and other information filed by Swing-N-Slide can be inspected
and copied at the public reference facilities maintained by the Commission
at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549, and at the Commission's Regional Offices located at Suite 1400,
Northwestern Atrium Center, 500 West Madison Street, Chicago, Illinois
60601-2511, and 13th Floor, 7 World Trade Center, New York, New York,
10048. Copies of such material can be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C., at
prescribed rates.
Swing-N-Slide's Common Stock is listed on the AMEX, and reports,
proxy statements and other information concerning Swing-N-Slide can be
inspected at the AMEX, 86 Trinity Place, New York, New York 10006.
Swing-N-Slide has filed with the Commission a Registration
Statement on Form S-2 ("Registration Statement") under the Securities Act
of 1933, as amended ("Securities Act"), with respect to the securities
offered hereby. This Prospectus does not contain all of the information
set forth in the Registration Statement and the exhibits and schedules
thereto. For further information with respect to Swing-N-Slide and such
securities, reference is hereby made to such Registration Statement,
exhibits and schedules. Statements contained in this Prospectus
concerning the provisions of any document are not necessarily complete,
and, in each instance, reference is made to the copy of such document
filed as an exhibit to the Registration Statement or otherwise filed with
the Commission. Each such statement is qualified in its entirety by such
reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents of Swing-N-Slide that have been filed
with the Commission pursuant to the Exchange Act are hereby incorporated
by reference in this Prospectus: (a) Quarterly Report on Form 10-Q for the
quarter ended March 31, 1996 (the "Form 10-Q"); (b) Annual Report on Form
10-K for the fiscal year ended December 31, 1995 (the "Annual Report");
and (c) Current Report on Form 8-K filed March 1, 1996 (the "Form 8-K").
All documents filed by Swing-N-Slide pursuant to Sections 13(a),
13(c), 14, or 15(d) of the Exchange Act subsequent to the date of this
Prospectus are hereby incorporated by reference in this Prospectus and
shall be deemed a part hereof from the date of filing of such documents.
Any statement or information contained in a document incorporated or
deemed to be incorporated by reference herein shall be deemed modified or
superseded for the purposes of this Prospectus to the extent that a
statement contained herein or in any subsequently filed document that also
is or is deemed to be incorporated herein by reference modifies or
supersedes such statement. Any such statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a
part of this Prospectus.
Swing-N-Slide will provide without charge to any person to whom
a Prospectus is delivered, on written or oral request of such person, a
copy of any or all documents incorporated herein by reference (not
including the exhibits to such documents, unless such exhibits are
specifically incorporated by reference into such documents). Requests
should be directed to: Joseph P. Hildebrandt, Esq. or Wayne O. Hanewicz,
Esq., Foley & Lardner, P.O. Box 1497, 150 East Gilman Street, Madison,
Wisconsin 53701-1497, phone number (608) 258-4246.
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more
detailed information and consolidated financial statements (including the
notes thereto) appearing elsewhere in this Prospectus and in the documents
incorporated by reference in this Prospectus. As used in this Prospectus,
"Swing-N-Slide" refers to Swing-N-Slide Corp., "Newco" refers to Swing-N-
Slide's wholly-owned subsidiary, Newco, Inc., and the "Company" refers to
Swing-N-Slide and Newco together.
THE COMPANY
The Company is the leading designer, manufacturer and marketer
of do-it-yourself, wooden home playground equipment. Its core product
group--kits for wooden swing sets and climbing units, plastic slides and
related accessories--is sold nationwide through over 8,000 home center,
building supply and hardware stores and in Mexico, South America and
Europe. The Company also offers the Tuff Kids line of commercial
playground systems targeted at churches, daycare centers, park districts,
campgrounds and housing developments. See "Part 1, Item 1 - Business" in
the Annual Report on Form 10-K that is incorporated by reference for a
more detailed description of the Company and its business.
THE OFFERING
Securities Offered $3,333,333 principal amount of 10% Convertible
Subordinated Debentures due October 15, 2004, plus
additional Debentures issuable as interest (the
"Debentures").
Interest Payment
Dates October 15 and April 15, commencing October 15, 1996.
Form of Interest
Payments Interest will be paid in cash, except that until
October 15, 1999, Swing-N-Slide may, at its option,
pay interest in additional Debentures in a principal
amount equal to the interest. It is Swing-N-Slide's
intent to exercise this option to pay additional
interest in the form of Debentures.
Maturity October 15, 2004.
Conversion The Debentures are convertible into Swing-N-Slide's
Common Stock, $.01 par value per share (the "Common
Stock"), prior to maturity or redemption at a
conversion price of $4.70 per share subject to
adjustment under certain conditions.
Optional Redemption
by Swing-N-Slide The Debentures are redeemable at any time and from
time to time at the option of Swing-N-Slide, in whole
or in part, at the principal amount thereof, plus
accrued and unpaid interest, but without premium, upon
not less than 45 nor more than 60 days, notice by
mail.
Redemption Upon
Occurrence of
Contingent Event Upon the occurrence of a Contingent Event, as defined,
each holder of Debentures may, at his option, subject
to certain conditions and restrictions, require Swing-
N-Slide to repurchase all or a portion of such
Debentures at the principal amount thereof, plus
accrued and unpaid interest, but without premium.
Subordination The Debentures are subordinated to existing and future
Senior Indebtedness, as defined, currently consisting
of the guaranty by Swing-N-Slide of the indebtedness
of Newco. The Debentures are general, unsecured
obligations of Swing-N-Slide.
Use of Proceeds The net proceeds will be used to reduce Newco's bank
debt.
<TABLE>
SELECTED FINANCIAL DATA
(in thousands, except per share amounts)
<CAPTION>
Predecessor (1) Company
Year Ended Year Ended Year Ended Year Ended
December 31, December 31, 1992 December 31, December 31,
1991 To Jan. 31, From Feb. 1, 1993 1994
<S> <C> <C> <C> <C> <C>
Statement of
operations data:
Net Sales................ $33,337 $ 3,951 $42,345 $51,074 $51,816
Gross profit............. 17,014 2,229 22,058 26,769 25,500
Operating income......... 10,402 1,405 11,038 13,786 7,909
Income (loss) before
income taxes and
extraordinary item...... 9,745 1,391 3,942 12,569 7,378
Extraordinary item
(net of tax benefit).... - - (922) - -
Net income (loss)........ 9,745 1,391 1,274 7,962 4,591
Pro forma income taxes
(2)..................... 3,815 545 - - -
Pro forma net income
(2)..................... 5,930 846 - - -
Per common share:
Income (loss) before
extraordinary item...... $ 0.28 $ 0.83 $ 0.48
Extraordinary item....... (0.12) - -
Net income (loss) 0.16 0.83 0.48
Ratio of earnings to
fixed charges (3) 36.83 100.36 1.54 11.40 14.54
Pro forma ratio of
earnings to fixed
charges (3) - - - - -
Balance sheet data (at
period end):
Working capital
(deficit)............... $ 1,309 $ (277) $ 2,332 $ (4,783) $ 2,178
Total assets............. 7,093 46,548 46,679 44,330 47,610
Total debt (4)........... 1,804 45,745 19,720 9,909 7,588
Total stockholders'
equity (deficit) (5).... 2,706 (3,627) 22,872 30,834 35,425
<CAPTION>
Three Months
Year Ended Ended Three Months
December 31, March 31, Ended
1995 1995 March 31, 1996
<S> <C> <C> <C>
Statement of operations data:
Net Sales................ $45,077 $13,863 $ 9,602
Gross profit............. 21,902 6,604 5,019
Operating income......... 11,131 3,207 2,209
Income (loss) before
income taxes and
extraordinary item...... 6,727 2,008 (1,414)
Extraordinary item (net of
tax benefit)............ - - -
Net income (loss)........ 4,127 1,233 (1,151)
Pro forma income taxes
(2)..................... - - -
Pro forma net income
(2)..................... - - -
Per common share:
Income (loss) before
extraordinary item...... $ 0.67 $ 0.18 $ (0.19)
Extraordinary item....... - - -
Net income (loss)........ 0.67 0.18 (0.19)
Ratio of earnings to fixed
charges (3) 2.46 2.64 (3)
Pro forma ratio of earnings
to fixed charges (3) 2.43 - (3)
Balance sheet data (at period
end):
Working capital
(deficit)............... $ (81) $ 1,964 $ 629
Total assets............. 44,585 59,046 55,144
Total debt (4)........... 41,738 54,928 48,528
Total stockholders' equity
(deficit) (5).......... (796) (3,650) (1,932)
<FN>
(1) Swing-N-Slide was formed in January 1992 and acquired substantially all of the assets and business of the "Predecessor
Company" on January 31, 1992.
(2) The Predecessor Company elected to be treated as an S Corporation for income tax purposes and accordingly did not pay
federal or state income taxes. The pro forma information has been computed as if the Predecessor Company were subject to
federal and state income taxes for such periods, based on the tax laws in effect during the respective periods.
(3) Earnings used in computing the ratio of earnings to fixed charges consist of income (loss) before income taxes and
extraordinary item plus fixed charges. Fixed charges consist of interest expense and amortization of deferred financing
costs. In the three months ended March 31, 1996 and the pro forma three months ended March 31, 1996, the Company's
earnings were insufficient to cover fixed charges by $1,414,000 and $1,432,000, respectively. The pro forma ratio of
earnings to fixed charges reflects the offering of the Debentures and the Company's use of the net proceeds as if they
had occurred on January 1, 1995. See "Use of Proceeds."
(4) Includes seasonal revolving loan and current and long-term portions of debt and capital leases.
(5) Net of historical stockholder distributions for the Predecessor Company.
</TABLE>
RISK FACTORS
In addition to the other information in this Prospectus, the
following factors should be considered carefully in evaluating an
investment in the Debentures offered by this Prospectus.
Decreasing Sales
Sales declined during the last fiscal year from $51.8 million in
1994 to $45.1 million in 1995. Sales in the first quarter of 1996
declined from $13.9 million for the three months ended March 31, 1995 to
$9.6 million for the three months ended March 31, 1996. Among the factors
which contributed to this decline in sales was increased competition for
retailers in the backyard playground equipment industry, resulting in a
net loss to the Company of approximately 300 outlets during 1995. Some of
these outlet losses resulted purely from a product offering standpoint, as
home center chains sought to differentiate themselves from rival chains by
stocking a competing product. The Company's market share leadership made
it more vulnerable to this type of strategy. In addition, the slide
market remained highly competitive with no short-term improvement in
pricing expected for the more commodity-type models. The home center
industry also experienced a tough year in 1995 and continues to focus on
reducing retail inventories of all products, including backyard playground
equipment. Each year customer programs are negotiated for the upcoming
selling season. Poor weather in early 1996 also contributed to decreased
sales in the recently completed first quarter. The Company expects the
market for home playground equipment to remain highly competitive.
Competition
The market for home playground equipment is highly competitive,
and the Company faces competition from manufacturers of metal swingsets
and pre-cut and custom built wood kits. Hedstrom Corporation is a major
manufacturer and marketer of metal gym sets, plastic and metal slides and
accessories. Hedstrom Corporation also manufactures and sells a competing
line of wooden swingset and climbing unit kits. Several other
manufacturers also market kit products which are similar to the Company's
kits. The Company competes on the basis of design, a complete
merchandising program, quality, timeliness of delivery, service, price,
packaging and brand name recognition. The Company believes that its
design capabilities, complete merchandising program and reputation for
delivery enable it to compete effectively. The Company's reputation as a
pioneer in the market has also been an important element of its successful
operations. Although there are no significant technological or
manufacturing barriers to entering into the home playground equipment
business, factors such as brand recognition, the Company's established
relationship with its home center and building supply retailers and
quality assurance may discourage new competitors from entering the
business. There can be no assurance, however, that the Company will be
able to maintain all of its competitive advantages and other companies in
the industry may succeed in acquiring market share at the expense of the
Company.
Reliance on Certain Customers
One customer, Lowe's, accounted for 16% of the Company's sales
in 1995. Sales to another customer, Menard's, were 11% of net sales in
1995. The Company's top five customers accounted for 43% of total sales
in 1995. The loss of significant customers, such as Lowe's or Menard's,
or a significant decline in the amount of business from such customers,
could have a material adverse effect on the Company.
Seasonality
The Company's sales pattern is highly seasonal, and the bulk of
the Company's sales take place during the spring and early summer months,
the peak selling season. During fiscal years 1993, 1994 and 1995,
approximately 79%, 80% and 74%, respectively, of the Company's net sales
occurred between January 1 and June 30. Unseasonably cool or rainy
weather during the spring and early summer months adversely affects the
Company's ability to make sales during this peak selling season. Sales
that are not completed during this season are generally not recovered
later in the year. During the first quarter of 1996, the Company's sales
suffered significantly, partially as the result of poor weather.
Reliance on Expansion Beyond Core Product Group
The Company is pursuing an aggressive growth strategy, the
success of which will depend in part upon its ability to successfully
expand beyond its core product group of do-it-yourself wooden swingset and
climbing unit kits for the backyard. The Company has embarked upon a
strategy to become one of the largest manufacturers and marketers of large
scale play equipment for all environments, including (1) commercial
products of indoor and outdoor use in several venues, (2) consumer
playground equipment that includes pre-cut wood and other materials,
(3) new product categories that can be marketed through existing
retailers, and (4) expanding international markets. The Company may incur
significant costs in connection with these initiatives. There can be no
assurance that the Company will achieve its planned expansion goals,
manage its growth effectively, or continue to operate its core business
profitably. The failure of the Company to achieve its expansion goals on
a timely basis, manage its growth effectively or continue to operate its
core business profitably would have a material adverse effect on the
Company's business, financial condition and results of operation.
Price Volatility of Lumber
Since assembly of the Company's kits requires lumber, retail
prices of the complete kit package with lumber vary with the price of
lumber. Lumber prices have shown volatility over the past few years. A
substantial increase in lumber prices could cause the Company's products
to have less market acceptance or result in significant price erosion
which will have a material adverse effect on the Company's profitability.
In addition, because almost all of the Company's sales are made to
retailers which appeal to do-it-yourself consumers, changes in economic
activity which impact retailers may also have an impact on the Company's
sales.
Backlog
The Company does not generally have a meaningful backlog of
orders, and the Company's backlog as of any given date is not a meaningful
measure because, even during peak periods, orders will generally be filled
three business days from receipt of the order.
Dependence Upon Key Personnel
The Company is highly dependent upon the efforts and abilities
of Richard G. Mueller, Chairman, President and Chief Executive Officer,
and is also dependent on the other members of the Company's senior
management team. The loss of the services of Mr. Mueller, or all or part
of the Company's senior management team, could, if a competent replacement
for such individuals were not located, have a material adverse effect on
the Company's business, financial condition or results of operations.
Declining Stock Price
Swing-N-Slide's stock has been traded on the AMEX since August
10, 1995, under the symbol "SWG." From July 6, 1995 to August 9, 1995,
the stock was traded on the over-the-counter market and prior to July 6,
1995, the stock was traded on the NASDAQ National Market System. Set
forth below for the calendar quarters indicated are the high and low
closing prices:
1994 1994 1995 1995 1996 1996
high low high low high low
First Quarter 13 9 1/2 8 7/8 3 3/4 5 9/16 3 1/2
Second Quarter 11 9 1/2 5 1/4 3 1/4 N/A N/A
Third Quarter 10 1/4 8 1/4 4 13/16 3 5/8 N/A N/A
Fourth Quarter 9 1/2 7 3/4 4 15/16 3 1/2 N/A N/A
The per share price of Swing-N-Slide's stock has consistently declined for
the past nine quarters and there can be no assurance that this trend will
be reversed soon or at any time in the foreseeable future.
Controlling Interest in the Company and the Indenture
GreenGrass Holdings, a Delaware general partnership
("GreenGrass"), which is owned in part by members of the Company's
management, owns approximately 60% (approximately 66% if GreenGrass
converted all $5,000,000 of its First Series Debentures (as defined below,
see "Background of Offering") into Common Stock) of the outstanding Common
Stock of Swing-N-Slide and is able to elect a majority of Swing-N-Slide's
Board of Directors. As a result, GreenGrass is able to control
substantially all decisions made by the Company, with certain exceptions
established by the Transaction Agreement (as defined below). If GreenGrass
exchanged its $5,000,000 in First Series Debentures for Debentures issued
under the Indenture, it would also own a minimum of 60% of such Debentures
upon the conclusion of this Offering, and could own an even greater
percentage. See "Background of Offering." Consequently, GreenGrass would
be able to effectively control many of the decisions to be made by holders
of Debentures under the Indenture. See "Description of Debentures--
Amendments and Supplements."
Holding Company Structure; Subordination
The Debentures are a direct obligation of Swing-N-Slide, which
derives substantially all of its revenues from the operations of its
wholly-owned subsidiary, Newco. The ability of Swing-N-Slide to make
interest payments on or redeem the Debentures and to pay dividends, if
any, on the Common Stock will be primarily dependent on receipt of
dividends or other distributions from Newco. Payment of dividends from
Newco to Swing-N-Slide and the payment of any interest on or repayment of
any principal of any loans or advances made by Swing-N-Slide to Newco may
be subject to statutory or contractual restrictions and are contingent
upon the earnings of Newco. In particular, Newco is subject to a number
of restrictions contained in that certain Credit Agreement, between Newco
and certain lenders, dated as of January 19, 1995, as amended, restated,
modified or supplemented ("Credit Agreement"). Under the Credit
Agreement, mandatory prepayments are required based on excess cash flow
(as defined), and proceeds from sales of equity, sales of assets, or
issuance of debt (including this Offering). In addition, the Credit
Agreement restricts the Company's ability to incur additional
indebtedness, pay cash dividends, and sell assets and requires Newco to
maintain certain financial ratios. These restrictions include limits on
Newco's ability to pay dividends or make other cash payments to Swing-N-
Slide. The Credit Agreement also restricts Swing-N-Slide's activities,
and provides that Swing-N-Slide shall not engage in any operating business
(other than through Newco) but shall solely own the capital stock of
Newco. See "Use of Proceeds." Although Swing-N-Slide believes the
permitted distributions and dividends from Newco would be sufficient to
pay interest on the Debentures as well as to meet the Company's other
obligations, there can be no assurance that they will be sufficient.
The Debentures are subordinated in right of payment to current
and future Senior Indebtedness, including currently the guaranty of Swing-
N-Slide of the indebtedness of Newco under the Company's (and Newco's)
credit agreements, including the Credit Agreement. By reason of such
subordination, and in the event of an insolvency, liquidation or other
reorganization of Swing-N-Slide, such indebtedness must be paid in full
before the principal of, and interest on, Debentures may be paid. See
"Description of Debentures." At March 31, 1996, the indebtedness of Newco
under the Credit Agreement was approximately $44,191,000. In addition,
because all of Swing-N-Slide's operations are conducted through Newco,
claims of the creditors of Newco will have priority with respect to the
assets and earnings of Newco over the claims of the creditors of Swing-N-
Slide, including holders of the Debentures, even though such obligations
may not otherwise constitute senior indebtedness (except to the extent
Swing-N-Slide is itself recognized as a creditor of Newco or such other
creditors have agreed to subordinate their claims to the payment of the
Debentures).
The Debentures are not secured by any of the assets of Swing-N-
Slide or Newco. Certain obligations of Newco are secured by pledges of
substantially all of its assets. In addition, Swing-N-Slide has pledged
its stock in Newco as security for its guaranty of the Newco Indebtedness.
Substantial Indebtedness
Following the issuance of the Debentures, the Company will
continue to have indebtedness that is substantial in relation to its
Stockholders' Equity. See "Capitalization." The Credit Agreement and the
Indenture impose significant operating and financial restrictions on the
Company. See "Risk Factors--Holding Company Structure; Subordination."
Such restrictions will affect, and in many respects significantly limit or
prohibit, among other things, the ability of the Company to incur
additional indebtedness to pay dividends. These restrictions, in
combination with the leveraged nature of the Company, could limit the
ability of the Company to effect future financing or otherwise may
restrict corporate activities. See "Part II, Item 7 - Management's
Discussion and Analysis of Financial Condition and Results of Operations"
and "Part II, Item 8 - Financial Statements and Supplementary Data" in the
Annual Report and "Part I, Management's Discussion and Analysis of
Financial Condition and Results of Operations" in the 10-Q for further
discussion and description of the Company's indebtedness.
The Indenture permits the Company to incur additional Senior
Indebtedness, and the Company expects to obtain additional indebtedness as
so permitted.
The Company's high degree of leverage could have important
consequences to the holders of the Debentures, including the following:
(1) the Company's ability to obtain additional financing for working
capital, capital expenditures, acquisitions, general corporate and other
purposes may be impaired in the future; (2) a substantial portion of the
Company's cash flow from operations must be dedicated to the payment of
principal and interest on its indebtedness, thereby reducing the funds
available to the Company for other purposes; (3) the Company's substantial
degree of leverage may hinder its ability to adjust rapidly to changing
market conditions; and (4) the Company's indebtedness could make it more
vulnerable in the event of a downturn in general economic conditions or
its business.
Funding of Repurchase Obligations; Absence of a Sinking Fund
There is no sinking fund with respect to the Debentures, and at
maturity, the entire outstanding principal amount thereof will become due
and payable by Swing-N-Slide. Also, upon the occurrence of certain
events, Swing-N-Slide may be required to repurchase all or a portion of
the outstanding Debentures. See "Description of Debentures." The sources
of funds for any such payment at maturity or earlier repurchase will be
Swing-N-Slide's available cash, the source of which is dividends and other
payments by Newco to Swing-N-Slide, which payments are subject to a number
of restrictions. There can be no assurance that sufficient funds will be
available at the time of such event to pay such principal or to make any
required repurchase or that Swing-N-Slide's ability to access such sources
will not be prohibited or restricted by its or Newco's obligations under
the Credit Agreement or its or Newco's obligations to other creditors.
See "Description of Debentures," "Risk Factors--Holding Company Structure;
Subordination" and "Risk Factors--Substantial Indebtedness."
Stockholders' Suits
Swing-N-Slide has been named as a defendant in the proceeding
Robert Barbieri v. Swing-N-Slide Corp, Thomas R. Baer, Richard G. Mueller,
Andrew W. Code, James M. Dodson, Peter M. Goetsch, Terrance S. Malone,
Henry B. Pearsall and Brian P. Simmons (the "Civil Action"). The
Complaint alleges that Swing-N-Slide's purchase of 3.6 million of
outstanding shares of Common Stock, which was completed in January 1995,
was the result of a deceptive and manipulative plan on the part of the
individual defendants to enrich themselves. The plaintiffs were granted
certification of the two classes of stockholders consisting of all
stockholders other than the defendants at November 14, 1994 or at March
15, 1994. The relief sought includes the imposition of a constructive
trust on all proceeds of the repurchase received by the defendants as well
as various non-monetary forms of relief. In addition, a related
derivative action, Sirota v. Swing-N-Slide Corp., was filed on November
17, 1995, raising claims similar to those in the Civil Action, but
alleging damage to the Company, as a whole, as opposed to individual
stockholders. The parties are currently conducting discovery, and Swing-
N-Slide intends to vigorously defend both of the claims. Swing-N-Slide
believes it has substantial defenses to all the claims, and that
resolution of the claims should not have any material adverse effect on
the financial condition or results of operation of the Company.
Product Liability Claims
Due to the nature of its business, the Company, at any
particular time, is subject to a number of product liability claims for
personal injuries allegedly related to its products. The Company has to
date been successful in defending or settling such claims. Thus far, no
such claims have resulted in any material payments on account of defending
or settling such claims. The Company's products are designed to meet the
applicable safety guidelines of the American Society for Testing and
Materials ("ASTM Guidelines"). Several of the Company's products are new,
however, and the claims experience with such products cannot be predicted.
Because of the foregoing factors, there can be no assurance that the
Company will not be subject to material liabilities on account of product
liability claims in the future.
Regulation
The Company's products are designed and tested to meet the
applicable ASTM Guidelines for home playground equipment. The Company
employs PFS Corporation, an independent testing company located in
Madison, Wisconsin, to conduct ongoing testing of its products to ensure
that they comply with the ASTM Guidelines. These independent test results
are documented by PFS Corporation and kept on file by the Company.
The Company is also subject to the environmental laws and
regulations of the United States and the State of Wisconsin as well as
local ordinances. The Company has established procedures for maintaining
environmental law compliance, including procedures for the disposal of
limited quantities of hazardous waste, with the United States
Environmental Protection Agency ("EPA") licensed haulers and recyclers.
The Company also incurs ongoing costs monitoring compliance with
environmental laws and in connection with disposal of waste materials.
Environmental laws imposed by the EPA and state officials nationwide are
becoming more stringent and may result in higher costs for the Company and
its competitors. Costs for environmental compliance and waste disposal
have not been material to the Company in the past.
In general, the Company has not experienced difficulty complying
with governmental regulations, and compliance has not had a material
effect on the Company's business; however, there can be no assurance that
these circumstances will not change in a materially adverse manner in the
future.
Intellectual Property Protection
The Company uses numerous trademarks and tradenames in its
business. While the Company believes that the products and services
underlying such tradenames and trademarks are of great importance and that
such trademarks and tradenames as a whole are of material importance to
the Company's business in which they are used, none, besides Swing-N-
Slide, individually is material to the Company's business.
Market for the Debentures
There is currently no public trading market for the Debentures.
The Company does not intend to apply for a listing of the Debentures on
the AMEX or any other exchange; however, the Company does intend to use
its reasonable efforts to arrange for one or more firms to make a market
in the Debentures, subject to an adequate amount of the Debentures being
purchased by stockholders to permit the development of an adequate market.
There can be no assurance that any market for the Debentures
will develop in the future or that the holders of the Debentures will be
able to sell their Debentures or that there will be an adequate price at
which such holders may be able to sell their Debentures. If the market
were to develop, the Debentures could trade at prices that may be higher
or lower than the initial offering price depending on many factors,
including prevailing interest rates, the Company's operating results, the
market price of Swing-N-Slide Common Stock, and the market for similar
convertible debentures. There can be no assurance as to the liquidity of
any trading market for the Debentures or that an active public market for
the Debentures will develop. Investors may be required to convert their
Debentures into shares of Swing-N-Slide's Common Stock in order to dispose
of their Debentures.
The Common Stock of Swing-N-Slide is listed on the AMEX. The
market price of the Common Stock has declined over the past two years, and
there can be no assurance that the price will improve.
No Dividends
There have been no dividends paid to stockholders since the
inception of Swing-N-Slide in January, 1992. The Credit Agreement
restricts the ability of Newco, Swing-N-Slide's operating subsidiary, to
pay dividends to Swing-N-Slide. See "Risk Factors--Holding Company
Structure; Subordination."
Possible Dilution of Ownership Interest
The Debentures may be converted into shares of Common Stock at a
rate of $4.70 for each share, subject to adjustment, and, to the extent a
holder of a Debenture converts his or her Debentures to Common Stock, such
holder will be entitled to vote on all matters presented to the
stockholders. Accordingly, stockholders who do not elect to purchase
their pro rata portion of the Debentures in full may realize a dilution in
their voting rights in Swing-N-Slide and percentage interests in future
net earnings, if any, of the Company. Although GreenGrass is not
purchasing Debentures (see "Background of Offering") in this Offering,
the $5,000,000 in First Series Debentures already issued to GreenGrass
allows it to purchase up to an additional 1,041,667 shares of Common
Stock at a conversion price of $4.80 a share. If GreenGrass exchanges its
First Series Debentures for debentures issued under the Indenture, it would
continue to have the right to convert its debentures into Common Stock at
a conversion price of $4.80 per share. See "Background of Offering" and
"Risk Factors--Controlling Interest in the Company and the Indenture."
Shares Eligible for Future Sale
The sale, or availability for sale, of substantial amounts of
Common Stock in the public market could adversely affect the prevailing
market price of the Common Stock into which the Debentures are convertible
and could impair the Company's ability to raise additional capital through
the sale of its securities. The Debentures offered hereby are convertible
at any time prior to maturity, unless previously redeemed or repurchased,
into shares of Common Stock at a conversion price of $4.70 per share
(GreenGrass's First Series Debentures have a conversion price of $4.80 per
share), subject to adjustment under certain circumstances. As of May 15,
1996, there was an aggregate of 6,004,000 shares of Common Stock
outstanding (excluding 3,600,000 shares of Common Stock in Treasury). Of
such outstanding shares, approximately 3,597,985 shares of Common Stock
are restricted under the Securities Act and are resalable pursuant to the
limitations of Rule 144 under the Securities Act.
Certain Anti-Takeover Measures
GreenGrass's position as majority stockholder and debenture
holder will, in most instances, allow it to effectively prevent changes of
control of the Company without its consent. See "Risk Factors--
Controlling Interest in the Company and the Indenture."
The Indenture's provisions with respect to the repurchase of
Debentures upon the occurrence of a Contingent Event could also have the
effect of delaying, deferring or preventing a change of control. See
"Description of Debentures." In addition, the Company has entered into
agreements with certain key members of management providing for the
payment of certain severance benefits to such persons in the event of
their termination following a change in control of the Company.
Swing-N-Slide has elected not to be subject to Section 203 of
the Delaware General Corporation Law ("DGCL"), which provides certain
conditions which must be fulfilled prior to "business combinations" with
"interested stockholders" (as such terms are defined in Section 203).
Swing-N-Slide's election not to be subject to Section 203 will not apply
to any business combination between Swing-N-Slide and any person who
became an interested stockholder prior to June 18, 1992. See "Description
of Capital Stock."
USE OF PROCEEDS
The net proceeds to Swing-N-Slide from the sale of the
Debentures offered hereby, after deducting estimated expenses payable by
the Company in connection with this Offering, are estimated to be
approximately $3,256,333. Under the Credit Agreement, the Company is
obligated to pay the net proceeds to The First National Bank of Chicago
for the account of certain lenders to Newco, as a designated prepayment
under the term loan facility of the Credit Agreement. See "Note 3 - Bank
Line of Credit, Long-Term Debt and Lease Commitments" to the Consolidated
Financial Statements contained in the Annual Report on Form 10-K
incorporated by reference for a description of the loan facilities under
the Credit Agreement. At March 31, 1996, the principal amount due under
the term loan facility of the Credit Agreement was $37,288,000, which
amount does not reflect the proceeds from this Offering or the $700,000 in
First Series Debentures.
CAPITALIZATION
The following table sets forth the historical capitalization of
the Company as of March 31, 1996 and as adjusted to give effect to the
issuance and sale of the Debentures offered by Swing-N-Slide hereby.
March 31, 1996
Actual As Adjusted/1
(in thousands)
Short-term debt:
Revolving loan $6,940 $6,940
Current portion of long-term
debt 6,038 6,038
Long-term obligations:
Long-term debt, net of
current portion 31,250 27,294
10% Convertible Debentures
due 2004 4,300/2 8,333/3
Stockholders' equity (deficit):
Preferred stock, $.01 par
value - 5,000,000 shares
authorized, no shares
issued or outstanding ----- -----
Common Stock, $.01 par
value - 25,000,000 shares
authorized, 9,604,000
shares issued/4 96 96
Class B Common Stock, $.01
par value - 1,750,000
shares authorized, no
shares issued or
outstanding ----- -----
Additional paid-in capital 27,646 27,646
Excess purchase price over
predecessor basis (5,627) (5,627)
Retained earnings 16,301 16,301
Cost of 3,600,000 shares of
common stock in treasury/5 (40,348) (40,348)
Total stockholders' equity
(deficit) (1,932) (1,932)
1/ As adjusted for the proceeds from the issuance of $700,000 in First
Series Debentures to GreenGrass on April 25, 1996 and the net proceeds
from the issuance of $3,333,333 in Debentures pursuant to this Offer, as
of March 31, 1996.
2/ This amount represents $4,300,000 in First Series Debentures issued
to GreenGrass on February 16, 1996.
3/ This amount consists of (a) $5,000,000 in First Series Debentures,
and (b) $3,333,333 in Debentures issued hereunder.
4/ This amount includes 3,600,000 shares that are held by Swing-N-Slide
as treasury shares. As of March 31, 1996, there were 6,004,000 shares of
Common Stock issued and outstanding.
5/ See Note 4 above.
BACKGROUND OF OFFERING
On January 4, 1996, Swing-N-Slide and GreenGrass entered into a
transaction agreement (the "Transaction Agreement") pursuant to which
GreenGrass agreed to offer to purchase (the "Tender Offer") up to
3,510,000 shares of Swing-N-Slide's Common Stock (the "Shares"). Under
the terms of the Transaction Agreement, GreenGrass also agreed to purchase
for cash from Swing-N-Slide no later than 30 days (subject to certain
exceptions) after the purchase of the Shares in the Tender Offer, certain
securities of Swing-N-Slide convertible into Shares at a conversion price
of $4.80 per Share (the "Securities") in an amount not less than
$5,000,000 and not more than $7,380,000. GreenGrass elected to purchase
$5,000,000 of Swing-N-Slide's 10% Convertible Subordinated Debentures to
satisfy this requirement to purchase Securities (sometimes referred to
herein as the "First Series Debentures"). Because of concerns about
complying with certain AMEX rules, GreenGrass purchased the First Series
Debentures in two transactions: the first, in the amount of $4,300,000
was completed on February 16, 1996; and the second, in the amount of
$700,000 was completed on April 25, 1996.
Under the Transaction Agreement, GreenGrass also agreed to use
reasonable efforts to cause Swing-N-Slide to file, within 90 days after
the date on which Shares were purchased in the Tender Offer, a
registration statement with the Securities and Exchange Commission under
the Securities Act, covering an offering by Swing-N-Slide of the
Securities (the "Securities Offering") to stockholders of Swing-N-Slide
other than GreenGrass (the "Other Stockholders"). Under the Securities
Offering, each of the Other Stockholders would be given the right, on the
basis of the number of Shares held by such Other Stockholder, to purchase
his pro rata share of the amount available to the Other Stockholders as a
group, for cash at the same price as GreenGrass paid for its Securities.
The amount of Securities available to the Other Stockholders would be two-
thirds of that purchased by GreenGrass. Because GreenGrass purchased
$5,000,000 in First Series Debentures, the amount of the Debentures to be
offered to the Other Stockholders is $3,333,333. This Offering
constitutes the Securities Offering required by the Transaction Agreement.
Because the Credit Agreement would have been violated by the
issuance of the Securities to GreenGrass and to the Other Stockholders
pursuant to this Offering, GreenGrass reached agreement with the Lender
(as defined in the Credit Agreement) regarding, among other matters,
modifications to the Credit Agreement that would permit issuance of the
Securities. In consideration for its agreement effective February 14,
1996 to amend the Credit Agreement to permit the issuance of the
Securities, the Lender received certain commitments from Swing-N-Slide,
including the following, which are set forth in Consent No. 1, dated as of
February 14, 1996, to Credit Agreement with Newco, Inc., dated as of
January 19, 1995, between Newco and certain of its creditors ("Consent")
(capitalized terms used below in (a) through (d) which are not otherwise
defined have the meaning given them in the Credit Agreement):
(a) The initial principal amount of the First Series Debentures
shall be not less than $5,000,000, and the Debentures
offered to the Other Stockholders shall be not less than
$3,300,000; the stated maturity of the Securities shall be
not earlier than eight years from the date of issuance of
the initial series; the Securities shall have no interest
payable in cash with respect thereto prior to the date that
is three years from the date of issuance thereof; and the
maximum rate of interest on the Securities shall be 10% per
annum.
(b) The proceeds of the initial $4,300,000 shall be applied as
follows:
(i) Not more than $2,600,000 shall be available for
payment of expenses in connection with the Tender
Offer transaction; and
(ii) Within three (3) Business Days after Swing-N-Slide's
receipt of any Net Cash Proceeds from the issuance of
the first series of Convertible Debentures, Swing-N-
Slide shall pay the remainder of such Net Cash
Proceeds (but not less than $1,700,000) as Designated
Prepayment to be allocated and applied to the unpaid
installments of the Term Loans in the inverse order of
maturity.
(c) Members of the Company's management were required to place
$540,250 in escrow to be used toward the purchase of the
$700,000 in First Series Debentures. Management placed this
amount in escrow, and it was applied toward the purchase of
the $700,000 in First Series Debentures, issued April 25,
1996. This brought the total amount of First Series
Debentures issued to GreenGrass to $5,000,000.
(d) No later than 90 days after the date on which shares of
common stock of Swing-N-Slide are purchased in the Tender
Offer, Swing-N-Slide shall file with the Securities and
Exchange Commission a Registration Statement to register
the offering and sale of the second series of Convertible
Debentures to the Other Stockholders and Swing-N-Slide
shall exercise its best efforts to cause such
Registration Statement to become effective as soon as
possible; and no later than three Business days' following
Swing-N-Slide's issuance of the second series of the
Convertible Debentures, the Net Cash Proceeds from such
issuance shall be paid to the Agent for the account of the
Lender as Designated Prepayment which shall be allocated
and applied to the unpaid installments of the Term Loans in
the inverse order of maturity.
In addition, as part of a Stipulation and Order dated February
13, 1996 (the "Stipulation and Order"), in connection with the Civil
Action (see "Risk Factors--Stockholders' Suits") Swing-N-Slide agreed to
certain additional modifications to the Securities Offering, including:
(a) Securities offered to the Other Stockholders shall be
convertible into Common Stock of Swing-N-Slide at the rate
of one share of common stock for each $4.70 principal
amount of Debentures. Securities purchased by GreenGrass
shall have a conversion rate of $4.80 per share.
(b) Securities shall be offered to the Other Stockholders in
one dollar increments in order to permit holders of odd lot
amounts of Common Stock to participate on a pro rata basis
in the offering of Securities to Other Stockholders.
(c) The Securities Offering to the Other Stockholders shall
occur no earlier than ninety (90) days after the Purchase
Date (as defined in the Transaction Agreement) and the
offering shall remain open for acceptance by Other
Stockholders for not less than sixty (60) days.
(d) In the event of prepayment for any reason of the
Debentures, Other Stockholders shall have not less than
thirty (30) days prior written notice during which
they may elect to exercise conversion rights under
the Debentures.
(e) Swing-N-Slide shall use reasonable efforts to cause market
makers in its common stock or other persons or entities to
make a market in Debentures (it being agreed and understood
that the ability of Swing-N-Slide to procure a market maker
in the Debentures will depend, in part, on the amount of
Debentures purchased by Other Stockholders and there is no
commitment intended hereby with respect to the liquidity of
the market for Debentures). There can be no assurance,
however, that such a market will develop. See "Risk
Factors--Market for Debentures."
The Transaction Agreement was amended on February 12, 1996, to
reflect, in part, the changes to the Securities Offering required by the
Stipulation and Order. On February 16, 1996, GreenGrass purchased
$4,300,000 of the First Series Debentures and, on April 25, 1996, after
receiving confirmation from AMEX that stockholder approval would not be
required for GreenGrass to purchase additional debentures, GreenGrass
purchased an additional $700,000 of First Series Debentures.
Under the Transaction Agreement, as amended, GreenGrass has
the option to exchange, prior to the issuance of Debentures hereunder, its
First Series Debentures for debentures issued under the Indenture.
GreenGrass has indicated its intent to exercise this option. The terms
of the debentures issued in exchange for the First Series Debentures would
be identical to the terms of the Debentures offered to the Other
Stockholders pursuant to this Offering, except that the conversion price
to GreenGrass would be $4.80 per share. See "Description of Debentures."
As a result of this exchange, GreenGrass would hold at least 60% of the
principal amount of outstanding debentures issued under the Indenture
(consisting of the debentures issued to GreenGrass in exchange for the
First Series Debentures, and the Debentures issued to the Other
Stockholders pursuant to this Offer) and, to a large extent, would be able
to exercise effective control over the Trustee and decisions to be made by
debenture holders (including the Other Stockholders) under the Indenture.
See "Risk Factors--Controlling Interest in the Company and the Indenture."
PLAN OF DISTRIBUTION
Subscription Period
The Subscription Period commences on the date of this Prospectus
and shall remain open for a period of sixty (60) days therefrom (the date
on which the Subscription Period ends is referred to as the "Expiration
Date"). Subscriptions for the Debentures, in the form of a Subscription
Agreement, must be received by the Expiration Date by Richard E. Ruegger,
Vice-President - Finance, Swing-N-Slide Corp., 1212 Barberry Drive,
Janesville, Wisconsin 53545. The Expiration Date may be extended by
Swing-N-Slide from time to time in its sole discretion by issuing a press
release to that effect no later than 10:00 a.m., Eastern Time, on the
business day following the Expiration Date.
Debenture Offering
Swing-N-Slide is offering the Debentures only to its Other
Stockholders of record on a pro rata basis among all Other Stockholders.
GreenGrass will not be allowed to purchase Debentures in this Offering.
GreenGrass may, however, exchange its First Series Debentures for
debentures issued under the Indenture (except with a conversion price of
$4.80). See "Background of Offering." Each Other Stockholder is entitled
to purchase Debentures up to an amount equal to $3,333,333 times a
fraction, the numerator of which is the number of shares of Common Stock
owned of record by such Other Stockholder, and the denominator of which is
the total number of shares of Common Stock owned of record by all Other
Stockholders (such amount is referred to herein as the "Maximum
Subscription Amount").
Each Other Stockholder who wants to purchase Debentures must
submit to Swing-N-Slide, by the Expiration Date, a Subscription Agreement
indicating which portion, if any, of the Maximum Subscription Amount such
Other Stockholder will purchase. Other Stockholders will be able to
purchase Debentures only in an amount up to the Maximum Subscription
Amount. Each Subscription Agreement shall be considered a non-revokable
offer to purchase Debentures in an amount up to the Maximum Subscription
Amount, as set forth in the Subscription Agreement. Once submitted to
Swing-N-Slide, the Subscription Agreement and the offer to purchase set
forth therein cannot be changed or revoked.
If some of the Other Stockholders do not subscribe for the
Maximum Subscription Amount, the remaining Debentures will not be
reoffered to Other Stockholders and will not be issued.
Certificates representing the Debentures purchased in this
Offering will be delivered to the subscribing Other Stockholders as soon
as practicable after the Expiration Date.
Subscription Agreement
Each Other Stockholder who wishes to purchase Debentures must
submit to Richard E. Ruegger, Vice-President - Finance, Swing-N-Slide
Corp., 1212 Barberry Drive, Janesville, Wisconsin 53545, at or prior to
the Expiration Date, a properly completed and executed Subscription
Agreement, together with payment in full of the purchase price ("Purchase
Price") for that portion of the Maximum Subscription Amount to be
purchased by such Other Stockholder. Payment may be made only (a) by
check or bank draft drawn upon a U.S. bank, or postal, telegraphic or
express money order, payable to Swing-N-Slide Corp., or (b) by wire
transfer of funds to the account maintained by Swing-N-Slide for the
purpose of accepting subscriptions, or (c) a combination of the foregoing.
The Purchase Price will be deemed to have been received by Swing-N-Slide
only upon (i) clearance of any uncertified check, (ii) receipt by Swing-N-
Slide of any certified check or bank draft drawn upon a U.S. bank or any
postal, telegraphic or express money order, or (iii) receipt of collected
funds in Swing-N-Slide's account designated above. If paying by
uncertified personal check, please note that the funds paid thereby may
take at least five (5) business days to clear. Accordingly, Other
Stockholders who wish to pay the Purchase Price by means of uncertified
personal check are urged to make payment sufficiently in advance of the
Expiration Date to ensure that such payment is received and clears by such
time and are urged to consider in the alternative payment by means of
certified or cashier's check, money order or wire transfer of funds.
Beneficial owners of Common Stock held of record by a broker,
dealer, commercial bank, trust company or other nominee, as well as
persons holding certificates for Common Stock personally who would prefer
to have such institutions effect transactions related to this Offering on
their behalf, should contact the appropriate institution or nominee and
request it to effect such transactions for them. Brokers, dealers,
commercial banks, trust companies and others who exercise the right to
purchase Debentures hereunder on behalf of beneficial owners of Common
Stock will be required to certify to Swing-N-Slide the Maximum
Subscription Amount subscribed for by each such beneficial owner. Copies
of the Nominee Holder Certification form may be obtained from Joseph P.
Hildebrandt, Esq. or Wayne O. Hanewicz, Esq., Foley & Lardner, P.O. Box
1497, 150 East Gilman Street, Madison, Wisconsin 53701-1497, phone number
(608) 258-4246.
If an Other Stockholder does not indicate in its Subscription
Agreement the amount of the Maximum Subscription Amount, if any, which the
Other Stockholder is willing to purchase, or does not forward full payment
of the Purchase Price for the amount of Debentures the Other Stockholder
indicates it is willing to purchase, then such Other Stockholder will be
deemed to have offered to purchase an amount of Debentures equal to the
amount (up to the Maximum Subscription Amount) of the Purchase Price
received by Swing-N-Slide.
Funds received in payment of the Purchase Price for Debentures
will be held in a segregated account pending issuance of the Debentures.
Persons who hold shares of Common Stock for the account of
others, such as brokers, trustees or depositories for securities, should
contact the respective beneficial owners of such shares as soon as
possible to ascertain those beneficial owners' intentions and to obtain
instructions with respect to responding to this Offer. If a beneficial
owner so instructs, the record holder of that beneficial owner's shares of
Common Stock should complete the Subscription Agreement and submit it to
Swing-N-Slide with proper payment. In addition, beneficial owners of
Common Stock held through such a nominee holder should contact the nominee
holder and request the nominee holder to effect transactions in accordance
with the beneficial owner's instructions.
The Instructions accompanying the Subscription Agreement should
be read carefully and followed in detail.
THE SUBSCRIPTION AGREEMENT SHOULD BE SENT WITH PAYMENT TO
RICHARD E. RUEGGER, VICE-PRESIDENT - FINANCE, SWING-N-SLIDE CORP., 1212
BARBERRY DRIVE, JANESVILLE, WISCONSIN 53545.
THE METHOD OF DELIVERY OF THE SUBSCRIPTION AGREEMENT AND PAYMENT
OF THE PURCHASE PRICE TO SWING-N-SLIDE ARE AT THE ELECTION AND RISK OF THE
STOCKHOLDER. IF SENT BY MAIL, STOCKHOLDERS ARE URGED TO SEND THE
SUBSCRIPTION AGREEMENT AND PAYMENTS BY REGISTERED MAIL, PROPERLY INSURED,
WITH RETURN RECEIPT REQUESTED, AND ARE URGED TO ALLOW A SUFFICIENT NUMBER
OF DAYS TO ENSURE DELIVERY TO SWING-N-SLIDE AND CLEARANCE OF PAYMENT PRIOR
TO THE EXPIRATION TIME. BECAUSE UNCERTIFIED PERSONAL CHECKS MAY TAKE AT
LEAST FIVE (5) BUSINESS DAYS TO CLEAR, STOCKHOLDERS ARE STRONGLY URGED TO
PAY, OR ARRANGE FOR PAYMENT, BY MEANS OF CERTIFIED OR CASHIER'S CHECK,
MONEY ORDER OR WIRE TRANSFER OF FUNDS.
All issues concerning timeliness, validity, form and eligibility
regarding this Offer will be resolved by Swing-N-Slide, whose
determinations will be final and binding. Swing-N-Slide, in its sole
discretion, may waive any defect or irregularity, or permit a defect or
irregularity to be corrected within such time as it may determine.
Subscription Agreements will not be deemed to have been received or
accepted until all irregularities have been waived or cured within such
time as Swing-N-Slide determines, in its sole discretion. Swing-N-Slide
will not be under any duty to give notification of any defect or
irregularity in connection with the submission of Subscription Agreements
or incur any liability for failure to give such notification.
Any questions or requests for assistance concerning the method
of purchasing Debentures or requests for additional copies of this
Prospectus or Subscription Agreements should be directed to Joseph P.
Hildebrandt, Esq. or Wayne O. Hanewicz, Esq., Foley & Lardner, P.O. Box
1497, 150 East Gilman Street, Madison, Wisconsin 53701-1497, phone number
(608) 258-4246.
No Revocation; No Transfer of Rights
ONCE AN OTHER STOCKHOLDER HAS SUBMITTED ITS SUBSCRIPTION
AGREEMENT IT MAY NOT BE REVOKED OR CHANGED.
This Offer is made only to Other Stockholders, and each Other
Stockholder is entitled to purchase only his pro rata share of Debentures,
as described above. An Other Stockholder may not transfer, in whole or in
part, his right to purchase the Debentures offered hereby, to any other
person, including another Other Stockholder.
Procedures for DTC Participants
It is anticipated that the purchase of Debentures under this
Offering may be effected through the facilities of the Depository Trust
Company ("DTC"). An Other Stockholder who wishes to effect a purchase
hereunder through the DTC may do so by properly executing and delivering
to Swing-N-Slide, at or prior to the Expiration Date, a DTC Participant
Exercise Form, together with payment of the appropriate Purchase Price.
Copies of the DTC Participant Exercise Form may be obtained from Joseph P.
Hildebrandt, Esq. or Wayne O. Hanewicz, Esq., Foley & Lardner, P.O. Box
1497, 150 East Gilman Street, Madison, Wisconsin 53701-1497, phone number
(608) 258-4246.
State and Foreign Securities Law
Swing-N-Slide will not offer, sell or issue Debentures in states
or other jurisdictions where it is unlawful to do so or whose laws, rules,
regulations or orders would require Swing-N-Slide to incur costs,
obligations or time delays which Swing-N-Slide determines, in its sole
discretion, are disproportionate to the net proceeds to be realized by
Swing-N-Slide from such offers, sales or issuances. No action has been
taken in any jurisdiction outside the United States to permit offers and
sales of the Debentures. Consequently, Swing-N-Slide may reject
subscriptions for Debentures by any Other Stockholder, unless it
determines that it may lawfully accept such subscriptions, even if it
could do so by qualifying the Debentures for sale or by taking other
actions in such jurisdictions.
Rights of Subscribers
Other Stockholders will have no rights as Debenture holders
until certificates representing the Debentures for which they have
subscribed are issued to them. An Other Stockholder will not have the
right to revoke its subscriptions after delivery of its Subscription
Agreement to Swing-N-Slide.
DESCRIPTION OF DEBENTURES
The Debentures will be issued pursuant to an Indenture (the
"Indenture"), dated as of _____________, 1996, by and between Swing-N-
Slide and Firstar Trust Company, as trustee (the "Trustee"). The
Debentures are the second series of debentures issued by Swing-N-Slide.
GreenGrass purchased $5,000,000 of First Series Debentures. See
"Background of the Offering." GreenGrass has indicated its intent to
exchange, effective as of the closing date of the issuance of Debentures,
the First Series Debentures for debentures issued under the Indenture,
with rights, privileges, terms and conditions identical to those of the
Debentures, except that the conversion price to GreenGrass will be $4.80
per share. See "Risk Factors--Controlling Interest in the Company and the
Indenture." If GreenGrass does not so exchange its First Series Debentures,
it will not have rights under the Indenture and, instead, will have the
rights contained in the $4,300,000 and $700,000 debentures issued by
Swing-N-Slide to GreenGrass on February 16, 1996 and April 25, 1996,
respectively. The terms and conditions of these debentures (copies of
which are attached as exhibits) are substantially similar to those of
the Indenture (except with a conversion price of $4.80 per share). For
purposes of this section, "Debentures" shall refer both to the Debentures
issued in this Offering and to the debentures issuable to GreenGrass in
exchange for the First Series Debentures.
The following summary of the Debentures and the Indenture does
not purport to be complete and is subject to, and is qualified in its
entirety by, reference to all the provisions of the Debentures and the
Indenture, copies of which have been filed as exhibits to the Registration
Statement of which this Prospectus constitutes a part. The terms of the
Indenture are also governed by certain provisions contained in the Trust
Indenture Act of 1939, as amended. Capitalized terms used herein without
definition have the meanings ascribed to them in the Indenture. Wherever
particular provisions of the Indenture are referred to in this summary,
such provisions are incorporated by reference as a part of the statements
made and such statements are qualified in their entirety by such
reference.
General
The Debentures will be unsecured, subordinated, general
obligations of Swing-N-Slide, limited in aggregate principal amount to
$3,333,333, plus such additional amounts as may be necessary to pay
interest on the Debentures in additional debentures (see below). The
Debentures will be subordinated in right of payment to all Senior
Indebtedness of Swing-N-Slide, as described under "Subordination" below.
The Debentures will be issued only in fully registered form, without
coupons, in denominations of $1 and integral multiples thereof.
The Debentures will mature on October 15, 2004. The Debentures
will bear interest at the rate per annum stated on the cover page hereof
from the date of issuance or from the most recent Interest Payment Date to
which interest has been paid or provided for, payable semi-annually on
October 15 and April 15 of each year, commencing October 15, 1996, to the
persons in whose names such Debentures are registered at the close of
business on the Regular Record Date for such interest. Interest shall be
calculated based on a year composed of 365 days.
Until October 15, 1999, interest on the Debentures may, at the
option of Swing-N-Slide (which option Swing-N-Slide intends to exercise),
be paid in the form of additional Debentures, issued pursuant to the
Indenture, in the principal amount of the interest so payable, dated the
Interest Payment Date for such interest payment, with interest payable as
provided in the Indenture with a Stated Maturity of principal and interest
as provided in the Indenture and otherwise identical to the Debentures.
Principal or premium, if any, and interest on the Debentures
will be payable, the Debentures will be convertible and the Debentures may
be presented for registration of transfer or exchange at the office or
agency of Swing-N-Slide maintained for such purpose. At the option of
Swing-N-Slide, payment of interest may be made by check (or Debentures, as
described above) mailed to the holders of the Debentures (individually a
"Holder" and collectively the "Holders") at the addresses set forth upon
the registry books of Swing-N-Slide. No service charge will be made on
any registration of transfer or exchange of the Debentures, but Swing-N-
Slide may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith. Until otherwise
designated by Swing-N-Slide, Swing-N-Slide's office or agency will be the
corporate trust office of the Trustee presently located at 615 E. Michigan
Street, Milwaukee, Wisconsin.
The covenants and provisions contained in the Indenture and the
Debentures would not necessarily afford the Holders protection in the
event of a highly leveraged transaction involving Swing-N-Slide, including
a leveraged transaction initiated or supported by Swing-N-Slide, the
management of Swing-N-Slide or any affiliate of either party.
Conversion Rights
The Holder of any Debentures will have the right, at the
Holder's option, at any time prior to maturity, to convert the principal
amount thereof (or any portion of the principal thereof which is $1 or an
integral multiple of $1) into fully paid and nonassessable (except as
otherwise provided by law) shares of Common Stock of Swing-N-Slide at the
$4.70 Conversion Price set forth on the cover page hereof (except in the
case of Debentures issued to GreenGrass, if any, which shall be convertible
at a price of $4.80 per share), subject to adjustment as described below.
The right to convert a Debenture, or portion thereof, called for redemption
will terminate on the close of business on the 5th Business Day prior to
the Redemption Date for such Debentures, or portion thereof, unless Swing-
N-Slide subsequently fails to pay the applicable Redemption Price.
In the case of any Debenture which has been converted after any
Regular Record Date and on or before the next succeeding Interest Payment
Date (other than any Debenture whose Maturity is prior to such Interest
Payment Date or any Debenture being converted which has been called for
redemption during such period), interest whose Stated Maturity is on such
Interest Payment Date shall be payable on such Interest Payment Date
notwithstanding such conversion, and such interest shall be paid to the
Holder in whose name that Debenture is registered at the close of business
on such Regular Record Date. No fractional shares will be issued upon
conversion but, in lieu thereof, an appropriate amount will be paid in
cash by Swing-N-Slide based on the market price of Common Stock (as
determined in accordance with the Indenture) at the close of business on
the day of conversion.
The Conversion Price will be subject to adjustment in certain
events, including: (a) any dividend payable in Common Stock on Common
Stock, (b) any issuance to all holders of Common Stock of rights or
warrants entitling them to subscribe for or purchase Common Stock at less
than the then current market price (as determined in accordance with the
Indenture) of Common Stock, and (c) any subdivision, combination or
reclassification of Common Stock. In the event of any distribution to all
holders of Common Stock of capital stock (other than Common Stock) or
assets (excluding cash dividends paid out of retained earnings of Swing-N-
Slide) or rights or warrants to subscribe or purchase (excluding those
referred to in (b) above) (collectively referred to as "Distributions on
Common Stock"), then in each such case, each Holder shall receive the
Distribution on Common Stock to which such Holder would be entitled if it
had converted the Debentures for Common Stock immediately prior to the
record date for the purpose of determining stockholders entitled to
receive such Distribution on Common Stock.
Swing-N-Slide reserves the right to make such reductions in the
conversion rate, in addition to those required in the Indenture, as it
considers to be advisable in order that any event treated for Federal
income tax purposes as a dividend of stock or stock rights shall not be
taxable to the recipients. No adjustment in the conversion rate shall be
required unless the cumulative adjustments amount to 1% or more of the
conversion price as last adjusted.
In the case of any consolidation of Swing-N-Slide with, or
merger of Swing-N-Slide into, any other Person (with certain exceptions)
or any sale or transfer of all or substantially all of the assets of
Swing-N-Slide (whether such assets are held by Swing-N-Slide or its
Subsidiaries), the Holder of each Debenture then outstanding shall have
the right thereafter, during the period such Debenture shall be
convertible, under the Indenture, to convert such Debenture only into the
kind and amount of securities, cash and other property receivable upon
such consolidation, merger, sale or transfer by a holder of the number of
shares of Common Stock of Swing-N-Slide into which such Debenture might
have been converted immediately prior to such consolidation, merger, sale
or transfer assuming such holder of Common Stock (i) is not a party to
such transaction, and (ii) failed to exercise any rights of election and
received per share the kind and amount received per share by a plurality
of non-electing shares.
If at any time Swing-N-Slide makes a distribution of cash or
property to stockholders that would be taxable to such stockholders as a
dividend for Federal income tax purposes (for example, distributions of
assets or evidences of indebtedness of Swing-N-Slide, but generally not
stock dividends or rights to subscribe for Common Stock), and pursuant to
the antidilution provisions of the Indenture, the Conversion Price is
decreased, such decrease may be deemed to result in taxable dividends to
holders of the Debentures. See "Certain Federal Income Tax Considerations
- Conversion."
Subordination
The Debentures are general unsecured obligations of Swing-N-
Slide, subordinated in right of payment to all existing and future Senior
Indebtedness of Swing-N-Slide. The Senior Indebtedness consists of Swing-
N-Slide's guaranty of money borrowed by Newco, Swing-N-Slide's wholly-
owned subsidiary, whether outstanding on the date hereof or hereafter, and
all renewals, extensions and refundings of such borrowings. As of March
31, 1996, the Newco Indebtedness was approximately $44,191,000. There is
no restriction on the incurrence of additional Senior Indebtedness or
other indebtedness by the Company, including other indebtedness senior to
the Debentures.
The Indenture will provide that (a) in the event and during the
continuation of any default in the payment of principal (or premium, if
any) or interest on any Newco Indebtedness beyond any applicable grace
period with respect thereto, or in the event that any event of default
with respect to any Newco Indebtedness shall have occurred and be
continuing permitting the holders of such Newco Indebtedness (or trustee
on behalf of the holders thereof) to declare such Newco Indebtedness due
and payable prior to the date on which it would otherwise have become due
and payable, unless and until such event of default shall have been cured
or waived or shall have ceased to exist and such acceleration shall have
been rescinded or annulled, or (b) in the event any judicial proceeding
shall be pending with respect to any such default in payment or event of
default, then no payment (including any payment which may be payable by
reason of the payment of any other indebtedness of Swing-N-Slide being
subordinated to the payment of the Debentures) may be made by Swing-N-
Slide on account of principal of (or premium, if any) or interest on the
Debentures or on account of the purchase or other acquisition of
Debentures.
In the event that, notwithstanding the foregoing, Swing-N-Slide
shall make any payment to the Trustee or the Holder of any Debenture
prohibited by the foregoing, and if such fact shall then have been made
known to the Trustee or, as the case may be, such Holder, then and in such
event such payment shall be paid over and delivered forthwith to Swing-N-
Slide for the benefit of the holders of Senior Indebtedness.
Upon any distribution of assets of Swing-N-Slide in the event of
(a) any insolvency or bankruptcy case or proceeding, or any receivership,
liquidation, reorganization or other similar case or proceeding in
connection therewith, relative to Swing-N-Slide or to its creditors, as
such, or to its assets, or (b) any liquidation, dissolution or other
winding up of Swing-N-Slide, or (c) any assignment for the benefit of
creditors or any other marshalling of assets and liabilities of Swing-N-
Slide, then the holders of Senior Indebtedness will be entitled to receive
payment in full of all amounts due or to become due on or in respect of
all Senior Indebtedness, or provision shall be made for such payment,
before Holders of Debentures are entitled to receive any payment on
account of principal of (or premium, if any) or interest on the
Debentures.
Notwithstanding any other provision in the Indenture, each
Holder shall have the right, which is absolute and unconditional, to
receive payment of the principal of (and premium, if any) and interest on
Debentures on the date when due (or, in the case of redemption, on the
Redemption Date) and to convert Debentures in accordance with the
Indenture and to institute suit for the enforcement of any such payment
and right to convert.
As a result of these subordination provisions, in the event of
the liquidation, bankruptcy, reorganization, insolvency, receivership or
similar proceeding or an assignment for the benefit of the creditors of
Swing-N-Slide or any of its Subsidiaries or a marshalling of assets or
liabilities of Swing-N-Slide and its Subsidiaries, Holders of Debentures
may receive ratably less than other creditors.
Redemption at Swing-N-Slide's Option
The Debentures will be subject to redemption upon not less than
45 nor more than 60 days' notice by mail, at any time, as a whole or in
part, at the election of Swing-N-Slide, at a Redemption Price equal to
100% of the principal amount, together with accrued interest to the
Redemption Date.
The Debentures will not be subject to any sinking fund.
Notice of any redemption will be sent by first-class mail, at
least 45 days and not more than 60 days prior to the Redemption Date to
each Holder whose Debentures are to be redeemed, at his address appearing
in the Security Register. The notice of redemption must state (a) the
Redemption Date, (b) the Redemption Price, (c) if less than all the
outstanding Debentures are to be redeemed, the identification (and, in the
case of partial redemption, the principal amounts) of the particular
Debentures to be redeemed, (d) that on the Redemption Date the Redemption
Price will become due and payable upon each such Debenture to be redeemed
and that interest thereon will cease to accrue on and after said date, (e)
the conversion rate, the date on which the right to convert the principal
of the Debentures to be redeemed will terminate and the place or places
where such Debentures may be surrendered for conversion, and (f) the place
or places where such Debentures are to be surrendered for payment of the
Redemption Price.
Repurchase of Debentures Upon Occurrence of Contingent Event
In the event that a Contingent Event (as defined) occurs, each
Holder, at his option, may require Swing-N-Slide to purchase his
Debentures, in whole or in part, at the repurchase price ("Repurchase
Price") equal to the principal amount of Debentures so purchased plus
accrued interest, on the date (the "Repurchase Date") that is 90 days
after the mailing of a notice by Swing-N-Slide to Holders that a
Contingent Event has occurred. This obligation to repurchase is subject
to the restriction that Swing-N-Slide may not repurchase Debentures at any
time when the Indenture's subordination provisions would prohibit Swing-N-
Slide from making a payment of principal, premium or interest on the
Debentures.
As used herein, "Contingent Event" means any one or more of the
following events which shall occur subsequent to the date of issuance of
the Debentures:
a. Swing-N-Slide shall convey, transfer or lease all or
substantially all of its assets (whether held directly or
indirectly through Subsidiaries) to any Person (other than a
Subsidiary of Swing-N-Slide);
b. any Person (other than Swing-N-Slide), including a
"group" (within the meaning of Sections 13(d) and 14(d)(2) of
the Exchange Act) that includes such Person, shall acquire,
directly or indirectly, beneficial ownership, in the aggregate,
of (i) 50% or more of the Common Stock, or (ii) securities
representing 50% or more of the combined voting power of Swing-
N-Slide's voting securities, in either case, outstanding on the
date immediately prior to the date of the last such acquisition
by such Person; or
c. on any day (a "Calculation Date") (i) (A) Swing-N-
Slide shall distribute cash, securities or other properties,
including cash dividends (other than Common Stock, or rights or
warrants to acquire Common Stock or preferred stock
substantially equivalent to Common Stock) to holders of Common
Stock, whether by means of dividend, reclassification,
recapitalization or otherwise, or (B) Swing-N-Slide shall
acquire, directly or indirectly, beneficial ownership of Common
Stock; and (ii) the sum of the Applicable Percentages (as
defined below) of all such distributions and acquisitions which
have occurred on the Calculation Date and during the 365-day
period immediately preceding the Calculation Date shall exceed
30%.
As used herein, "Applicable Percentage" means (i) in the case of
each distribution referred to in clause (c) above, the percentage
determined as of the Calculation Date of each such distribution by
dividing the aggregate fair market value (as determined in good faith by
the Board of Directors of Swing-N-Slide) of such distribution, by the fair
market value (based on the then current market price) of all of the shares
of Common Stock outstanding on the day immediately prior to such
Calculation Date; and (ii) in the case of each acquisition referred to in
clause (c) above, the percentage determined as of the Calculation Date of
each such acquisition by dividing all amounts expended by Swing-N-Slide
(such amounts, if other than in cash, as determined in good faith by the
Board of Directors of Swing-N-Slide) in connection with the acquisition of
any shares of Common Stock, by the fair market value (based on the then
current market price) of all of the shares of Common Stock outstanding on
the day immediately prior to such Calculation Date.
The term "all or substantially all" is likely to be interpreted
by reference to applicable state law at the time applicable, and will be
dependent on the facts and circumstances existing at such time. As a
result, there may be a degree of uncertainty in ascertaining whether a
sale or transfer of "all or substantially all" of the assets of Swing-N-
Slide has occurred. In addition, no assurances can be given that Swing-N-
Slide will be able to acquire the Debentures tendered upon the occurrence
of a Contingent Event.
To the extent applicable and if required by law, Swing-N-Slide
will comply with Section 14 of the Exchange Act and the provisions of
Regulation 14E, Rule 13e-4 and any other tender offer rules under the
Exchange Act and any other securities laws, rules and regulations which
may then be applicable to any offer by Swing-N-Slide to purchase
Debentures at the option of Holders upon a Contingent Event.
The obligation of Swing-N-Slide to repurchase Debentures as a
result of the occurrence of a Contingent Event could create an event of
default under the Senior Indebtedness as a result of which any repurchase
could, absent a waiver, be blocked by the subordination provision of the
Debentures. See "Subordination." Failure of Swing-N-Slide to repurchase
the Debentures when required would result in an Event of Default with
respect to the Debentures whether or not such repurchase is permitted by
the subordination provisions.
The right to require Swing-N-Slide to repurchase the Debentures
upon the occurrence of certain events could make more difficult, and
thereby discourage, attempts to acquire control of Swing-N-Slide.
Repurchasing the Debentures might adversely affect Swing-N-Slide's capital
structure by causing the replacement of the Debentures by other financing.
In addition, such a repurchase would consume cash or borrowing capacity of
Swing-N-Slide that otherwise might be employed by a prospective acquiror
as a means of financing its acquisition of control.
Limitation on Merger, Sale or Consolidation
The Indenture will provide that Swing-N-Slide may not
consolidate with or merge into any other Person or convey, transfer or
lease its properties and assets substantially as an entirety (whether such
properties and assets are held by Swing-N-Slide directly or through its
Subsidiaries) to any Person, unless:
(1) the Person formed by such consolidation or into which
Swing-N-Slide is merged or the Person which acquires by
conveyance or transfer, or which leases, the properties and
assets of Swing-N-Slide substantially as an entirety shall be a
corporation organized and existing under the laws of the United
States of America, any State thereof or the District of Columbia
and shall expressly assume, by a supplemental indenture, all of
the obligations of Swing-N-Slide in connection with the
Debentures and the Indenture and shall have provided for
conversion rights in accordance with the Indenture; and
(2) immediately after giving effect to such transaction,
no Event of Default, and no event which, after notice or lapse
of time or both, would become an Event of Default, shall have
happened and be continuing.
Upon any consolidation or merger by Swing-N-Slide with or into
any other Person or any conveyance, transfer or lease of the properties
and assets of Swing-N-Slide substantially as an entirety in accordance
with the foregoing, the successor corporation formed by such consolidation
or into which Swing-N-Slide is merged or to which such conveyance,
transfer or lease is made shall succeed to, and be substituted for, and
may exercise every right and power of Swing-N-Slide under the Indenture
with the same effect as if such successor corporation had been named
therein as Swing-N-Slide.
Reports
Swing-N-Slide shall deliver to the Trustee its annual and
quarterly reports, within 15 days after it files such reports with the
Commission pursuant to the reporting requirements of Section 13 or 15(d)
of the Exchange Act. In addition, the Indenture will require Swing-N-
Slide, each year, to deliver to the Trustee an Officer's Certificate
stating that Swing-N-Slide fulfilled all its obligations under the
Indenture during such year, or, if there has been a default, describing
the default.
Events of Default and Remedies
The Indenture will define an Event of Default as (i) default in
the payment of any interest upon any Debenture when it becomes due and
payable and continuance of such default for a period of 10 days; or (ii)
default in the payment of the principal of (or premium, if any, on) any
Debenture at its Maturity whether or not such payment is prohibited by the
subordination provisions of the Indenture and continuance of such default
for a period of 30 days; or (iii) default in the performance, or breach,
of any covenant or warranty of Swing-N-Slide in the Indenture (other than
a covenant or warranty a default in whose performance or whose breach is
elsewhere in the Indenture specifically dealt with), and continuance of
such default or breach for a period of 30 days after there has been given,
by registered or certified mail, to Swing-N-Slide by the Trustee or to
Swing-N-Slide and the Trustee by holders of at least 10% in principal
amount of the outstanding Debentures a written notice specifying such
default or breach and requiring it to be remedied and stating that such
notice is a "Notice of Default" under the Indenture; or (iv) certain
events of bankruptcy, insolvency or reorganization in respect of Swing-N-
Slide. The Indenture provides that if a default occurs thereunder, the
Trustee must, within 90 days after the occurrence of such default, give
the Holders written notice of the default.
The Indenture will provide that if an Event of Default occurs
and is continuing, then in every such case the Trustee or the Holders of
not less than 25% in principal amount of the outstanding Debentures may
declare the principal of all the Debentures to be due and payable
immediately, by a notice in writing to Swing-N-Slide (and to the Trustee
if given by the Holders). The Holders of no less than a majority in
principal amount of the outstanding Debentures generally are authorized to
rescind such acceleration if all existing Events of Default, other than
the nonpayment of the principal of Debentures which have become due solely
by such declaration of acceleration, have been cured or waived.
Prior to the declaration of acceleration, the Holders of not
less than a majority in principal amount of the outstanding Debentures may
on behalf of the Holders of all Debentures waive any past default under
the Indenture except a default in payment of principal of (or premium, if
any) or interest on any Debenture, and certain other defaults described in
the Indenture. Subject to the provisions of the Indenture relating to the
duties of the Trustee, the Trustee will be under no obligation to exercise
any of the rights or powers vested in it by the Indenture at the request
or direction of any of the Holders pursuant to the Indenture, unless such
Holders shall have offered to the Trustee reasonable security or
indemnity. Subject to the provisions of the Indenture and applicable law,
the Holders of a majority in aggregate principal amount of outstanding
Debentures will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee. If GreenGrass
exchanged its First Series Debentures for Debentures, it would be able
to exercise substantial, and often decisive, control over issues involving
the Company, the Debentures and the Indenture. See "Risk Factors--
Controlling Interest in the Company and the Indenture."
Amendments and Supplements
The Indenture will contain provisions permitting Swing-N-Slide
and the Trustee to enter into a supplemental indenture for certain limited
purposes without the consent of the Holders. With the consent of the
Holders of not less than two-thirds in aggregate principal amount of the
outstanding Debentures, Swing-N-Slide and the Trustee are permitted to
amend or supplement the Indenture or any supplemental indenture or modify
the rights of the Holders; provided, that no such modification may,
without the consent of each Holder of outstanding Debentures affected
thereby, (i) change the Stated Maturity Date of the principal of, or any
installment of interest on, any Debenture, or reduce the principal amount
thereof or the rate of interest thereon or any premium payable upon the
redemption thereof, or change the place of payment where, or the coin or
currency in which, any Debenture or any premium or interest thereon is
payable, or impair the right to institute suit for the enforcement of any
payment on or with respect to any Debentures, or adversely affect the
right to convert any Debenture as provided in the Indenture or modify the
provisions of the Indenture with respect to the subordination of the
Debentures in a manner adverse to the Holders, or (ii) reduce the
percentage in principal amount of outstanding Debentures, the consent of
whose Holders is required for any such supplemental indenture, or the
consent of whose Holders is required for any waiver provided for in the
Indenture, or (iii) modify any of the waiver provisions, except to
increase any such percentage or to provide that certain other provisions
of the Indenture cannot be modified or waived without the consent of the
Holder of each outstanding Debenture affected thereby.
If GreenGrass exchanged its First Series Debentures for
Debentures, it would be able to exercise substantial, and often decisive,
control over issues involving the Debentures and the Indenture. See "Risk
Factors--Controlling Interest in the Company and the Indenture."
Certain Definitions
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in New York, New
York are authorized or obligated by law or executive order to close.
"Debt" of any Person means at any due, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of
such Person evidenced by bonds, debentures, notes or other similar
instruments, (iii) all obligations of such Person as lessee under leases
which are or may be capitalized under generally accepted accounting
principles, (iv) all Debt of others secured by a lien on any asset of such
Person, whether or not such Debt is assumed by such Person, or (v) all
Debt of others for the payment of which such Person is responsible or
liable as obligor, guarantor or otherwise.
"Newco Indebtedness" means the principal, premium, if any, and unpaid
interest on indebtedness for money borrowed by Newco and guaranteed by
Swing-N-Slide (at any time and from time to time), whether outstanding on
the date hereof or hereafter, and all renewals, extensions and refundings
of any such Debt; provided, however, that the following shall not
constitute Newco Indebtedness: any Debt which by its terms refers
explicitly to the Debentures issued hereunder and states that such Debt
shall not be senior in right of payment thereto.
"Senior Indebtedness" means all Debts, obligations and liabilities of
Swing-N-Slide arising under the guarantee by Swing-N-Slide of the Newco
Indebtedness, whether such guarantee is outstanding on the date hereof or
hereafter, and all renewals, replacements and extensions thereof.
"Stated Maturity" when used with respect to any Debenture, means
October 15, 2004.
"Subsidiary" means a corporation more than 50% of the outstanding
voting stock of which is owned, directly or indirectly, by Swing-N-Slide
or by one or more other Subsidiaries, or by Swing-N-Slide and one or more
other Subsidiaries. For the purposes of this definition, "voting stock"
means stock which ordinarily has voting power for the election of
directors, whether at all times or only so long as no senior class of
stock has such voting power by reason of any contingency.
DESCRIPTION OF CAPITAL STOCK
Debentures are convertible, under the terms and conditions of
the Indenture, into Common Stock (as defined below). See "Description of
Debentures." Swing-N-Slide has 31,750,000 authorized shares of capital
stock, divided into three classes as follows: 25,000,000 shares, par
value $0.01 per share, of common stock (for purposes of this section,
"Common Stock"), 1,750,000 shares, par value $0.01 per share, of Class B
Common Stock ("Class B Common Stock" and together with the Common Stock,
the "common stock"), and 5,000,000 shares, par value $0.01 per share of
Preferred Stock. As of May 15, 1996, 9,604,000 shares of Common Stock
were issued, of which 3,600,000 shares were held in treasury, and no
shares of Class B Common Stock or Preferred Stock were issued. All
outstanding shares of Common Stock are fully paid and nonassessable
(except as otherwise provided by law).
Common Stock
Holders of Common Stock are entitled to one vote per share on
all matters which, pursuant to the Delaware General Corporation Law (the
"DGCL"), require the approval of Swing-N-Slide's stockholders. Holders of
Class B Common Stock have no right to vote on any matters to be voted on
by Swing-N-Slide's stockholders. GreenGrass's ownership of 60% of the
currently issued and outstanding Common Stock (66% if GreenGrass converted
all $5,000,000 in First Series Debentures into Common Stock), along with
GreenGrass's potential ownership of at least 60% of the debentures issued
under the Indenture, give it effective control over Swing-N-Slide. See
"Risk Factors--Controlling Interest in the Company and the Indenture."
In the event of a liquidation, dissolution or winding up of
Swing-N-Slide, holders of common stock are entitled to participate ratably
in all distributions to the holders of Common Stock after payment of
liabilities and satisfaction of any preferential rights of holders of
Preferred Stock, if any. Holders of common stock are not entitled to any
preemptive rights. Subject to any preferences that may be applicable to
any outstanding shares of Preferred Stock, holders of common stock are
entitled to receive cash dividends ratably on a per share basis if and
when such dividends are declared by the Board of Directors from funds
legally available therefor. But see "Risk Factors--No Dividends."
Shares of Common Stock can be converted into shares of Class B
Common Stock by "Regulated Stockholders" (defined in the Amended
Certificate of Incorporation to mean stockholders who, among other things,
are subject to Regulation Y of the Board of Governors of the Federal
Reserve System). Currently, there are no Regulated Stockholders. Each
holder of Class B Common Stock can convert it into Common Stock under
certain circumstances described in the Amended Certificate of
Incorporation. Currently, there are no holders of Class B Common Stock.
The rights, preferences and privileges of common stock are
subject to, and may be adversely affected by, the rights of holders of
shares of any series of Preferred Stock which Swing-N-Slide may designate
and issue in the future.
Preferred Stock
The Board of Directors of Swing-N-Slide is authorized to provide
for the issuance by Swing-N-Slide of Preferred Stock in one or more series
and to fix the rights, preferences, privileges, qualifications,
limitations and restrictions thereof, including, without limitation,
dividend rights, dividend rates, conversion rights, voting rights, terms
of redemption or repurchase, redemption or repurchase prices, limitations
or restrictions thereon, liquidation preferences and the number of shares
constituting any series or the designation of such series, without any
further vote or action by the stockholders. The issuance of any series of
Preferred Stock may have an adverse effect on the rights of holders of
common stock, and could decrease the amount of earnings and assets
available for distribution to holders of common stock. In addition, any
issuance of Preferred Stock could have the effect of delaying, deferring
or preventing a change in control of Swing-N-Slide.
Swing-N-Slide has no present plans to issue any shares of
Preferred Stock.
Section 203 of the Delaware Law
Generally, Section 203 of the DGCL prohibits certain Delaware
corporations from engaging in a business combination with an interested
stockholder for a period of three years after the date of the transaction
in which the person became an interested stockholder, subject to certain
exceptions. A Delaware corporation may "opt out" from the application of
Section 203 of the DGCL through a provision in its certificate of
incorporation or by-laws. Swing-N-Slide has "opted out" from the
application of Section 203. Swing-N-Slide's election not to be governed
by Section 203 will not, however, apply to any business combination
between Swing-N-Slide and any person who became an interested stockholder
on or prior to June 18, 1992.
Certain Certificate of Incorporation and Bylaw Provisions
The Amended and Restated Certificate of Incorporation ("Amended
Certificate of Incorporation") of Swing-N-Slide provides that the number
of directors of Swing-N-Slide shall consist of not less than one and not
more than ten, with the exact number to be determined by a vote of a
majority of the Board. There are currently seven members of the Board of
Directors. Any vacancies on the Board may be filled for the unexpired
portion of the term by a majority vote of the remaining directors.
Election of directors at all meetings of the stockholders at
which directors are to be elected shall be by ballot, and, except as may
be limited by the rights of Preferred Stockholders, a plurality of votes
cast thereat shall elect. Except as otherwise provided by law or the
Amended Certificate of Incorporation, all matters other than the election
of directors submitted to the stockholders at any meeting shall be decided
by a majority of the votes cast with respect thereto.
The Amended Certificate of Incorporation prohibits stockholders
of Swing-N-Slide from taking action by written consent without a meeting
of stockholders. The Amended Certificate of Incorporation provides, with
certain exceptions, that meetings of stockholders of the Corporation may
be called only by the Chairman of the Board of Directors or the President
of Swing-N-Slide, a majority of the Board of Directors, or holders of a
majority of the shares of Common Stock. The Amended Certificate of
Incorporation and Bylaws further provide that nominations for the election
of directors and advance notice of other action to be taken at meetings of
stockholders of Swing-N-Slide must be given in the manner provided in the
Bylaws, and the Bylaws contain detailed notice requirements relating to
nominations and other action.
Swing-N-Slide may change or repeal any provision contained in
the Amended Certificate of Incorporation (except as provided below) and
any other provision authorized by the laws of the State of Delaware at the
time in force may be added (except as provided below) in the manner
prescribed by law. Notwithstanding the foregoing, the affirmative vote of
the holders of at least a majority of the voting power of the shares of
the then outstanding voting stock of Swing-N-Slide, voting together as a
single class, shall be required to amend or repeal, or adopt any
provisions inconsistent with, Articles FIFTH (Election of Directors),
EIGHTH (Indemnification of Directors and Officers), NINTH (limiting
liability of Directors for money damages), or TENTH (stockholders meeting
requirements).
GreenGrass's position as majority stockholder and debenture
holder will, in most instances, allow it to effectively prevent changes of
control of the Company without its consent. See "Risk Factors--
Controlling Interest in the Company and the Indenture" and "Risk Factors--
Certain Anti-Takeover Measures."
The provisions in the Indenture obligating Swing-N-Slide to
repurchase the Debentures (and similar provisions with regard to the First
Series Debentures) upon the happening of a Contingent Event could have the
effect of delaying, deferring or preventing a change in control or the
removal of existing management of Swing-N-Slide. See "Description of
Debentures" and "Risk Factors--Certain Anti-Takeover Measures."
Limitation of Liability
Swing-N-Slide's Amended Certificate of Incorporation provides
that directors of Swing-N-Slide shall not be personally liable to Swing-N-
Slide or its stockholders for monetary damages for breach of fiduciary duty
as a director, except for liability (i) for any breach of the director's
duty of loyalty to Swing-N-Slide or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the DGCL, relating to
prohibited dividends or distributions or the repurchase or redemption of
stock, or (iv) for any transaction from which the director derives an
improper personal benefit. Such limitation of liability does not affect
the availability of equitable remedies such as injunctive relief or
rescission.
Transfer Agent and Registrar
The transfer agent and registrar for Swing-N-Slide is First
Chicago Trust Company of New York, P.O. Box 13701, Newark, New Jersey
07188.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of the material federal
income tax consequences relevant to the purchase, ownership and
disposition of the Debentures described in this Prospectus and of the
Common Stock receivable upon conversion of the Debentures. No ruling or
other guidance from the Internal Revenue Service (the "IRS") has been or
will be sought with respect to the tax matters discussed herein, and thus
there can be no assurance that the IRS will agree with the conclusions set
forth below. This summary is based on current provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), applicable Treasury
regulations, judicial authority and administrative rulings and practice
all of which are subject to change, possibly on a retroactive basis.
This discussion is limited to Holders who hold the Debentures
and/or the Common Stock as capital assets within the meaning of Section
1221 of the Code. Furthermore, this discussion does not include all of
the income tax consequences which may be relevant to certain types of
investors who are subject to special treatment under the Code, including,
but not limited to, individual retirement accounts ("IRAs") and other tax-
deferred accounts, dealers in securities, life insurance companies,
depository institutions, tax exempt organizations and foreign persons,
non-resident aliens and foreign corporations. Additionally, this summary
does not discuss the effect of any applicable foreign, state or local
taxes or estate and gift taxes upon the acquisition, ownership or
disposition of the Debentures or Common Stock.
Purchasers of the Debentures should consult their own tax
advisors with respect to the consequences of acquiring, holding or
disposing of the Debentures, including the applicability of any state,
local or foreign tax laws.
Interest on Debentures
The semi-annual interest paid on the Debentures, whether in
cash, additional debentures or other property, will be taxable to a Holder
as ordinary income in accordance with the Holder's method of tax
accounting at the time that such interest is accrued or either actually or
constructively received.
Market Discount
Subsequent purchasers of the Debentures, if any, may be subject
to the market discount provisions of the Code. Market discount is defined
as the excess, if any, of a debt instrument's stated redemption price at
maturity over its tax basis in the hands of the acquiror immediately after
the acquisition. Market discount will not be considered to exist,
however, if at the time of acquisition, such excess is less than 1/4 of 1%
of the obligation's stated redemption price at maturity multiplied by the
number of complete years remaining to maturity. When a subsequent
purchaser disposes of a Debenture, acquired at a market discount, the
lesser of (i) the total recognizable gain, or (ii) the accrued market
discount, will be taxable to him as ordinary income (and will be treated
as interest). Market discount is accrued on a ratable basis unless the
Holder elects to compute the accrued market discount based upon an
economic yield to maturity. If principal on a debt instrument is paid in
more than one installment, the Holder may be required to include accrued
market discount in income with respect to each principal payment in
advance of the time otherwise required. This requirement could apply to
persons who acquire Debentures at a market discount if such Debentures are
redeemed in part prior to maturity.
A person who acquires a Debenture at a market discount is
generally required to defer the deduction of a portion of the interest on
any indebtedness incurred or maintained by him to purchase or carry the
Debenture. The amount required to be deferred is calculated on an annual
basis and is equal to the excess of the interest on the indebtedness
incurred or maintained to carry the Debenture over the amount of interest
includable in income by the Holder with respect to the Debenture. Any
interest expense so deferred is allowed as a deduction, subject to the
general rules regarding the deductibility of interest, in the year the
Holder disposes of the Debenture in a taxable transaction.
As an alternative to the treatment of Debentures acquired at a
market discount described above (requiring interest income to be
recognized at the time of disposition or redemption), a Holder may elect
to include market discount in income as such discount accrued, in which
event the above-described rules regarding recognition of ordinary income
upon a disposition and deferral of interest expense would be applicable.
Amortizable Bond Premium
If a purchaser of the Debentures acquires them subsequent to
their original issuance for an amount in excess of the amount payable at
maturity, except to the extent that such excess is attributable to the
conversion feature of the Debentures, the purchaser may elect to deduct
the excess over the remaining term of the Debentures as "amortizable bond
premium." Such Holder's tax basis in the Debentures will be reduced by
the amount of such deductions. In the case of an obligation, such as the
Debentures, that may be called at a premium prior to maturity, the
earliest call date is treated as its maturity date and the amount of
amortizable bond premium is determined by treating the amount payable on
such call date as the amount payable at maturity if such a calculation
produces a lesser amount of amortizable bond premium than the method
described above. If the Debentures are not redeemed on such call date,
for purposes of computing any remaining amortizable bond premium, they
will be treated as reissued on such date at the amount that would have
been payable had they been called.
Currently, in the absence of any temporary or final Treasury
Regulations, any amortizable bond premium with respect to the Debentures,
including any remaining unamortized bond premium existing at the time of
redemption, must be treated as an offset to interest received on the
Debentures, rather than as an interest or loss deduction.
Conversion
A Holder will not recognize gain or loss on the conversion of
the Debentures into Common Stock, except with respect to any cash received
in lieu of a fractional share. A Holder who receives cash in lieu of a
fractional share will be treated as if he had received the fractional
share and Swing-N-Slide simultaneously redeemed the fractional share for
the cash payment. Gain or loss recognized on the receipt of cash paid in
lieu of such a fractional share generally will be equal to the difference
between the amount of cash received and the amount of tax basis allocable
to the fractional share treated as having been redeemed. The holding
period of the Common Stock received by the Holder upon conversion of a
Debenture will include the period during which the Debenture was held
prior to conversion. The Holder's aggregate tax basis in the Common Stock
received upon conversion of a Debenture will equal the Holder's aggregate
tax basis in the Debentures exchanged therefor (less the allocable portion
of the basis attributable to any fractional share exchanged for cash).
If a Debenture as to which there is accrued market discount not
yet recognized in taxable income (see "--Market Discount" above) is
converted into Common Stock, such unrecognized accrued discount should
carry over to the Common Stock and any gain realized upon the subsequent
disposition of such Common Stock will, to the extent of such unrecognized
accrued market discount, be taxable as ordinary income.
A taxable distribution to Holders of the Common Stock which
results in an adjustment of the conversion price of the Debentures may, in
certain circumstances, be treated as a deemed distribution to the Holders.
In certain other circumstances, the absence of such an adjustment may
result in a deemed distribution to the Holders of Common Stock. Such
deemed distributions will be taxable as a dividend, as a return of
capital, or as a capital gain, depending upon the earnings and profits of
the Company. See the discussion below in the second paragraph under "--
Dividends on Common Stock."
Disposition of Debentures or Common Stock
In general, the Holder of a Debenture (or the Common Stock into
which it was converted) will recognize capital gain or loss upon the sale,
exchange, redemption, retirement or other disposition of the Debentures or
Common Stock which is equal to the difference between the amount realized
(except to the extent attributable to the payment of accrued interest or
to accrued market discount not previously included in income - see "--
Market Discount" above) and the Holder's tax basis in the Debenture or
Common Stock. In certain circumstances, however, a redemption of Common
Stock may be treated as a Dividend and taxed in the manner discussed below
under "--Dividends on Common Stock." A Holder's tax basis is generally
the cost of the Debenture increased by the amount of any accrued market
discount previously taken into income and decreased by any premium which
has been amortized. To determine the basis in the Common Stock into which
the Debentures have been converted, see "--Conversion" (above) and "--
Dividends on Common Stock" (below). The gain or loss on such disposition
of the Debenture or the Common Stock, in excess of any market discount not
previously included in the determination of taxable income, will be long-
term capital gain or loss if the holding period of the Debentures or
Common Stock is more than one year at the time of such disposition.
Dividends on Common Stock
Distributions paid to Holders of Common Stock will constitute
dividends for federal income tax purposes to the extent of the Company's
current and accumulated earnings and profits, as determined under the
Code. Such dividends will be taxable to the Holder under rules generally
applicable to distributions received from United States corporations.
Holders that are United States corporations which receive distributions
made from the Company's current and accumulated earnings and profits,
which satisfy certain holding period and taxable income requirements and
which have not incurred indebtedness to carry the Common Stock, may be
eligible for a 70% dividends-received deduction.
In the event that a Holder receives a distribution on Common
Stock which otherwise constitutes a dividend under the Code, but the
distribution exceeds the current and accumulated profits of the Company,
such distribution will be treated first as a non-taxable return of capital
reducing the Holder's basis in the Common Stock. Any distribution in
excess of the Holder's basis in the Common Stock will be treated as a
capital gain.
Information Reporting and Backup Withholding
For federal income tax purposes, a Holder of the Debentures or
Common Stock will be subject to "backup withholding" at the rate of 31%
with respect to interest, dividends or distributions paid with respect to,
and gross proceeds from a sale of, the Debentures or Common Stock, unless
such Holder (i) is a corporation, or otherwise exempt from backup
withholding and, when required, demonstrates this fact or (ii) provides a
correct taxpayer identification number, certifies as to no loss of
exemption from backup withholding and otherwise complies with requirements
of the backup withholding rules. Any amount withheld under the backup
withholding rules is allowed as a credit against a Holder's federal income
tax, upon his furnishing the required information. A Holder who does not
provide the Company with his correct taxpayer identification number may be
subject to penalties imposed by the IRS. The company will report to
Holders and the IRS the amount of any "reportable payments" for each
calendar year and the amount of tax withheld, if any, with respect to
payments to Holders of the Debentures or Common Stock.
Holders should consult their tax advisors regarding the
application of information and backup withholding in their particular
situation, the availability of an exemption therefrom, and the procedures
for obtaining any such exemption.
THE FOREGOING DISCUSSION OF CERTAIN FEDERAL INCOME TAX
CONSIDERATIONS IS INCLUDED HEREIN FOR GENERAL INFORMATION ONLY. EACH
INVESTOR SHOULD CONSULT HIS OWN TAX ADVISOR WITH RESPECT TO THE TAX
CONSEQUENCES TO HIM, INCLUDING THE SPECIFIC TAX CONSEQUENCES UNDER
FEDERAL, STATE, LOCAL FOREIGN AND OTHER TAX LAWS, OF THE ACQUISITION,
OWNERSHIP AND DISPOSITION OF THE DEBENTURES AND THE COMMON STOCK.
LEGAL MATTERS
The validity of the Debentures and Common Stock registered
hereunder will be passed upon for Swing-N-Slide by Foley & Lardner,
Madison and Milwaukee, Wisconsin.
EXPERTS
The consolidated financial statements and related consolidated
financial statement schedules of Swing-N-Slide Corp. appearing in Swing-N-
Slide Corp.'s Annual Report (Form 10-K) for the year ended December 31,
1995, have been audited by Ernst & Young LLP, independent auditors, as set
forth in their report thereon included therein and incorporated herein by
reference. Such consolidated financial statements and financial statement
schedules are incorporated herein by reference in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
No person has been authorized in connection with the offering
made hereby to give any information or to make any representation not
contained in this Prospectus and, if given or made, such information or
representation must not be relied upon as having been authorized by the
Company or by any other person. This Prospectus does not constitute an
offer to sell or a solicitation of any offer to buy any of the securities
offered hereby to any person or by anyone in any jurisdiction in which it
is unlawful to make such offer or solicitation. Neither the delivery of
this Prospectus nor any sale made hereunder shall, under any
circumstances, create any implication that the information contained
herein is correct as of any date subsequent to the date hereof.
Table of Contents
Page
Available Information . . . . . . . . . . . . . . . . . . . . . . . . . 3
Incorporation of Certain Documents by Reference . . . . . . . . . . . . 3
Prospectus Summary . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . 7
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Background of Offering . . . . . . . . . . . . . . . . . . . . . . . . 21
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . 24
Description of Debentures . . . . . . . . . . . . . . . . . . . . . . . 28
Description of Capital Stock . . . . . . . . . . . . . . . . . . . . . 39
Certain Federal Income Tax Consequences . . . . . . . . . . . . . . . . 43
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table sets forth the estimated expenses in
connection with the issuance and distribution of the securities being
registered, all of which are being borne by the Registrant:
Securities and Exchange Commission
registration fee . . . . . . . . . . . . . . . . . . $1,485.08
Listing fee . . . . . . . . . . . . . . . . . . . . . $3,000.00
Legal fees and expenses . . . . . . . . . . . . . . . $30,000.00
Accounting fees and expenses . . . . . . . . . . . . $5,000.00
Printing fees . . . . . . . . . . . . . . . . . . . . $20,000.00
Blue Sky qualification fees and expenses . . . . . . $1,000.00
Miscellaneous . . . . . . . . . . . . . . . . . . . . $16,514.92
TOTAL . . . . . . . . . . . . . . . . . . . . . $77,000.00
Item 15. Indemnification of Directors and Officers
Set forth below is a description of certain provisions of Swing-
N-Slide's Amended Certificate of Incorporation and Bylaws and the DGCL, as
such provisions relate to the indemnification of the directors and
officers of Swing-N-Slide. This description is intended only as a summary
and is qualified in its entirety by reference to the Amended Certificate
of Incorporation, Bylaws, and the DGCL.
Swing-N-Slide's Amended Certificate of Incorporation provides
that Swing-N-Slide shall, to the full extent permitted by the DGCL, as
amended from time to time, indemnify its directors, officers and certain
other persons (subject to certain conditions and qualifications) and
eliminates the personal liability of its directors to the full extent
permitted by Section 102(b)(7) of the DGCL, as amended from time to time.
Section 145 of the DGCL permits a corporation to indemnify its
directors and officers against expenses (including attorney's fees),
judgments, fines and amounts paid in settlements actually and reasonably
incurred by them in connection with any action, suit or proceeding brought
by third parties, if such directors or officers acted in good faith and in
a manner they reasonably believed to be in or not opposed to the best
interests of the corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe their conduct was unlawful.
In a derivative action, i.e., one by or in the right of the corporation,
indemnification may be made only for expenses actually and reasonably
incurred by directors and officers in connection with the defense or
settlement of an action or suit, and only with respect to a matter as to
which they shall have acted in good faith and in a manner they reasonably
believed to be in or not opposed to the best interests of the corporation,
except that no indemnification shall be made if such person shall have
been adjudged liable for negligence or misconduct in the performance of
his respective duties to the corporation, although the court in which the
action or suit was brought may determine upon application that the
defendant officers or directors are reasonably entitled to indemnification
for such expenses despite such adjudication of liability.
Section 102(b)(7) of the DGCL provides that a corporation may
eliminate or limit the personal liability of a director to the corporation
or its stockholders for monetary damages for breach of fiduciary duty as a
director, provided that such provision shall not eliminate or limit the
liability of a director (i) for any breach of the director's duty of
loyalty to the corporation or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing
violation of law (iii) under Section 174 of the DGCL, or (iv) for any
transaction from which the director derived an improper personal benefit.
No such provision shall eliminate or limit the ability of a director for
any act or omission occurring prior to the date which such provision
becomes effective.
Swing-N-Slide maintains insurance on behalf of its officers and
directors which, subject to certain exceptions, covers liabilities under
the Securities Act of 1933.
Under the Transaction Agreement, Swing-N-Slide is required to
indemnify and provide insurance to the officers and directors of Swing-N-
Slide and Newco, and to certain other persons ("Indemnified Persons").
These obligations require, among other things, that: (a) for three years
and sixty days after the date on which shares of Common Stock were
purchased in the Tender Offer ("Purchase Date"), Swing-N-Slide must
(subject to certain terms, conditions and qualifications) provide
officers' and directors' liability insurance covering each present and
former director or officer of Swing-N-Slide or Newco, and fiduciary
liability insurance covering each present and former Fiduciary (as defined
in the Transaction Agreement), with respect to events, actions and
omissions occurring on or prior to the Purchase Date, including any which
relate to the transactions contemplated by the Transaction Agreement; (b)
for not less than six years after the date on which the Tender Offer
expired, Swing-N-Slide's Certificate of Incorporation and Bylaws shall
provide indemnification to the Indemnified Persons on terms no less
favorable to the Indemnified Persons than those contained in Swing-N-
Slide's Amended Certificate of Incorporation and Bylaws, and Newco's
Articles of Incorporation and Bylaws, as in effect on January 4, 1996; and
(c) proper provision be made so that Swing-N-Slide's successors, assigns
and transferees of all or substantially all Swing-N-Slide's assets assume
the indemnification and insurance obligations set forth in the Transaction
Agreement (without relieving Swing-N-Slide of its obligations thereunder).
Item 16. Exhibits
Exhibit Number Description
2.(1) Transaction Agreement dated January 4, 1996 between
GreenGrass Holdings and Swing-N-Slide*
2.(2) Amendment No. 1 to Transaction Agreement dated February 12,
1996 between GreenGrass Holdings and Swing-N-Slide*
2.(3) Registration Rights Agreement dated January 4, 1996 between
GreenGrass Holdings and Swing-N-Slide*
2.(4) Amendment No. 1 to Registration Rights Agreement dated
February 12, 1996 between GreenGrass Holdings and Swing-N-
Slide*
2.(5) Stipulation and Order dated February 13, 1996 relating to
Barbieri v. Swing-N-Slide Corp., et al., Court of Chancery
of the State of Delaware, New Castle County, Civil Action
No. 14239
4.(i)(1) Form of Indenture dated between Swing-N-Slide and
Firstar Trust Company relating to 10% Convertible
Subordinated Debentures due 2004 in the original
principal amount of $3,333,333
4.(i)(2) Form of Debenture
4.(i)(3) Amended and Restated Certificate of Incorporation of
Swing-N-Slide**
5.(i) Opinion of Foley & Lardner+
10.(i)(1) 10% Convertible Subordinated Debenture due 2004, dated
February 16, 1996, in the original principal amount of
$4,300,000 issued by Swing-N-Slide to GreenGrass
Holdings
10.(i)(2) 10% Convertible Subordinated Debenture due 2004, dated
April 25, 1996, in the original principal amount of
$700,000 issued by Swing-N-Slide to GreenGrass
Holdings
10.(i)(3) Credit Agreement dated January 19, 1996 between The
First National Bank of Chicago (as agent for various
lenders) and Newco
10.(i)(4) Consent No. 1 to Credit Agreement dated February 14,
1996 between The First National Bank of Chicago (as
agent for various lenders) and Newco
10.(i)(5) Amendment No. 2 to Credit Agreement dated March 31,
1996 between The First National Bank of Chicago (as
agent for various lenders) and Newco
10.(ii)(A)(1) Amended and Restated Transitional Compensation
Agreement dated February 9, 1995 between Swing-N-Slide
and Richard Mueller*
10.(ii)(A)(2) Severance and Change of Control Agreement dated
February 15, 1996 between Swing-N-Slide and Joseph
Beebe
10.(ii)(A)(3) Severance and Change of Control Agreement dated
February 15, 1996 between Swing-N-Slide and James
Rastetter $
10.(ii)(A)(4) Severance and Change of Control Agreement dated
February 15, 1996 between Swing-N-Slide and Curtis
Cole $
10.(ii)(A)(5) Severance and Change of Control Agreement dated
February 15, 1996 between Swing-N-Slide and Richard
Ruegger $
10.(ii)(A)(6) Severance and Change of Control Agreement dated
February 15, 1996 between Swing-N-Slide and David
Hammelman $
10.(ii)(A)(7) Severance and Change of Control Agreement dated
February 15, 1996 between Swing-N-Slide and Brian
Zeilinger $
10.(ii)(A)(7) Severance and Change of Control Agreement dated
February 15, 1996 between Swing-N-Slide and Kenneth
Jonas $
10.(iii)(A)(1) Swing-N-Slide Corp. 1996 Incentive Stock Plan
10.(iii)(A)(2) Swing-N-Slide Corp. Stock Program**
12. Statement re Computation of Ratios
13. Annual Report of Swing-N-Slide for the year ended
December 31, 1995
15. Letter of Ernst & Young LLP+
19. Quarterly Report of Swing-N-Slide for the quarter
ended March 31, 1996***
23.(i)(1) Consent of Ernst & Young LLP
23.(i)(2) Consent of Foley & Lardner (to be included in Exhibit
5)+
24. Powers of Attorney+
25. Statement of Eligibility of Firstar Trust Company+
27. Financial Data Schedule
_________________________
* Incorporated by reference to Swing-N-Slide's Schedule 14D-9
(File No. 0-20450).
** Incorporated by reference to Swing-N-Slide's Registration
Statement on Form S-8 (Registration No. 33-48735).
*** Incorporated by reference to Swing-N-Slide's Quarterly Report on
Form 10-Q (File No. 0-20450)
$ Substantially identical in all material respects with the form
of Severance and Change of Control Agreement attached as an
Exhibit 10(ii)(A)(2) except as to the parties thereto.
+ To be filed by amendment.
Item 17. Undertakings
The undersigned registrant hereby undertakes:
The undersigned registrant hereby undertakes that, for purposes
of determining any liability under the Securities Act of 1993, each filing
of the registrant's annual report pursuant to Section 13(a) or Section
15(d) of the Securities Exchange Act of 1934 (and, where applicable, each
filing of an employee benefit plan's annual report pursuant to Section
15(d) of the Securities Exchange Act of 1934) that is incorporated by
reference in the registration statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
The undersigned registrant hereby undertakes to deliver or cause
to be delivered with the prospectus, to each person to whom the prospectus
is sent or given, the latest annual report to security holders that is
incorporated by reference in the prospectus and furnished pursuant to and
meeting the requirements of Rule 14a-3 or Rule 14c-3 under the Securities
Exchange Act of 1934; and where interim financial information required to
be presented by Article 3 of Regulation S-X are not set forth in the
prospectus, to deliver, or cause to be delivered to each person to whom
the prospectus is sent or given, the latest quarterly report that is
specifically incorporated by reference in the prospectus to provide such
interim financial information.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes to file an
application for the purpose of determining the eligibility of the trustee
to act under subsection (a) of section 310 of the Trust Indenture Act
("Act") in accordance with the rules and regulations prescribed by the
Commission under section 305(b)(2) of the Act.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certificates that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-2 and has duly caused this
registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Janesville, State of Wisconsin.
SWING-N-SLIDE CORP.
By: /s/ Richard G. Mueller
Richard G. Mueller, Chairman, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
/s/ Richard G. Mueller
Richard G. Mueller, Chairman of the Board of
Directors, President and Chief Executive
Officer
/s/ Richard E. Ruegger
Richard E. Ruegger, Vice President-Finance,
Chief Financial Officer, Secretary and
Treasurer (Principal Financial and
Accounting Officer)
/s/ Thomas R. Baer
Thomas R. Baer, Director
/s/ David S. Evans
David S. Evans, Director
/s/ George N. Herrera
George N. Herrera, Director
/s/ Timothy R. Kelleher
Timothy R. Kelleher, Director
/s/ Terence S. Malone
Terence S. Malone, Director
/s/ Carolin L. Williams
Caroline L. Williams, Director
<PAGE>
EXHIBIT INDEX
Sequential
Exhibit Page
Number Description Number
2.(1) Transaction Agreement dated January 4,
1996 between GreenGrass Holdings and
Swing-N-Slide*
2.(2) Amendment No. 1 to Transaction
Agreement dated February 12, 1996
between GreenGrass Holdings and Swing-
N-Slide*
2.(3) Registration Rights Agreement dated
January 4, 1996 between GreenGrass
Holdings and Swing-N-Slide*
2.(4) Amendment No. 1 to Registration Rights
Agreement dated February 12, 1996
between GreenGrass Holdings and Swing-
N-Slide*
2.(5) Stipulation and Order dated February
13, 1996 relating to Barbieri v.
Swing-N-Slide Corp., et al., Court of
Chancery of the State of Delaware, New
Castle County, Civil Action No. 14239
4.(i)(1) Form of Indenture dated between Swing-
N-Slide and Firstar Trust Company
relating to 10% Convertible
Subordinated Debentures due 2004 in
the original principal amount of
$3,333,333
4.(i)(2) Form of Debenture
4.(i)(3) Amended and Restated Certificate of
Incorporation of Swing-N-Slide**
5.(i) Opinion of Foley & Lardner+
10.(i)(1) 10% Convertible Subordinated Debenture
due 2004, dated February 16, 1996, in
the original principal amount of
$4,300,000 issued by Swing-N-Slide to
GreenGrass Holdings
10.(i)(2) 10% Convertible Subordinated Debenture
due 2004, dated April 25, 1996, in the
original principal amount of $700,000
issued by Swing-N-Slide to GreenGrass
Holdings
10.(i)(3) Credit Agreement dated January 19,
1996 between The First National Bank
of Chicago (as agent for various
lenders) and Newco
10.(i)(4) Consent No. 1 to Credit Agreement
dated February 14, 1996 between The
First National Bank of Chicago (as
agent for various lenders) and Newco
10.(i)(5) Amendment No. 2 to Credit Agreement
dated March 31, 1996 between The First
National Bank of Chicago (as agent for
various lenders) and Newco
10.(ii)(A)(1) Amended and Restated Transitional
Compensation Agreement dated February
9, 1995 between Swing-N-Slide and
Richard Mueller*
10.(ii)(A)(2) Severance and Change of Control
Agreement dated February 15, 1996
between Swing-N-Slide and Joseph Beebe
10.(ii)(A)(3) Severance and Change of Control
Agreement dated February 15, 1996
between Swing-N-Slide and James
Rastetter $
10.(ii)(A)(4) Severance and Change of Control
Agreement dated February 15, 1996
between Swing-N-Slide and Curtis Cole $
10.(ii)(A)(5) Severance and Change of Control
Agreement dated February 15, 1996
between Swing-N-Slide and Richard
Ruegger $
10.(ii)(A)(6) Severance and Change of Control
Agreement dated February 15, 1996
between Swing-N-Slide and David
Hammelman $
10.(ii)(A)(7) Severance and Change of Control
Agreement dated February 15, 1996
between Swing-N-Slide and Brian
Zeilinger $
10.(ii)(A)(7) Severance and Change of Control
Agreement dated February 15, 1996
between Swing-N-Slide and Kenneth
Jonas $
10.(iii)(A)(1) Swing-N-Slide Corp. 1996 Incentive
Stock Plan
10.(iii)(A)(2) Swing-N-Slide Corp. Stock Program**
12. Statement re Computation of Ratios
13. Annual Report of Swing-N-Slide for the
year ended December 31, 1995
15. Letter of Ernst & Young LLP+
19. Quarterly Report of Swing-N-Slide for
the quarter ended March 31, 1996***
23.(i)(1) Consent of Ernst & Young LLP
23.(i)(2) Consent of Foley & Lardner (to be
included in Exhibit 5)+
24. Powers of Attorney+
25. Statement of Eligibility of Firstar
Trust Company+
27. Financial Data Schedule
_________________________
* Incorporated by reference to Swing-N-Slide's Schedule 14D-9 (File
No. 0-20450).
** Incorporated by reference to Swing-N-Slide's Registration Statement
on Form S-8 (Registration No. 33-48735).
*** Incorporated by reference to Swing-N-Slide's Quarterly Report on
Form 10-Q (File No. 0-20450)
$ Substantially identical in all material respects with the form of
Severance and Change of Control Agreement attached as an Exhibit
10(ii)(A)(2) except as to the parties thereto.
+ To be filed by amendment.
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
ROBERT BARBIERI, )
)
Plaintiff )
)
v. )
) Civil Action No. 14239
SWING-N-SLIDE CORP., A Delaware )
corporation; THOMAS R. BAER, )
RICHARD G. MUELLER, ANDREW W. )
CODE, JAMES M. DODSON, PETER M. )
GOTSCH, TERENCE S. MALONE, HENRY )
B. PEARSALL, BRIAN P. SIMMONS, )
GREENGRASS HOLDINGS and )
GREENGRASS MANAGEMENT LLC, )
)
Defendants. )
STIPULATION AND ORDER
Subject to the approval of the Court, the parties hereby
stipulate and agree:
1. The Stipulation and Order dated February 7, 1996 is hereby
vacated.
2. Plaintiff's Motion For A Temporary Restraining Order and
Plaintiff's Motion For a Preliminary Injunction are withdrawn without
prejudice (other than as specifically described herein). Plaintiff shall
not seek any injunctive relief, emergency or otherwise, against any of the
transactions contemplated by that certain Transaction Agreement dated
January 4, 1996 ("Transaction Agreement") between Swing-N-Slide Corp.
("Company") and GreenGrass Holdings ("Purchaser") or the transactions
otherwise described in Purchaser's Tender Offer for common stock of
Company (including, without limitation, Purchaser's purchase of
Debentures).
3. Purchaser previously agreed with Plaintiff to extend the
expiration of its tender offer until noon on Monday, February 12, 1996.
Purchaser hereby agrees to a further extension of its tender offer until
Midnight E.S.T. on Wednesday, February 14, 1996. Purchaser shall publicly
announce such extension.
4. Pursuant to the Transaction Agreement, Purchaser has agreed
to offer to each stockholder of Company the right to purchase its pro rata
share of Debentures (as defined in the Transaction Agreement) on the basis
of the number of Shares held by such stockholder as of the record date for
such offering to stockholders. The Debentures shall contain the following
terms:
(a) Debentures offered to stockholders (other than
Purchaser) shall be convertible into common stock of Company at the
rate of one (1) share of common stock for each $4.70 principal amount
of Debentures. Debentures purchased by Purchaser shall have a
conversion rate of $4.80 per share.
(b) Debentures shall be offered to stockholders (other
than Purchaser) in one dollar increments in order to permit holders
of odd lot amounts of common stock to participate on a pro rata basis
in the offering of Debentures to stockholders.
(c) The Debenture offering to stockholders (other than
Purchaser) shall occur no earlier than ninety (90) days after the
Purchase Date (as defined in the Transaction Agreement) and the
offering shall remain open for acceptance by stockholders for not
less than sixty (60) days.
(d) In the event of prepayment for any reason of the
Debentures, stockholders shall have not less than thirty (30) days
prior written notice during which stockholders may elect to exercise
conversion rights under the Debentures.
(e) Company shall use reasonable efforts to cause market
makers in Company common stock or other persons or entities to make a
market in Debentures (it is agreed and understood that the ability of
Company to procure a market maker in the Debentures will depend, in
part, on the amount of Debentures purchased by stockholders (other
than Purchaser) and there is no commitment intended hereby with
respect to the liquidity of the market for Debentures).
5. Plaintiff may tender shares of common stock of Company
owned by Plaintiff in the Tender Offer without prejudice to any rights or
claims Plaintiff has made in connection with this action.
6. The parties further agree and stipulate that neither the
withdrawal of Plaintiff's Motion For A Temporary Restraining Order and
Plaintiff's Motion For A Preliminary Injunction, nor Defendants' agreement
set forth herein shall be considered an admission or a waiver of any
claims or positions by any party in any subsequent stage of these
proceedings, except as specifically described herein.
PRICKET, JONES, ELLIOTT, MORRIS, NICHOLS, ARSHT & TUNNELL
KRISTOL & SCENEE
/s/ Donald E. Reid
/s/ Michael Hanrahan Donald E. Reid
Michael Hanrahan 1201 N. Market Street
Elizabeth M. McGeever 18th Floor
1310 King Street P.O. Box 1347
P.O. Box 1328 Wilmington, DE 19801
Wilmington, DE 19801 (302) 658-9200
(302) 888-6500 Attorneys for Defendants other
Attorneys for Plaintiff than GreenGrass Holdings and
GreenGrass Management LLC
FOLEY & LARDNER
/s/ Martin D. Mann
Martin D. Mann
Douglas Hagerman
SO ORDERED this 13th day of 777 East Wisconsin Avenue
February, 1996. Milwaukee, WI 53207
(414) 271-2400
Attorneys for Defendants
/s/ GreenGrass Holdings and
Vice Chancellor GreenGrass Management LLC
DRAFT: 5/14/96
SWING-N-SLIDE CORP.
TO
________________________________________
Trustee
INDENTURE
Dated as of ___________________, 1996
10% Convertible Subordinated Debentures due 2004
<PAGE>
SWING-N-SLIDE CORP.
Reconciliation and tie between
Trust Indenture Act of 1939 and
Indenture, dated as of ____________, 1996
Trust Indenture
Act Section Indenture Section
Section 310(a)(1) 6.09
(a)(2) 6.09
(a)(3) Not Applicable
(a)(4) Not Applicable
(b) 6.08
6.10
Section 311(a) 6.13(a)
(b) 6.13(b)
(b)(2) 7.03(a)(2)
Section 312(a) 7.01
7.02(a)
(b) 7.02(b)
(c) 7.02(c)
Section 313(a) 7.03(a)
(b) 7.03(b)
(c) 7.03(a), 7.03(b)
(d) 7.03(c)
Section 314(a) 7.04
(b) Not Applicable
(c)(1) 1.02
(c)(2) 1.02
(c)(3) Not Applicable
(d) Not Applicable
(e) 1.02
Section 315(a) 6.01(a)
(b) 6.02
7.03(a)(6)
(c) 6.01(b)
(d) 6.01(c)
(d)(1) 6.01(a)(1)
(d)(2) 6.01(c)(2)
(d)(3) 6.01(c)(3)
(e) 5.14
Section 316(a) 1.01
(a)(1)(A) 5.12
(a)(1)) 5.13
(a)(2) Not Applicable
(b) 5.08
Section 317(a)(1) 5.03
(a)(2) 5.04
(b) 10.03
Section 318(a) 1.07
Note: This reconciliation and tie shall not, for any purpose, be
deemed to be part of the Indenture.
<PAGE>
TABLE OF CONTENTS
PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I. DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION . . . . . . . . . . . . . . . . . 1
SECTION 1.01 Definitions . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02. Compliance Certificates and Opinions . . . . . . 6
SECTION 1.03. Form of Documents Delivered to Trustee . . . . . 6
SECTION 1.04. Acts of Securityholders . . . . . . . . . . . . . 7
SECTION 1.05. Notices, etc., to Trustee and Company . . . . . . 7
SECTION 1.06. Notice to Securityholders; Waiver . . . . . . . . 8
SECTION 1.07. Conflict with Trust Indenture Act . . . . . . . . 8
SECTION 1.08. Effect of Headings and Table of Contents . . . . 8
SECTION 1.09. Successors and Assigns . . . . . . . . . . . . . 8
SECTION 1.10. Separability Clause . . . . . . . . . . . . . . . 8
SECTION 1.11. Benefits of Indenture . . . . . . . . . . . . . . 8
SECTION 1.12. Governing Law; Choice of Forum . . . . . . . . . 8
SECTION 1.13. Legal Holidays . . . . . . . . . . . . . . . . . 9
ARTICLE II. SECURITY FORMS . . . . . . . . . . . . . . . . . . . . . 9
SECTION 2.01. Forms Generally . . . . . . . . . . . . . . . . . 9
SECTION 2.02. Form of Face of Security . . . . . . . . . . . . 9
SECTION 2.04. Form of Trustee's Certificate of Authentication . 13
SECTION 2.05. Form of Election to Convert . . . . . . . . . . . 13
ARTICLE III. THE SECURITIES . . . . . . . . . . . . . . . . . . . . 14
SECTION 3.01. Title and Terms . . . . . . . . . . . . . . . . . 14
SECTION 3.02. Denominations . . . . . . . . . . . . . . . . . . 15
SECTION 3.03. Execution, Authentication, Delivery and Dating . 15
SECTION 3.04. Temporary Securities . . . . . . . . . . . . . . 15
SECTION 3.05. Registration, Registration of Transfer and
Exchange . . . . . . . . . . . . . . . . . . . . 16
SECTION 3.06. Mutilated, Destroyed, Lost and Stolen Securities 17
SECTION 3.07. Payment of Interest; Interest Rights Preserved . 17
SECTION 3.08. Persons Deemed Owners . . . . . . . . . . . . . . 18
SECTION 3.09. Cancellation . . . . . . . . . . . . . . . . . . 19
SECTION 3.10. Computation of Interest . . . . . . . . . . . . . 19
SECTION 3.11. CUSIP Numbers . . . . . . . . . . . . . . . . . . 19
ARTICLE IV. SATISFACTION AND DISCHARGE . . . . . . . . . . . . . . . 19
SECTION 4.01. Satisfaction and Discharge of Indenture . . . . . 19
SECTION 4.02. Application of Trust Money . . . . . . . . . . . 20
ARTICLE V. REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 5.01. Events of Default . . . . . . . . . . . . . . . . 20
SECTION 5.02. Acceleration of Maturity; Rescission and
Annulment . . . . . . . . . . . . . . . . . . . . 21
SECTION 5.03. Collection of Indebtedness and Suits for
Enforcement by Trustee . . . . . . . . . . . . . 22
SECTION 5.04. Trustee May File Proofs of Claim . . . . . . . . 23
SECTION 5.05. Trustee May Enforce Claims Without Possession of
Securities . . . . . . . . . . . . . . . . . . . 23
SECTION 5.06. Application of Money Collected . . . . . . . . . 24
SECTION 5.07. Limitation on Suits . . . . . . . . . . . . . . . 24
SECTION 5.08. Unconditional Right of Holders to Receive
Principal, Premium and Interest and to
Convert . . . . . . . . . . . . . . . . . . . . . 24
SECTION 5.09. Restoration of Rights and Remedies . . . . . . . 25
SECTION 5.10. Rights and Remedies Cumulative . . . . . . . . . 25
SECTION 5.11. Delay or Omission Not Waiver . . . . . . . . . . 25
SECTION 5.12. Control by Holders . . . . . . . . . . . . . . . 25
SECTION 5.13. Waiver of Past Defaults . . . . . . . . . . . . . 25
SECTION 5.14. Undertaking for Costs . . . . . . . . . . . . . . 26
SECTION 5.15. Waiver of Stay or Extension Laws . . . . . . . . 26
ARTICLE VI. THE TRUSTEE . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 6.01. Certain Duties and Responsibilities . . . . . . . 26
SECTION 6.02. Notice of Defaults . . . . . . . . . . . . . . . 27
SECTION 6.03. Certain Rights of Trustee . . . . . . . . . . . . 27
SECTION 6.04. Not Responsible for Recitals or Issuances of
Securities . . . . . . . . . . . . . . . . . . . 29
SECTION 6.05. May Hold Securities . . . . . . . . . . . . . . . 29
SECTION 6.06. Money Held in Trust . . . . . . . . . . . . . . . 29
SECTION 6.07. Compensation and Reimbursement . . . . . . . . . 29
SECTION 6.08. Disqualification; Conflicting Interests . . . . . 29
SECTION 6.09. Corporate Trustee Required; Eligibility . . . . . 34
SECTION 6.10. Resignation and Removal; Appointment of
Successor . . . . . . . . . . . . . . . . . . . . 34
SECTION 6.11. Acceptance of Appointment by Successor . . . . . 35
SECTION 6.12. Merger, Conversion, Consolidation or Succession
to Business . . . . . . . . . . . . . . . . . . . 35
SECTION 6.13. Preferential Collection of Claims Against
Company . . . . . . . . . . . . . . . . . . . . . 35
SECTION 6.14. Appointment of Authenticating Agent . . . . . . . 39
ARTICLE VII. HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY . . . 41
SECTION 7.01. Company to Furnish Trustee Names an Addresses of
Holders . . . . . . . . . . . . . . . . . . . . . 41
SECTION 7.02. Preservation of Information Communications to
Holders . . . . . . . . . . . . . . . . . . . . . 41
SECTION 7.03. Reports by Trustee . . . . . . . . . . . . . . . 42
SECTION 7.04. Reports by Company . . . . . . . . . . . . . . . 43
ARTICLE VIII. CONSOLIDATION, MERGER, CONVEYANCE,
TRANSFER OR LEASE . . . . . . . . . . . . . . . . . . 44
SECTION 8.01. Company May Consolidate, etc. Only on Certain
Terms . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 8.02. Successor Corporation Substituted . . . . . . . . 44
ARTICLE IX. SUPPLEMENTAL INDENTURES . . . . . . . . . . . . . . . . 45
SECTION 9.01. Supplemental Indentures Without Consent of
Holders . . . . . . . . . . . . . . . . . . . . . 45
SECTION 9.02. Supplemental Indentures with Consent of Holders . 45
SECTION 9.03. Execution of Supplemental Indentures . . . . . . 46
SECTION 9.04. Effect of Supplemental Indentures . . . . . . . . 46
SECTION 9.05. Conformity with Trust Indenture Act . . . . . . . 46
SECTION 9.06. Reference in Securities to Supplemental
Indentures. . . . . . . . . . . . . . . . . . . . 46
ARTICLE X. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 10.01. Payment of Principal, Premium and Interest . . . 46
SECTION 10.02. Maintenance of Office or Agency . . . . . . . . 46
SECTION 10.03. Money for Securities Payments to Be Held in
Trust. . . . . . . . . . . . . . . . . . . . . . 47
SECTION 10.04. Statement as to Compliance . . . . . . . . . . . 48
SECTION 10.05. Further Instruments and Acts . . . . . . . . . . 48
ARTICLE XI. OPTIONAL REDEMPTION OF SECURITIES . . . . . . . . . . . 48
SECTION 11.01. Right of Redemption . . . . . . . . . . . . . . 48
SECTION 11.02. Applicability of Article . . . . . . . . . . . . 48
SECTION 11.03. Election to Redeem; Notice to Trustee . . . . . 48
SECTION 11.04. Selection by Trustee of Securities to Be
Redeemed . . . . . . . . . . . . . . . . . . . . 49
SECTION 11.05. Notice of Redemption . . . . . . . . . . . . . . 49
SECTION 11.06. Deposit of Redemption Price . . . . . . . . . . 50
SECTION 11.07. Securities Payable on Redemption Date . . . . . 50
SECTION 11.08. Securities Redeemed in Part . . . . . . . . . . 50
ARTICLE XII. RESERVED . . . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE XIII. CONVERSION OF SECURITIES . . . . . . . . . . . . . . . 51
SECTION 13.01. Right of Conversion . . . . . . . . . . . . . . 51
SECTION 13.02. Issuance of Common Stock; Time of Conversion . . 51
SECTION 13.03. No Adjustments in Respect of Interest or
Dividends. . . . . . . . . . . . . . . . . . . . 52
SECTION 13.04. Adjustment of Conversion Price . . . . . . . . . 52
SECTION 13.05. No Fractional Shares . . . . . . . . . . . . . . 55
SECTION 13.06. Consolidation, Merger or Sale of Assets . . . . 55
SECTION 13.07. Prior Notice of Certain Events . . . . . . . . . 56
SECTION 13.08. Shares to be Reserved; Accounting Treatment of
Consideration . . . . . . . . . . . . . . . . . 56
SECTION 13.09. Registration and Listing of Shares . . . . . . . 57
SECTION 13.10. Taxes and Charges . . . . . . . . . . . . . . . 57
SECTION 13.11. Trustee and Conversion Agents Not Liable . . . . 57
ARTICLE XIV. SUBORDINATION OF SECURITIES . . . . . . . . . . . . . . 58
SECTION 14.01. Securities Subordinate to Senior Indebtedness . 58
SECTION 14.02. Payment Over of Proceeds Upon Dissolution Etc. . 58
SECTION 14.03. Prior Payment to Senior Indebtedness Upon
Acceleration of Securities . . . . . . . . . . 59
SECTION 14.04. No Payment When Senior Indebtedness in Default . 59
SECTION 14.05. Payment Permitted if No Default . . . . . . . . 60
SECTION 14.06. Subrogation to Rights of Holders of Senior
Indebtedness . . . . . . . . . . . . . . . . . 60
SECTION 14.07. Provisions Solely to Define Relative Rights . . 60
SECTION 14.08. Trustee to Effectuate Subordination . . . . . . 61
SECTION 14.09. No Waiver of Subordination Provisions . . . . . 61
SECTION 14.10. Notice to Trustee . . . . . . . . . . . . . . . 61
SECTION 14.11. Reliance on Judicial Order or Certificate of
Liquidating Agent . . . . . . . . . . . . . . . 62
SECTION 14.12. Trustee Not Fiduciary For Holders of Senior
Indebtedness . . . . . . . . . . . . . . . . . 62
SECTION 14.13. Rights of Trustee as Holder of Senior
Indebtedness; Preservation of Trustee's Rights . 62
SECTION 14.14. Article Applicable to Paying Agent . . . . . . . 62
ARTICLE XV. REPURCHASE OF SECURITIES BY THE COMPANY
UPON THE OCCURRENCE OF A CONTINGENT EVENT . . . . . . . 62
SECTION 15.01. Obligation to Repurchase . . . . . . . . . . . . 62
SECTION 15.02. Notice; Method of Exercising Repurchase Right . 63
SECTION 15.03. Certain Definitions . . . . . . . . . . . . . . 63
<PAGE>
INDENTURE, dated as of , 1996, between Swing-N-
Slide Corp., a corporation duly organized and existing under the laws of
the State of Delaware (herein called the "Company"), having its principal
office at 1212 Barberry Drive, Janesville, Wisconsin 53545, and
____________________________________, a [national banking association]
duly organized and existing under the laws of the United States of
America, as Trustee hereunder (herein called the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation of an issue of its
Securities (herein called the "Securities") of substantially the tenor and
amount hereinafter set forth, and to provide therefor the Company has duly
authorized the execution and delivery of this Indenture.
All things necessary to make the Securities, when executed by
the Company and authenticated and delivered hereunder and duly issued by
the Company, the valid obligations of the Company, and to make this
Indenture a valid agreement of the Company, in accordance with their and
its terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Securityholders thereof, it is mutually covenanted and
agreed, for the equal and proportionate benefit of all Securityholders, as
follows:
ARTICLE I.
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 1.01 Definitions. For all purposes of this Indenture,
except as otherwise expressly provided or unless the context otherwise
requires:
(1) the terms defined in this Article have the meanings
assigned to them in this Article and include the plural as
well as the singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein,
have the meanings assigned to them therein;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally
accepted accounting principles; and
(4) the words "herein", "hereof" and "hereunder" and other
words of similar import refer to this Indenture as a whole
and not to any particular Article, Section or other
subdivision.
Certain terms, used principally in Article VI, are defined in
that Article.
"Act" when used with respect to any Securityholder has the
meaning specified in Section 1.04.
"Affiliate" of any specified person means any other Person
directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person. For the purposes of
this definition, "control" when used with respect to any specified Person
means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Authenticating Agent" means any Person authorized by the
Trustee to act on behalf of the Trustee to authenticate Securities.
"Board of Directors" means either the board of directors of the
Company or any committee of that board duly authorized to act for such
board hereunder.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly
adopted by the Board of Directors and to be in full force and effect on
the date of such certification, and delivered to the Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday
and Friday which is not a day on which banking institutions in New York,
New York are authorized or obligated by law or executive order to close.
"Certificate of a Firm of Independent Public Accountants" means
a certificate signed by a nationally recognized independent certified
public accountant or a firm of nationally recognized independent certified
public accountants (who may be the independent certified public
accountants regularly retained by the Company) reasonably acceptable to
the Trustee. Such accountant or firm shall be entitled to rely upon any
Opinion of Counsel as to the interpretation of any legal matters relating
to such certificate. Any certificate or opinion of any independent firm
of certified public accountants filed with the Trustee shall contain a
statement that such firm is independent.
"Commission" means the Securities and Exchange Commission, as
from time to time constituted, created under the Securities Exchange Act
of 1934, or, if at any time after the execution of this instrument such
Commission is not existing and performing the duties now assigned to it
under the Trust Indenture Act, then the body performIng such duties at
such time.
"Common Stock" means all shares now or hereafter authorized of
the class of Common Stock of the Company currently authorized and stock of
any other class into which such shares may hereafter have been changed.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor corporation shall have
become such pursuant to the applicable provisions of this Indenture, and
thereafter "Company" shall mean such successor corporation.
"Company Request" or "Company Order" means a written request or
order signed in the name of the Company by its Chairman of the Board, its
President or a Vice President, and by its Treasurer, an Assistant
Treasurer, its Secretary or an Assistant Secretary, and delivered to the
Trustee.
"Corporate Trust Office" means the principal office of the
Trustee in [Milwaukee, Wisconsin] at which at any particular time its
corporate trust business shall be administered.
"Corporation" includes corporations, associations, companies and
business trusts.
"Debt" of any Person means at any due, without duplication, (i)
all obligations of such Person for borrowed money, (ii) all obligations of
such Person evidenced by bonds, debentures, notes or other similar
instruments, (iii) all obligations of such Person as lessee under leases
which are or may be capitalized under generally accepted accounting
principles, (iv) all Debt of others secured by a lien on any asset of such
Person, whether or not such Debt is assumed by such Person, or (v) all
Debt of others for the payment of which such Person is responsible or
liable as obligor, guarantor or otherwise.
"Defaulted Interest" has the meanings specified in Section 3.07.
"Event of Default" has the meaning specified in Section 5.01.
"Holder" or "Securityholder" means a Person in whose name a
Security is registered in the Security Register.
"Indenture" means this instrument as originally executed or as
it may from time to time be supplemented or amended by one or more
indentures supplemental hereto entered into pursuant to the applicable
provisions hereof.
"Independent," when used with respect to any specified Person,
means such a Person who (1) is in fact independent, (2) does not have any
direct financial interest or any material indirect financial interest in
the Company or in any other obligor upon the Securities or in any
Affiliate of the Company or of such other obligor, and (3) is not
connected with the Company or such other obligor or any Affiliate of the
Company or of such other obligor, as an officer, employee, promoter,
organizer, underwriter, trustee, partner, director or Person performing
similar afflictions. Whenever it is herein provided that any Independent
Person's opinion or certificate shall be furnished to the Trustee, such
Person shall be appointed by a Company Order, and such opinion or
certificate shall state that the signer has read this definition and that
the signer is Independent within the meaning hereof.
"Interest Payment Date" means the Stated Maturity of a
installment of interest on the Securities.
"Maturity" when used with respect to any Security means the date
on which the principal of such Security becomes due and payable as therein
or herein provided, whether at the Stated Maturity or by declaration of
acceleration, call for redemption or otherwise.
"Newco" means Newco, Inc., a Wisconsin corporation and any
successor thereto.
"Newco Indebtedness" means the principal, premium, if any, and
unpaid interest on indebtedness for money borrowed by Newco and guaranteed
by the Company (at any time and from time to time), whether outstanding on
the date hereof or hereafter, and all renewals, extensions and refundings
of any such Debt; provided, however, that the following shall not
constitute Newco Indebtedness: any Debt which by its terms refers
explicitly to the Securities issued hereunder and states that such Debt
shall not be senior in right of payment thereto.
"Officers" Certificate" means a certificate signed by the
Chairman of the Board, the President or a Vice President, and by the
Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary
of the Company, and delivered to the Trustee.
"Opinion of Counsel" means a written opinion of counsel, who may
be counsel for the Company or other counsel acceptable to the Trustee.
"Outstanding," when used with respect to Securities means, as of
the date of determination, all Securities theretofore authenticated and
delivered under the Indenture, except:
(i) Securities theretofore canceled by the Trustee or
delivered to the Trustee for cancellation;
(ii) Securities for whose payment or redemption money in the
necessary amount has been theretofore deposited with the
Trustee or any Paying Agent (other than the Company) in
trust or set aside and segregated in trust by the Company
(if the Company shall act as its own Paying Agent) for
the Securityholders; provided that if such Securities are
to be redeemed, notice of such redemption has been duly
given pursuant to this Indenture or provision therefor
satisfactory to the Trustee has been made; and
(iii) Securities which have been paid pursuant to Section 3.06
or in exchange for or in lieu of which other Securities
have been authenticated and delivered pursuant to this
Indenture, other than any such Securities in respect of
which there shall have been presented to the Trustee
proof satisfactory to it that such Securities are held by
a bona fide purchaser in whose hands such Securities are
valid obligations of the Company;
provided, however that in determining whether the Securityholders of the
requisite principal amount of the Outstanding Securities have given any
request, demand, authorization, direction, notice, consent or waiver
hereunder, Securities owned by the Company or any other obligor upon the
Securities shall be disregarded and deemed not to be Outstanding, except
that, in determining whether the Trustee shall be protected in relying
upon any such request, demand, authorization, direction, notice, consent
or waiver, only Securities which the Trustee knows to be so owned shall be
so disregarded. Securities so owned which have been pledged in good faith
may be regarded as Outstanding if the pledgee establishes to the
satisfaction of the Trustee the pledgee's right so to and with respect to
such Securities and that the pledgee is not the Company or any other
obligor upon the Securities.
"Paying Agent" means any Person authorized by the Company to pay
the principal of (and premium, if any) or interest on any Securities on
behalf of the Company.
"Person" means any individual, corporation, partnership, joint
venture, association, joint stock company, trust, unincorporated
organization or government or any agent or political subdivision thereof.
"Predecessor Security" of any particular Security means every
previous Security evidencing all or a portion of the same debt as that
evidenced by such particular Security; and, for the purposes of this
definition, any Security authenticated and delivered under Section 3.06 in
exchange for or in lieu of a mutilated, destroyed, lost or stolen Security
shall be deemed to evidence the same debt as the mutilated, destroyed,
lost or stolen Security.
"Redemption Date," when used with respect to any Security to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"Redemption Price," when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Regular Record Date" for the interest payable on any Interest
Payment Date means the April 1st or the October 1st (whether or not a
Business Day), as the case may be, next preceding such Interest Payment
Date.
"Responsible Officer," when used with respect to the Trustee,
means any officer of the Trustee assigned by the Trustee to administer its
corporate trust matters and also means, with respect to a particular trust
matter, any other officer to whom such matter is referred because of his
or her knowledge of and familiarity with the particular subject.
"Security Register" and "Security Registrar" have the respective
meanings specified in Section 3.05.
"Senior Indebtedness" means all Debts, obligations and
liabilities of the Company arising under the guarantee by the Company of
the Newco Indebtedness, whether such guarantee is outstanding on the date
hereof or hereafter, and all renewals, replacements and extensions
thereof.
"Special Record Date" for the payment of any Defaulted Interest
means a date fixed by the Trustee pursuant to Section 3.07.
"Stated Maturity," when used with respect to any Security or any
installment of interest thereon, means the date specified in such Security
as the fixed date on which the principal of such Security or such
installment of interest is due and payable.
"Subsidiary" means a corporation more than 50% of the
outstanding voting stock of which is owned, directly or indirectly, by the
Company or by one or more other Subsidiaries, or by the Company and one or
more other Subsidiaries. For the purposes of this definition, "voting
stock" means stock which ordinarily has voting power for the election of
directors, whether at all times or only so long as no senior class of
stock has such voting power by reason of any contingency.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become
such pursuant to the applicable provisions of this Indenture, and
thereafter "Trustee" shall mean such successor Trustee.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as
in force at the date as of which this instrument was executed, except as
provided in Section 9.05.
"Vice President," when used with respect to the Company or the
Trustee, means any vice president, whether or not designated by a number
or a word or words added before or after the title "vice president."
SECTION 1.02. Compliance Certificates and Opinions. Upon any
application or request by the Company to the Trustee to take any action
under any provision of this Indenture, the Company shall furnish to the
Trustee an Officers' Certificate stating that all conditions precedent, if
any, provided for in this Indenture relating to the proposed action have
been complied with and an Opinion of Counsel stating that in the opinion
of such counsel all such conditions precedent, if any, have been complied
with, except that in the case of any such application or request as to
which the furnishing of such documents is specially required by any
provision of this Indenture relating to such particular application or
request, no additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that each individual signing such certificate
or opinion has read such covenant or condition and the
definitions herein relating thereto;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statement or
opinions contained in such certificate or opinion are
based;
(3) a statement that, in the opinion of each such individual,
he has made such examination or investigation as is
necessary to enable him to express an informed opinion as
to whether or not such covenant or condition has been
complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied
with.
SECTION 1.03. Form of Documents Delivered to Trustee. In any
case where several matters are required to be certified by, or covered by
an opinion of, any specified Person, it is not necessary that all such
matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but
one such Person may certify or give an opinion with respect to some
matters and one or more other such Persons as to other matters, and any
such Person may certify or give an opinion as to such matters in one or
several documents.
Any certificate or opinion of an officer of the Company may be
based, insofar as it relates to legal matters, upon a certificate or
opinion of, or representations by, counsel, unless such officer knows, or
in the exercise of reasonable care should know, that the certificate or
opinion or representations with respect to the matters upon which his
certificate or opinion is based are erroneous. Any such certificate or
Opinion of Counsel may be based, insofar as it relates to factual matters,
upon a certificate or opinion of, or representations by, an officer or
officers of the Company stating that the information with respect to such
factual matters is in the possession of the Company, unless such counsel
knows, or in the exercise of reasonable care should know, that the
certificate or opinion or representations with respect to such matters are
erroneous.
Where any Person is required to make, give or execute two or
more applications, requests, consents, certificates, statements, opinions
or other instruments under this Indenture, they may, but need not, be
consolidated and form one instrument.
SECTION 1.04. Acts of Securityholders. (a) Any request,
demand, authorization, direction, notice, consent, waiver or other action
provided by this Indenture to be given or taken by Securityholders may be
embodied in and evidenced by one or more instruments of substantially
similar tenor signed by such Securityholders in person or by an agent duly
appointed in writing; and, except as herein otherwise expressly provided,
such action shall become effective when such instrument or instruments are
delivered to the Trustee and, where it is hereby expressly required, to
the Company. Such instrument or instruments (and the action embodied
therein and evidenced thereby) are herein sometimes referred to as the
"Act" of the Securityholders signing such instrument or instruments.
Proof of execution of any such instrument or of a writing appointing any
such agent shall be sufficient for any purpose of this Indenture and
(subject to Section 6.01) conclusive in favor of the Trustee and the
Company, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any
such instrument or writing may be proved by the affidavit of a witness of
such execution or by a certificate of a notary public or other officer
authorized by law to take acknowledgments of deeds, certifying that the
individual signing such instrument or writing acknowledged to him the
execution thereof. Where such execution is by a signer acting in a
capacity other than his individual capacity, such certificate or affidavit
shall also constitute sufficient proof of his authority. The fact and
date of the execution of any such instrument or writing, or the authority
of the Person executing the same, may also be proved in any other manner
which the Trustee deems sufficient.
(c) The ownership of Securities shall be proved by the
Security Register.
(d) Any request, demand, authorization, direction, notice,
consent, waiver or other Act of the Securityholder of any Security shall
bind every future Securityholder of the same Security and the
Securityholder of every Security issued upon the registration of transfer
thereof or in exchange therefor or in lieu thereof in respect of anything
done, omitted or suffered to be done by the Trustee or the Company in
reliance thereon, whether or not notation of such action is made upon such
Security.
(e) Whenever the Company or the Trustee solicits an Act of
the Securityholders, the Company or the Trustee, as the case may be, may
fix a date as a record date for determining the Securityholders entitled
to perform said Act. Such record date shall be not more than 15 days
prior to the date of the solicitation of said Act.
SECTION 1.05. Notices, etc., to Trustee and Company. Any
request, demand, authorization, direction, notice, consent, waiver or Act
of Securityholders or other document provided or permitted by this
Indenture to be made upon, given or furnished to, or filed with,
(1) the Trustee by any Securityholder or by the Company shall
be sufficient for every purpose hereunder if made, given, furnished
or filed in writing to or with the Trustee at its Corporate Trust
Office, or
(2) the Company by the Trustee or by any Securityholder shall
be sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if in writing and mailed, first class postage
prepaid, to the Company addressed to it at the address of its
principal office specified in the first paragraph of this instrument
or at any other address previously furnished in writing to the
Trustee by the Company.
SECTION 1.06. Notice to Securityholders; Waiver. Where this
Indenture provides for notice to Securityholders of any event, such notice
shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first class postage prepaid, to each
Securityholder affected by such event, at his address as it appears in the
Security Register, not later than the latest date, and not earlier than
the earliest date, prescribed for the giving of such notice. In any case
where notice to Securityholders is given by mail, neither the failure to
mail such notice, nor any defect in any notice so mailed, to any
particular Securityholder shall affect the sufficiency of such notice with
respect to other Securityholders. Where this Indenture provides for
notice in any manner, such notice may be waived in writing by the Person
entitled to receive such notice, either before or after the event, and
such waiver shall be the equivalent of such notice. Waivers of notice by
Securityholders shall be filed with the Trustee, but such filing shall not
be a condition precedent to the validity of any action taken in reliance
upon such waiver.
In case by reason of the suspension of regular mail service or
by reason of any other cause it shall be impracticable to give such notice
by mail, then such notification as shall be made with the approval of the
Trustee shall constitute a sufficient notification for every purpose
hereunder.
SECTION 1.07. Conflict with Trust Indenture Act. If any
provision hereof limits, qualifies or conflicts with another provision
hereof which is required to be included in this Indenture by any of the
provisions of the Trust Indenture Act, such required provision shall
control.
SECTION 1.08. Effect of Headings and Table of Contents. The
Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.
SECTION 1.09. Successors and Assigns. All covenants and
agreements in this Indenture by the Company shall bind its successors and
assigns, whether so expressed or not.
SECTION 1.10. Separability Clause. In case any provision in
this Indenture or in the Securities shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
SECTION 1.11. Benefits of Indenture. Nothing in this Indenture
or in the Securities, express or implied, shall give to any Person, other
than the parties hereto and their successors hereunder, the holders of
Senior Indebtedness and the Securityholders, any benefit or any legal or
equitable right, remedy or claim under this Indenture.
SECTION 1.12. Governing Law; Choice of Forum. This Indenture
and the Securities shall be governed by and construed in accordance with
the laws of the State of Wisconsin. If any action or proceeding shall be
brought by the Trustee or by a Holder of any of the Securities in order to
enforce any right or remedy under this Indenture or under the Securities,
the Company hereby consents and submits to the jurisdiction of the courts
of the State of Wisconsin and of any Federal court sitting in The City of
Milwaukee, State of Wisconsin. Any action or proceeding brought by the
Company to enforce any right, assert any claim or obtain any relief
whatsoever in connection with this Indenture or the Securities shall be
brought by the Company exclusively in the courts of the State of Wisconsin
or in any Federal court sitting in The City of Milwaukee, State of
Wisconsin.
SECTION 1.13. Legal Holidays. In any case where any Interest
Payment Date, Redemption Date or Stated Maturity of any Security or the
last date on which a Securityholder has the right to convert his
Securities shall not be a Business Day, then (notwithstanding any other
provision of this Indenture or of the Securities) payment of interest or
principal (and premium, if any) or conversion of the Securities need not
be made on such date, but may be made on the next succeeding Business Day
with the same force and effect as if made on the Interest Payment Date or
Redemption Date, or at the Stated Maturity, or on such last day for
conversion, provided that in the case of payment no interest shall accrue
for the period from and after such Interest Payment Date, Redemption Date
or Stated Maturity, as the case may be.
ARTICLE II.
SECURITY FORMS
SECTION 2.01. Forms Generally. The Securities and the
Trustee's certificates of authentication shall be in substantially the
forms set forth in this Article, with such appropriate insertions,
omissions, substitutions and other variations as are required or permitted
by this Indenture and may have such letters, numbers or other marks of
identification and such legends or endorsements placed thereon as may be
required to comply with the rules of any security exchange or as may,
consistently herewith, be determined by the officers executing such
Securities, as evidenced by their execution of the Securities.
The definitive Securities shall be printed, lithographed or
engraved or produced by any combination of these methods on steel engraved
borders or may be produced in any other manner permitted by the rules of
any securities exchange on which the Securities may be listed, all as
determined by the officers executing such Securities, as evidenced by
their execution of such Securities.
SECTION 2.02. Form of Face of Security.
10% Convertible Subordinated Debenture due 2004
No. $
Swing-N-Slide Corp., a corporation duly organized and existing
under the laws of Delaware (herein called the "Company," which term
includes any successor corporation under the Indenture hereinafter
referred to), for value received, hereby promises to pay to ____________,
or registered assigns, the principal sum of ______ Dollars on October 15,
2004, and to pay interest thereon from _____________,/1 or from the most
recent Interest Payment Date to which interest has been paid or duly
provided for, semiannually on April 15 and October 15, in each year,
commencing ____________,/2 at the rate of 10% per annum, until the
principal hereof is paid or made available for payment. The interest so
payable, and punctually paid or duly provided for, on any Interest Payment
Date will, as provided in such Indenture, be paid to the Person in whose
name this Debenture (or one or more Predecessor Debentures) is registered
at the close of business on the Regular Record Date for such interest,
which shall be the April 1st and October 1st (whether or not a Business
Day), as the case may be, next preceding such Interest Payment Date. Any
such interest not so punctually paid or duly provided for will forthwith
cease to be payable to the Holder on such Regular Record Date and may
either be paid to the Person in whose name this Debenture (or one or more
Predecessor Debentures) is registered at the close of business on a
Special Record Date for the payment of such Defaulted Interest to be fixed
by the Trustee, notice whereof shall be given to Holders of Debentures not
less than 10 days prior to such Special Record Date, or be paid at any
time in any other lawful manner not inconsistent with the requirement of
any securities exchange on which the Debentures may be listed, and upon
such notice as may be required by such exchange, all as more fully
provided in said Indenture. Payment of the principal of (and premium, if
any) and interest on this Debenture will be made at the office or agency
of the Company maintained for that purpose 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; provided, however, that (i) at the
option of the Company payment of interest may be made by check mailed to
the address of the Person entitled thereto as such address shall appear in
the Security Register and (ii) until October 15, 1999 interest on this
Debenture may, at the option of the Company, be paid by the issuance of an
additional debenture, in the form of this Debenture, in the principal
amount of the interest so payable, dated the Interest Payment Date for
such interest payment, with interest payable as provided herein with a
stated maturity of principal and interest as provided in this Debenture
and otherwise identical to this Debenture.
---------------
/1 Insert the date of issuance.
/2 Insert the first Interest Payment Date after the date of issuance.
Reference is hereby made to the further provisions of this
Debenture set forth on the reverse hereof, which further provisions shall
for all purposes have the same effect as if set forth at this place. The
Indenture includes limitations on the right of the Holder to institute a
proceeding, judicial or otherwise, with respect to the Indenture, for the
appointment of a receiver or trustee, or for any other remedy under the
Indenture.
Unless the certificate of authentication hereon has been
executed by the Trustee referred to on the reverse hereof by manual
signature, this Debenture shall not be entitled to any benefit under the
Indenture or be valid or obligatory for any purpose./3
---------------
/3 Insert disclosure language required, if any, under sections 1271 to
1275 of the Internal Revenue Code (or successor provisions of the Internal
Revenue Code).
IN WITNESS WHEREOF, the Company has caused this instrument to be
duly executed under its corporate seal.
Dated:
[SEAL] SWING-N-SLIDE CORP.
By:
Attest:
SECTION 2.03. Form of Reverse of Security.
This Debenture is one of a duly authorized issue of Debentures
of the Company designated as its 10% Convertible Subordinated Debentures
due 2004 (herein called the "Debentures"), limited in aggregate principal
amount to $_________ (plus any additional Debentures paid in lieu of cash
interest as permitted herein), issued and to be issued under an Indenture,
dated as of , 1996 (herein called the "Indenture"), between
the Company and _______________________________________________________ as
Trustee (herein called the "Trustee," which term includes any successor
trustee under the Indenture), to which Indenture and all indentures
supplemental thereto reference is hereby made for a statement of the
respective rights, limitations of rights, duties and immunities thereunder
of the Company, the Trustee, the holders of Senior Indebtedness and the
Holders of the Debentures and of the terms upon which the Debentures are,
and are to be, authenticated and delivered.
Subject to the provisions of the Indenture, the Holder hereof
has the right, at his option, at any time prior to maturity or at least
ten Business Days prior to a Redemption Date, to convert the principal
amount of this Debenture (or any portion of the principal amount hereof
which is $1.00 or an integral multiple of $1.00 into fully paid and
nonassessable (except as otherwise provided by law) shares of Common Stock
of the Company at the conversion rate of 1.0 shares of Common Stock for
each $4.70 principal amount of Debentures, subject to such adjustment, if
any, of the conversion rate and the securities or other property issuable
upon conversion as may be required by the provisions of the Indenture,
except that, in case this Debenture (or any portion hereof) shall be
called for redemption before maturity, such right shall terminate at the
close of business on the fifth Business Day prior to the Redemption Date
for this Debenture (or such portion hereof), unless in any such case the
Company shall default in payment due upon such redemption, but only upon
surrender of this Debenture for the property of such conversion to the
Company at the designated office or agency of the Company or any other
office or agency designated by the Company for such purpose pursuant to
the provisions of the Indenture, accompanied by written notice that the
Holder elects to convert this Debenture or any portion hereof and
specifying the name or names (with address or addresses) in which a
certificate or certificates for shares of Common Stock are to be issued
and (if so required by the Company or the Trustee) by a written instrument
or instruments of transfer in form satisfactory to the Company and the
Trustee duly executed by the registered Holder or his duly authorized
legal representative and transfer tax stamps or funds therefor, if
required, pursuant to the provisions of the Indenture and in case such
surrender shall be made during the period from the close of business on
any Regular Record Date to the opening of business on the next succeeding
Interest Payment Date (unless this Debenture or the portion thereof being
converted has been called for redemption on a Redemption Date during such
period), also accompanied by payment in New York Clearing House funds or
other funds acceptable to the Company of an amount equal to the interest
payable on such Interest Payment Date on the principal amount of this
Debenture then being converted. Subject to the aforesaid requirement with
respect to payment in the event of conversion after the close of business
on a Regular Record Date, no adjustment is to be made on conversion for
interest accrued hereon or for dividends on shares of Common Stock issued
on conversion. No fractional shares are issuable upon any conversion, but
in lieu thereof the Company shall pay therefor in cash as provided in the
Indenture. Within fifteen (15) Business Days after receipt of any
Debenture and an election to convert all or a portion of the principal
amount of such Debenture pursuant to the terms of the Indenture, the
Company will pay to the Holder any unpaid interest, accrued to the date of
conversion of such Debenture, on the principal amount converted; provided
that until October 15, 1999, such interest may, at the option of the
Company, be paid by the issuance of an additional debenture as described
in subclause (ii) on the face of this Debenture.
The Debentures are subject to redemption upon not less than 45
or more than 60 days' notice by mail, at any time, as a whole or in part,
at the election of the Company, at a Redemption Price equal to 100% of the
principal amount, together with accrued interest to the Redemption Date,
but interest installments whose Stated Maturity is on or prior to such
Redemption Date will be payable to the Holders of such Debentures, or one
or more Predecessor Debentures of record at the close of business on the
relevant Record Dates referred to on the face hereof, all as provided in
the Indenture.
In the event of redemption or conversion of this Debenture in
part only, a new Debenture or Debentures for the unredeemed or unconverted
portion hereof will be issued in the name of the Holder hereof upon the
cancellation hereof.
The indebtedness evidenced by the Debentures is, to the extent
and the manner provided in the Indenture, expressly subordinate and
subject in right of payment to the prior payment in full of any Senior
Indebtedness of the Company or provision for such payment, whether
outstanding at the date of the Indenture or thereafter incurred, and each
Holder of this Debenture, by his acceptance hereof, agrees to and shall be
bound by such provisions of the Indenture and authorizes and directs the
Trustee in his behalf to take such action as may be necessary or
appropriate to effectuate such subordination and appoints the Trustee his
attorney-in-fact for any and all such purposes.
If an Event of Default shall occur and be continuing, the
principal of all the Debentures may be declared due and payable in the
manner and with the effect provided in the Indenture.
The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Company and the Trustee (including the waiver of
compliance by the Company with the provisions of the Indenture and past
defaults under the Indenture and their consequences) with the consent of
the Holders of a majority in aggregate principal amount of the Debentures
at the time Outstanding. Any such consent or waiver by the Holder of this
Debenture shall be conclusive and binding upon such Holder and upon all
future Holders of this Debenture and of any Debenture issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof,
whether or not notation of such consent or waiver is made upon this
Debenture.
No reference herein to the Indenture and no provision of this
Debenture or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of (and
premium, if any) and interest on this Debenture at the times, place and
rate, and in the coin or currency or with another debenture, herein
prescribed or to convert this Debenture as provided in the Indenture.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Debenture is registrable in the
Security Register, upon surrender of this Debenture for registration of
transfer at the office or agency of the Company, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to
the Company and the Security Registrar duly executed by, the Holder hereof
or his attorney duly authorized in writing, and thereupon one or more new
Debentures, of authorized denominations and for the same aggregate
principal amount, will be issued to the designated transferee or
transferees.
The Debentures are issuable only in registered form without
coupons in denominations of $1.00 and any integral multiple thereof, as
provided in the Indenture and subject to certain limitations and
exceptions therein set forth. Debentures are exchangeable for a like
aggregate principal amount of Debentures of a different authorized
denomination, as requested by the Holder surrendering the same.
No service charge shall be made for any such registration of
transfer or exchange, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in
connection therewith.
The Company, the Trustee and any agent of the Company or the
Trustee may treat the Person in whose name this Debenture is registered as
the owner hereof for all purposes, whether or not this Debenture be
overdue, and neither the Company, the Trustee nor any such agent shall be
affected by notice to the contrary.
All terms used in this Debenture which are defined in the
Indenture shall have the meanings assigned to them in the Indenture.
SECTION 2.04. Form of Trustee's Certificate of Authentication.
This is one of the Debentures referred to in the within-
mentioned Indenture.
________________________________, as Trustee
By________________________________
Authorized Signature
SECTION 2.05. Form of Election to Convert.
To Swing-N-Slide Corp.:
The undersigned owner of this Debenture hereby irrevocably
exercises the option to convert this Debenture, or the portion below
designated, into shares of Common Stock of Swing-N-Slide Corp., in
accordance with the terms of the Indenture referred to in this Debenture,
and directs that the shares issuable and deliverable upon conversion,
together with any check in payment for fractional shares, be issued in the
name of and delivered to the undersigned, unless a different name has been
indicated in the assignment below. If shares are to be issued in the name
of a person other than the undersigned, the undersigned will pay all
transfer taxes payable with respect thereto.
Dated:
Portion of Debenture to be
converted ($1.00 or an integral
multiple thereof):
$
_________________________________
Signature (for conversion only)
Please Print or Type Name and
Address, Including Zip code,
and Social Security or Other
Identifying Number
_________________________________
_________________________________
_________________________________
ARTICLE III.
THE SECURITIES
SECTION 3.01. Title and Terms. The aggregate principal amount
of Securities which may be authenticated and delivered under this
Indenture is limited to $_________ (plus any additional Securities paid in
lieu of cash interest as permitted herein), except for Securities
authenticated and delivered upon registration of transfer of, or in
exchange for, or in lieu of, other Securities pursuant to Section 3.04,
3.05, 3.06, 9.06, 11.08, 13.01 or 15.02.
The Securities shall be known and designated as the "10%
Convertible Subordinated Debentures due 2004" of the Company. Their
Stated Maturity shall be October 15, 2004, and they shall bear interest at
the rate of 10% per annum, from the date of issuance or from the most
recent Interest Payment Date to which interest has been paid or duly
provided for, as the case may be, payable semiannually on April 15 and
October 15 commencing on the first such Interest Payment Date after the
date of issuance, until the principal thereof is paid or made available
for payment.
The principal of (and premium, if any) and interest on the
Securities shall be payable at the office or agency of the Company
maintained for such purpose and at any other office or agency maintained
by the Company for such purpose; provided, however, that (i) at the option
of the Company payment of interest may be made by check mailed to the
address of the Person entitled thereto as such address shall appear in the
Security Register and (ii) until October 15, 1999 interest on the
Securities may, at the option of the Company, be paid by the issuance of
additional securities, in the form of the Securities, in the principal
amount of the interest so payable, dated the Interest Payment Date for
such interest payment, with interest payable as provided herein with a
Stated Maturity of principal and interest as provided in the Securities
and otherwise identical to the Securities.
The Securities shall be redeemable as provided in Article XI.
The Securities shall be convertible as provided in Article XIV.
The Securities shall be subordinated in right of payment to
Senior Indebtedness as provided in Article XIV.
SECTION 3.02. Denominations. The Securities shall be issuable
only in registered form without coupons and only in denominations of $1.00
and any integral multiple thereof, except that when interest is payable in
Securities, the principal amount of the Securities shall be the amount of
the interest so payable.
SECTION 3.03. Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of the Company by its Chairman
of the Board, its President or one of its Vice Presidents, under its
corporate seal reproduced thereon attested by its Secretary or one of its
Assistant Secretaries. The signature of any of these officers on the
Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the Company shall
bind the Company, notwithstanding that such individuals or any of them
have ceased to hold such offices prior to the authentication and delivery
of such Securities or did not hold such offices at the date of such
Securities.
Any time and from time to time after the execution and delivery
of this Indenture, the Company may deliver Securities executed by the
Company to the Trustee for authentication, together with a Company Order
for the authentication and delivery of such Securities; and the Trustee in
accordance with such Company Order shall authenticate and deliver such
Securities as in this Indenture provided and not otherwise.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this
Indenture or be valid or obligatory for any purpose unless there appears
on such Security a certificate of authentication substantially in the form
provided for herein executed by the Trustee by manual signature, and such
certificate upon any Security shall be conclusive evidence, and the only
evidence, that such Security has been duly authenticated and delivered
hereunder.
SECTION 3.04. Temporary Securities. Pending the preparation of
definitive Securities, the Company may execute, and upon Company Order the
Trustee shall authenticate and deliver, temporary Securities which are
printed, lithographed, typewritten, mimeographed or otherwise produced, in
any authorized denomination, substantially of the tenor of the definitive
Securities in lieu of which they are issued and with such appropriate
insertions, omissions, substitutions and other variations as the officers
executing such Securities may determine, as evidenced by their execution
of such Securities.
If temporary Securities are issued, the Company will cause
definitive Securities to be prepared without unreasonable delay. After
the preparation of definitive Securities, the temporary Securities shall
be exchangeable for definitive Securities upon surrender of the temporary
Securities at any office or agency of the Company designated pursuant to
Section 10.02, without charge to the Securityholder. Upon surrender for
cancellation of any one or more temporary Securities the Company shall
execute and the Trustee shall authenticate and deliver in exchange
therefor a like principal amount of definitive Securities of authorized
denominations. Until so exchanged the temporary Securities shall in all
respects be entitled to the same benefits under this Indenture as
definitive Securities.
SECTION 3.05. Registration, Registration of Transfer and
Exchange. The Company shall cause to be kept at the Corporate Trust
Office of the Trustee a register (the register maintained in such office
and in any other office or agency designated pursuant to Section 10.02
being herein sometimes collectively referred to as the "Security
Register") in which, subject to such reasonable regulations as it may
prescribe, the Company shall provide for the registration of Securities
and of transfers of Securities. The Trustee is hereby appointed "Security
Registrar" for the purpose of registering Securities and transfers of
Securities as herein provided.
Upon surrender for registration of transfer of any Security at
an office or agency of the Company designated pursuant to Section 10.02
for such purpose, the Company shall execute, and the Trustee shall
authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Securities of any authorized denominations,
of a like aggregate principal amount.
At the option of the Holder, Securities may be exchanged for
other Securities of any authorized denominations, of a like aggregate
principal amount, upon surrender of the Securities to be exchanged at such
office or agency. Whenever any Securities are so surrendered for
exchange, the Company shall execute, and the Trustee shall authenticate
and deliver, the Securities which the Securityholder making the exchange
is entitled to receive.
All Securities issued upon any registration of transfer or
exchange of Securities shall be the valid obligations of the Company,
evidencing the same debt, and entitled to the same benefits under this
Indenture, as the Securities surrendered upon such registration of
transfer or exchange.
Every Security presented or surrendered for registration of
transfer or for exchange shall (if so required by the Company or the
Trustee) be duly endorsed, or be accompanied by a written instrument of
transfer in form satisfactory to the Company and the Security Registrar
duly executed, by the Securityholder thereof or his attorney duly
authorized in writing.
No service charge shall be made for any registration of transfer
or exchange of Securities, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge that may be
imposed in connection with any registration of transfer or exchange of
Securities, other than exchanges pursuant to Section 3.04, 9.06, 11.05 or
12.02 not involving any transfer.
The Company shall not be required (i) to issue, register the
transfer of or exchange any Security during a period beginning at the
opening of business 15 days before the day of the mailing of a notice of
redemption of Securities selected for redemption under Section 11.04 and
ending at the close of business on the day of such mailing, or (ii) to
register the transfer of or exchange any Security so selected for
redemption in whole or in part, except the unreturned portion of any
Security being redeemed in part.
SECTION 3.06. Mutilated, Destroyed, Lost and Stolen Securities.
If any mutilated Security is surrendered to the Trustee, the Company shall
execute and the Trustee shall authenticate and deliver in exchange
therefor a new Security of like tenor and principal amount and bearing a
number not contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any
Security and (ii) such security or indemnity as may be required by them to
save each of them and any agent of either of them harmless, then, in the
absence of notice to the Company or the Trustee that such Security has
been acquired by a bona fide purchaser, the Company shall execute and upon
its request the Trustee shall authenticate and deliver, in lieu of any
such destroyed, lost or stolen Security, a new Security of like tenor and
principal amount and bearing a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security
has become or is about to become due and payable, the Company in its
discretion may, instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the
Company may require the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in relation thereto and any
other expenses (including the fees and expenses of the Trustee) connected
therewith.
Every new Security issued pursuant to this Section in lieu of
any destroyed, lost or stolen Security shall constitute an original
additional contractual obligation of the Company, whether or not the
destroyed, lost or stolen Security shall be at any time enforceable by
anyone, and shall be entitled to all the benefits of this Indenture
equally and proportionately with any and all other Securities duly issued
hereunder.
The provisions of this Section are exclusive and shall preclude
(to the extent lawful) all other rights and remedies with respect to the
replacement or repayment of mutilated, destroyed, lost or stolen
Securities.
SECTION 3.07. Payment of Interest; Interest Rights Preserved.
Interest on any Security which is payable, and is punctually paid or duly
provided for, on any Interest Payment Date shall be paid to the Person in
whose name that Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such
interest.
Any interest on any Security which is payable, but is not
punctually paid or duly provided for, on any Interest Payment Date (herein
called "Defaulted Interest") shall forthwith cease to be payable to the
Securityholder on the relevant Regular Record Due by virtue of having been
such Securityholder, and such Defaulted Interest may be paid by the
Company, at its election in each case, as provided in clause (1) or (2)
below:
(1) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the Securities (or their
respective Predecessor Securities) are registered at the close of
business on a Special Record Date for the payment of such Defaulted
Interest, which shall be fixed in the following manner. The Company
shall notify the Trustee in writing of the amount of Defaulted
Interest proposed to be paid on each Security and the date of the
proposed payment, and at the same time the Company shall deposit with
the Trustee an amount of money (or, if the Defaulted Interest is
payable in Securities, Securities) equal to the aggregate amount
proposed to be paid in respect of such Defaulted Interest or shall
make arrangements satisfactory to the Trustee for such deposit prior
to the date of the proposed payment, such money or Securities, as the
case may be, when deposited to be held in trust for the benefit of
the Persons entitled to such Defaulted Interest as in this Clause
provided. Thereupon the Trustee shall fix a Special Record Date for
the payment of such Defaulted Interest which shall be not more than
15 days and not less than 10 days prior to the date of the proposed
payment and not less than 15 days (unless a shorter time period shall
be satisfactory to the Trustee) after the receipt by the Trustee of
the notice of the proposed payment. The Trustee shall promptly
notify the Company of such Special Record Date and, in the name and
at the expense of the Company, shall cause notice of the proposed
payment of such Defaulted Interest and the Special Record Date
therefor to be mailed, first-class postage prepaid, to each
Securityholder at his address as it appears in the Security Register,
not less than 10 days prior to such Special Record Date. Notice of
the proposed payment of such Defaulted Interest and the Special
Record Date therefor having been so mailed, such Defaulted Interest
shall be paid to the Persons in whose names the Securities (or their
respective Predecessor Securities) are registered at the close of
business on such Special Record Date and shall no longer be payable
pursuant to the following Clause (2).
(2) The Company may make payment of any Defaulted Interest
in any other lawful manner not inconsistent with the requirements of
any securities exchange on which the Securities may be listed, and
upon such notice as may be required by such exchange, if, after
notice given by the Company to the Trustee of the proposed payment
pursuant to this Clause, such manner of payment shall be deemed
practicable by the Trustee.
Subject the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in
exchange for or in lieu of any other Security shall carry the rights to
interest accrued and unpaid, and to accrue, which were carried by such
other Security.
Except as otherwise expressly provided in the following
sentence, interest whose Stated Maturity is after the date of conversion
of any Security shall not be payable. In the case of any Security which
is converted after any Regular Record Date and on or prior to the next
succeeding Interest Payment Date (other than any Security whose Maturity
is prior to such Interest Payment Date or any Security being converted
which has been called for redemption during such period), interest whose
Stated Maturity is on such Interest Payment Date shall be payable on such
Interest Payment Date notwithstanding such conversion, and such interest
(whether or not punctually paid or duly provided for) shall be paid to the
Person in whose name that Security (or one or more Predecessor Securities)
is registered at the close of business on such Regular Record Date.
SECTION 3.08. Persons Deemed Owners. Prior to due presentment
of a Security for registration of transfer, the Company, the Trustee and
any agent of the Company or the Trustee may treat the Person in whose name
such Security is registered as the owner of such Security for the purpose
of receiving payment of principal of (and premium, if any) and (subject to
Section 3) interest on such Security and for all other purposes whatsoever
whether or not such Security be overdue, and neither the Company, the
Trustee nor any agent of the Company or the Trustee shall be affected by
notice to the contrary.
SECTION 3.09. Cancellation. All Securities surrendered to
payment, redemption, registration of transfer or exchange or conversion
shall, if surrendered to any Person other than the Trustee, be delivered
to the Trustee and shall, subject to any limitation imposed by law or
regulation on the destruction of securities, be promptly canceled by it.
The Company may at any time deliver to the Trustee for cancellation any
Securities previously authenticated and delivered hereunder which the
Company may have acquired in any manner whatsoever, and all Securities so
delivered shall, subject to any limitation imposed by law or regulation on
the destruction of securities, be promptly canceled by the Trustee. No
Securities shall be authenticated in lieu of or in exchange for any
Securities canceled as provided in this Section, except as expressly
permitted by this Indenture. All canceled Securities held by the Trustee
shall, subject to any limitation imposed by law or regulation on the
destruction of securities, be destroyed by the Trustee unless the Company
instructs the Trustee by Company Order to return the Securities to the
Company.
SECTION 3.10. Computation of Interest. Interest on
the Securities shall be computed on the basis of a year of 365 days.
SECTION 3.11. CUSIP Numbers. Pursuant to a recommendation
promulgated by the Committee On Uniform Security Identification Procedures
("CUSIP"), the Company may cause CUSIP numbers (the "CUSIP Numbers") to be
printed on the Securities and may direct the Trustee to use CUSIP Numbers
in notices of redemption as a convenience to Holders of Securities. No
representation is made as to the accuracy of the CUSIP Numbers either as
printed on the Securities or as contained in any notice of redemption and
reliance may be placed only on the other identification numbers placed
thereon.
ARTICLE IV.
SATISFACTION AND DISCHARGE
SECTION 4.01. Satisfaction and Discharge of Indenture. This
Indenture shall cease to be of further effect (except as to any surviving
rights of conversion, registration of transfer or exchange of Securities
herein expressly provided for), and the Trustee, on demand of and at the
expense of the Company, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture, when
(1) either
(i) all Securities theretofore authenticated and
delivered (other than (x) Securities which have been
destroyed, lost or stolen and which have been replaced or
paid as provided in Section 3.06 and (y) Securities for
whose payment money has theretofore been deposited in
trust or segregated and held in trust by the Company and
thereafter repaid to the Company or discharged from such
trust, as provided in Section 10.03) have been delivered,
to the Trustee for cancellation; or
(ii) all such Securities not theretofore delivered to
the Trustee for cancellation
(A) have become due and payable, or
(B) will become due and payable at their Stated
Maturity within one year, or
(C) are to be called for redemption within one
year under arrangements satisfactory to the Trustee
for the giving of notice of redemption by the Trustee
in the name, and at the expense, of the Company,
and the Company, in the case of (A), (B)or (C) above, has deposited
or caused to be deposited with the Trustee as trust funds in trust
for the purpose an amount sufficient to pay and discharge the entire
indebtedness on such Securities not theretofore delivered to the
Trustee for cancellation, for principal (and premium, if any) and
interest to the date of such deposit (in the case of Securities which
have become due and payable) or to the Stated Maturity or Redemption
Date, as the case may be;
(2) the Company has paid or caused to be paid all other
sums payable hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all
conditions precedent herein provided for relating to the satisfaction
and discharge of this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 6.07 and the
obligations of the Trustee to any Authenticating Agent under Section 6.14
shall survive and, if money shall have been deposited with the Trustee
pursuant to subclause (ii) of clause (1) of this Section, the obligations
of the Trustee under Section 4.02 and the last paragraph of Section 10.03
shall survive.
SECTION 4.02. Application of Trust Money. Subject to the
provisions of the last paragraph of Section 10.03, all money deposited
with the Trustee pursuant to Section 4.01 shall be held in trust and
applied by it in accordance with the provisions of the Securities and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal (and premium,
if any) and interest for whose payment such money has been deposited with
the Trustee. All moneys deposited with the Trustee pursuant to Section
4.01 (and held by it or any Paying Agent) for the payment of Securities
subsequently converted shall be returned to the Company upon Company
Request.
ARTICLE V.
REMEDIES
SECTION 5.01. Events of Default. "Event of Default," wherever
used herein, means any one of the following events (whatever the reason
for such Event of Default and whether it shall be occasioned by the
provisions of Article XIII or 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 or any administrative or
governmental body):
(1) default in the payment of any interest upon any
Security when it becomes due and payable and continuance of such
default for a period of 10 days; or
(2) default in the payment of the principal of (or
premium, if any, on) any Security at its Maturity whether or not such
payment is prohibited by the subordination provisions of this
Indenture and continuance of such default for a period of 30 days; or
(3) default in the performance, or breach, of any covenant
or warranty of the Company in this Indenture (other than a covenant
or warranty a default in whose performance or whose breach is
elsewhere in this Section specifically dealt with), and continuance
of such default or breach for a period of 30 days after there has
been given, by registered or certified mail, to the Company by the
Trustee or to the Company and the Trustee by the holders of at least
10% in principal amount of the Outstanding Securities a written
notice specifying such default or breach and requiring it to be
remedied and stating that such notice is a Notice of Default"
hereunder; or
(4) the entry by a court having jurisdiction in the
premises of (A) a decree or order for relief in respect of the
Company in an involuntary case or proceeding under any applicable
Federal or state bankruptcy, insolvency, reorganization or other
similar law or (B) a decree or order adjudging the Company a bankrupt
or insolvent, or approving as properly filed a petition seeking
reorganization, arrangement, adjustment or composition of or in
respect of the Company under any applicable Federal or state law, or
appointing a custodian, receiver, liquidator, assignee, trustee,
sequestrator or other similar official of the Company or of any
substantial part of its property, or ordering the winding up or
liquidation of its affairs, and the continuance of any such decree or
order for relief or any such other decree or order unstayed and in
effect for a period of 60 consecutive days; or
(5) the commencement by the Company of a voluntary case or
proceeding under any applicable Federal or state bankruptcy,
insolvency, reorganization or other similar law or of any other case
or proceeding to be adjudicated a bankrupt or insolvent, or the
consent by it to the entry of a decree or order for relief in respect
of the Company in an involuntary case or proceeding under any
applicable Federal or state bankruptcy, insolvency, reorganization or
other similar law or to the commencement of any bankruptcy or
insolvency case or proceeding against it, or the filing by it of a
petition or answer or consent seeking reorganization or relief under
any applicable Federal or state law, or the consent by it to the
filing of such petition or to the appointment of or taking possession
by a custodian, receiver, liquidator, assignee, trustee, sequestrator
or similar official of the Company or of any substantial part of its
property, or the making by it of an assignment for the benefit of
creditors, or the admission by it in writing of its inability to pay
its debts generally as they become due, or the taking of corporate
action by the Company in furtherance of any such action.
SECTION 5.02. Acceleration of Maturity; Rescission and
Annulment. If any Event of Default occurs and is continuing, then and in
every such case the Trustee or the Holders of not less than [25%] in
principal amount of the Outstanding Securities may declare the principal
of all the Securities to be due and payable immediately, by a notice in
writing to the Company (and to the Trustee if given by Holders), and upon
any such declaration such principal shall become immediately due and
payable.
At any time after such a declaration of acceleration has been
made and before a judgment or decree for payment of the money due has been
obtained by the Trustee as hereinafter in this Article provided, the
Holders of a majority in principal amount of the Outstanding Securities,
by written notice to the Company and the Trustee, may rescind and annul
such declaration and its consequences if
(1) the Company has paid or deposited with the Trustee a
sum (or Securities, if applicable) sufficient to pay
(A) all overdue installments of interest on all
Securities,
(B) the principal of (and premium, if any, on) any
Securities which have become due otherwise than by such
declaration of acceleration and interest thereon at the
rate borne by the Securities,
(C) to the extent that payment of such interest is
lawful, interest upon overdue installments of interest at
the rate borne by the Securities, and
(D) all sums paid or advanced by the Trustee
hereunder and the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and
counsel; and
(2) all Events of Default, other than the nonpayment of
the principal of Securities which have become due solely by such
declaration of acceleration, have been cured or waived as provided in
Section 5.13.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
SECTION 5.03. Collection of Indebtedness and Suits for
Enforcement by Trustee. The Company covenants that if
(1) default is made in the payment of any installment of
interest on any Security when such interest become due and payable
and such default continues for a period of 30 days, or
(2) default is made in the payment of the principal of (or
premium, if any, on) any Security at the Maturity thereof,
the Company will, upon demand of the Trustee, pay to it, for the benefit
of the Holders of such Securities, the whole amount then due and payable
on such Securities for principal (and premium, if any) and interest, with
interest upon the overdue principal (and premium, if any) and, to the
extent that payment of such interest shall be legally enforceable, upon
overdue installments of interest, at the rate borne by the Securities and,
in addition thereto, 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 and any
predecessor Trustee, their agents and counsel.
If the Company fails to pay such amounts forthwith upon such
demand, the Trustee, in its own name and as trustee of an express trust,
may institute a judicial proceeding for the collection of the sums so due
and unpaid, may prosecute such proceeding to judgment or final decree and
may enforce the same against the Company or any other obligor upon the
Securities and collect the moneys adjudged or decreed to be payable in the
manner provided by law out of the property of the Company or any other
obligor upon the Securities, wherever situated.
If an Event of Default occurs and is continuing, the Trustee may
in its discretion proceed to protect and enforce its rights and the rights
of the Holders by such appropriate judicial proceedings as the Trustee
shall deem most effectual to protect and enforce any such rights, whether
for the specific enforcement of any covenant or agreement in this
Indenture or in aid of the exercise of any power granted herein, or to
enforce any other proper remedy.
SECTION 5.04. Trustee May File Proofs of Claim. In case of the
pendency of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other judicial
proceeding relative to the Company or any other obligor upon the
Securities or the property of the Company or of such other obligor or
their creditors, the Trustee (irrespective of whether the principal of the
Securities shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Trustee shall
have made any demand on the Company for the payment of overdue principal
or interest) shall be entitled and empowered, by intervention and in such
proceeding or otherwise,
(1) to file and prove a claim for the whole amount of
principal (and premium, if any) and interest owing and unpaid in
respect of the Securities and to file such 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 and any
predecessor Trustee, their agents and counsel) and of the Holders
allowed in such judicial proceeding, and
(2) to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute the same,
and any custodian, receiver, assignee, trustee, liquidator, sequestrator
or other similar official 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 Holders, to pay to the Trustee any amount due it or any
predecessor Trustee for the reasonable compensation, expenses,
disbursements and advances of the Trustee and any predecessor Trustee,
their agents and counsel, and any other amounts due the Trustee or any
predecessor Trustee under Section 6.07.
Nothing herein contained shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any
Holder any plan of reorganization, arrangement, adjustment or composition
affecting the Securities or the rights of any Holder thereof, or to
authorize the Trustee to vote in respect of the claim of any Holder in any
such proceeding.
SECTION 5.05. Trustee May Enforce Claims Without Possession of
Securities. All rights of action and claims under this Indenture or the
Securities may be prosecuted and enforced by the Trustee without the
possession of any of the Securities or the production thereof in any
proceeding relating thereto, and any such proceeding instituted by the
Trustee shall be brought in its own name as trustee of an express trust,
and any recovery of judgment shall, after provision for the payment of the
reasonable compensation, expenses, disbursements and advances of the
Trustee and any predecessor Trustee, their agents and counsel, be for the
ratable benefit of the Holders of the Securities in respect of which such
judgment has been recovered.
SECTION 5.06. Application of Money Collected. Subject to
Article XIV, any money collected by the Trustee pursuant to this Article
shall be applied in the following order, at the date or dates fixed by the
Trustee and, in case of the distribution of such money or Securities, as
the case may be, on account of principal (or premium, if any) or interest,
upon presentation of the Securities and the notation thereon of the
payment if only partially paid and upon surrender thereof if fully paid:
FIRST: to the payment of all amounts due the Trustee or
any predecessor Trustee under Section 6.07; and
SECOND: to the payment of the amounts then due and unpaid
for principal of (and premium, if any) and interest on the
Securities in respect of which or for the benefit of which such
money or Securities, as the case may be, has been collected,
ratably, without preference or priority of any kind, according
to the amounts due and payable on such Securities for principal
(and premium, if any) and interest, respectively.
SECTION 5.07. Limitation on Suits. No Holder of any Security
shall have any right to institute any proceeding, judicial or otherwise,
with respect to this Indenture, or for the appointment of a receiver or
trustee, or for any other remedy hereunder, unless
(1) such Holder has previously given written notice to the
Trustee of a continuing Event of Default;
(2) the Holders of not less than [25%] in principal amount
of the Outstanding Securities shall have made written request to the
Trustee to institute proceedings in respect of such Event of Default
in its own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee
reasonable indemnity against the costs, expenses and liabilities to
be incurred in compliance with such request;
(4) the Trustee for 60 days after its receipt of such
notice, request and offer of indemnity has failed to institute any
such proceeding; and
(5) no direction inconsistent with such written request
has been given to the Trustee during such 60-day period by the
Holders of a majority in principal amount of the Outstanding
Securities; it being understood and intended that no one or more
Holders shall have any right in any manner whatever by virtue of, or
by availing of, any provision of the Indenture to affect, disturb or
prejudice the rights of any other Holders, or to obtain or to seek to
obtain priority or preference over any other Holders or to enforce
any right under this Indenture, except in the manner herein provided
and for the equal and ratable benefit of all the Holders.
SECTION 5.08. Unconditional Right of Holders to Receive
Principal, Premium and Interest and to Convert. Notwithstanding any other
provision in this Indenture, the Holder of any Security shall have the
right, which is absolute and unconditional, to receive payment of the
principal of (and premium, if any) and (subject to Section 3.07) interest
on such Security on or after the respective Stated Maturities expressed in
such Security (or, in the case of redemption, on or after the Redemption
Date) and to convert such Security in accordance with Article XIII and to
institute suit for the enforcement of any such payment and right to
convert, and such rights shall not be impaired without consent of such
Holder.
SECTION 5.09. Restoration of Rights and Remedies. If the
Trustee or any Holder has instituted any proceeding to enforce any right
or remedy under this Indenture and such proceeding has been discontinued
or abandoned for any reason, or has been determined adversely to the
Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders
shall be restored severally and respectively to their former positions
hereunder and thereafter all rights and remedies of the Trustee and the
Holders shall continue as though no such proceeding had been instituted.
SECTION 5.10. Rights and Remedies Cumulative. Except as
otherwise provided with respect to the replacement or payment of
mutilated, destroyed, lost or stolen Securities in the last paragraph of
Section 3.06, no right or remedy herein conferred upon or reserved to the
Trustee or to the Holders is intended to be exclusive of any other right
or remedy, and every right and remedy shall, to the extent permitted by
law, be cumulative and in addition to every other right and remedy given
hereunder or now or hereafter existing at law or in equity or otherwise.
The assertion or employment of any right or remedy hereunder, or
otherwise, shall not prevent the concurrent assertion or employment of any
other appropriate right or remedy.
SECTION 5.11. Delay or Omission Not Waiver. No delay or
omission of the Trustee or of any Holder of any Security to exercise any
right or remedy accruing upon any Event of Default shall impair any such
right or remedy or constitute a waiver of any such Event of Default or an
acquiescence therein. Every right and remedy given by this Article or by
law to the Trustee or to the Holders may be exercised from time to time,
and as often as may be deemed expedient, by the Trustee or by the Holders,
as the case may be.
SECTION 5.12. Control by Holders. The Holders of a majority in
principal amount of the Outstanding Securities shall have the right to
direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee, or exercising any trust or power
conferred on the Trustee, provided, that
(1) such direction shall not be in conflict with any rule
of law or with this Indenture, and
(2) such direction shall not impose additional liability
on the Trustee, and
(3) the Trustee may take any other action deemed proper by
the Trustee which is not inconsistent with such direction.
SECTION 5.13. Waiver of Past Defaults. The Holders of not less
than a majority in principal amount of the Outstanding Securities may on
behalf of the Holders of all the Securities waive any past default
hereunder and its consequences except a default
(1) in the payment of the principal of (or premium, if
any) or interest on any Security, or
(2) in respect of a covenant or provision hereof which
under Article IX cannot be modified or amended without the consent of
the Holder of each Outstanding Security affected.
Upon any such waiver, such default shall cease to exist, and any
Event of Default arising therefrom shall be deemed to have been cured, for
every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other default or impair any right consequent thereon.
SECTION 5.14. Undertaking for Costs. All parties to this
Indenture agree, and each Holder of any Security by his acceptance thereof
shall be deemed to have agreed, that any court may in its discretion
require, 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,
suffered or omitted by it as Trustee, the filing by any party litigant in
such suit of an undertaking to pay the costs of such suit, and that such
court may in its discretion assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in such suit, having due
regard to the merits and good faith of the claims or defenses made by such
party litigant; but the provisions of this Section shall not apply to any
suit instituted by the Trustee, to any suit instituted by any Holder, or
group of Holders, holding in the aggregate more than [10%] in principal
amount of the Outstanding Securities, or to any suit instituted by any
Holder of the enforcement of the payment of the principal of (or premium,
if any) or interest on any Security on or after the respective Stated
Maturities expressed in such Security (or, in the case of redemption, on
or after the Redemption Date) or for the enforcement of the right to
convert any Security in accordance with Article XIII.
SECTION 5.15. Waiver of Stay or Extension Laws. The Company
covenants (to the extent that it may lawfully do so) that it will not at
any time insist upon, or plead, or in any manner whatsoever claim or take
the benefit or advantage of, any stay or extension law wherever enacted,
now or at any time hereafter in force, which may affect the covenants or
the performance of this Indenture; and the Company (to the extent that it
may lawfully do so) hereby expressly waives all benefit or advantage of
any such law and covenants that it will not hinder, delay or impede the
execution of any power herein granted to the Trustee, but will suffer and
permit the execution of every such power as though no such law had been
enacted.
ARTICLE VI.
THE TRUSTEE
SECTION 6.01. Certain Duties and Responsibilities. (a) Except
during the continuance of an Event of Default,
(1) the Trustee undertakes to perform such duties and only
such duties as are specifically set forth in this Indenture, and no
implied covenants or obligations shall be read into this Indenture
against the Trustee; and
(2) in the absence of bad faith on its part, the Trustee
may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements
of this Indenture; but in the case of any such certificates or
opinions which by any provision hereof are specifically required to
be furnished to the Trustee, the Trustee shall be under a duty to
examine the same to determine whether or not they conform to the
requirements of this Indenture.
(b) In case an Event of Default has occurred and is
continuing, the Trustee shall exercise such of the rights and
powers vested in it by this Indenture, and use the same degree
of care and skill in their exercise, as a prudent man would
exercise or use under the circumstances in the conduct of his
own affairs.
(c) No provision of this Indenture shall be construed
to relieve the Trustee from liability for its own negligent
action, its own negligent failure to act, or its own wilful
misconduct, except that
(1) this Subsection shall not be construed to limit the
effect of Subsection (a) of this Section;
(2) the Trustee shall not be liable for any error or
judgment made in good faith by a Responsible Officer, unless it shall
be proved that the Trustee was negligent in ascertaining the
pertinent facts;
(3) the Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in accordance
with the direction of the Holders of not less than a majority in
principal amount of the Outstanding Securities relating to the time,
method and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred
upon the Trustee, under this Indenture; and
(4) no provision of this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur any
financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if it
shall have reasonable grounds for believing that repayment of such
funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
(d) whether or not therein expressly so provided, every
provision of this Indenture relating to the conduct or affecting the
liability of or affording protection to the Trustee shall be subject
to the provisions of this Section.
SECTION 6.02. Notice of Defaults. Within 90 days after the
occurrence of any default hereunder, the Trustee shall transmit by mail to
all Holders, as their names and addresses appear in the Security Register,
notice of such default hereunder known to the Trustee, unless such default
shall have been cured or waived; provided, however, that, except in the
case of a default in the payment of the principal of (or premium, if any)
or interest on any Security, the Trustee shall be protected in withholding
such notice if and so long as the board of directors, the executive
committee or a trust committee of directors or Responsible Officers of the
Trustee in good faith determine that the withholding of such notice is in
the interest of the Holders; and provided further that in the case of any
default of the character specified in Section 5.01(4), no such notice to
Holders shall be given until at least 30 days after the occurrence
thereof. For the purpose of this Section, the term "default" means any
event which is, or after notice or lapse of time or both would become, an
Event of Default.
SECTION 6.03. Certain Rights of Trustee. Subject to the
provisions of Section 6.01, which such section shall govern in the case of
any conflict between Section 6.01 and this Section 6.03:
(1) the Trustee may rely and shall be protected in acting
or refraining upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, note or other paper or document believed by
it to be genuine and to have been signed or presented by the proper
party or parties;
(2) any request or direction of the Company mentioned
herein shall be sufficiently evidenced by a Company Request or
Company Order and any resolution of the Board of Directors may be
sufficiently evidenced by a Board Resolution;
(3) whenever in the administration of this Indenture the
Trustee shall deem it desirable that a matter be proved or
established prior to taking, suffering or omitting any action
hereunder, the Trustee (unless other evidence be herein specifically
prescribed) may request, and the Company shall provide, an Officers'
Certificate with respect to such matter and, in the absence of bad
faith on its part, the Trustee may rely upon such Officers'
Certificate;
(4) the Trustee may consult with counsel and request the
written advice of such counsel or an Opinion of Counsel, which shall
be full and complete authorization and protection in respect of any
action taken, suffered or omitted by it hereunder in good faith and
in reliance thereon;
(5) the Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Indenture at the
request or direction of any of the Holders pursuant to this
Indenture, unless such Holders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and
liabilities which might be incurred by it in compliance with such
request or direction;
(6) the Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note or other paper or
document, but the Trustee, in its discretion, may make such further
inquiry or investigation into such facts or matters as it may see
fit, and, if the Trustee shall determine to make such further inquiry
or investigation, it shall be entitled to examine the books, records
and premises of the Company, personally or by agent or attorney.
(7) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys and the Trustee shall not be responsible
for any misconduct or negligence on the part of any agent or attorney
appointed with due care by it hereunder;
(8) the Trustee shall not be liable for any action taken
or omitted by it in good faith and believed by it to be authorized or
within the discretion, rights or powers conferred upon it by this
Indenture; and
(9) the Trustee shall not be deemed to have knowledge or
notice of any default or Event of Default unless a Responsible
Officer has actual knowledge thereof or unless the holders of not
less than [25%] of the aggregate principal amount of the Securities
then outstanding have notified the Trustee thereof.
SECTION 6.04. Not Responsible for Recitals or Issuances of
Securities. The recitals contained herein and in the Securities, except
the Trustee's certificates of authentication, shall be taken as the
statements of the Company, and the Trustee assumes no responsibility for
their correctness. The Trustee makes no representations as to the
validity or sufficiency of this Indenture or of the Securities. The
Trustee shall not be accountable for the use or application by the Company
of Securities or the proceeds thereof.
SECTION 6.05. May Hold Securities. The Trustee, any
Authenticating Agent, any Paying Agent, any Security Registrar or any
other agent of the Company, in its individual or any other capacity, may
become the owner or pledgee of Securities and, subject to Sections 6.08
and 6.13, may otherwise deal with the Company with the same rights it
would have if it were not Trustee, Authenticating Agent, Paying Agent,
Security Registrar or such other agent.
SECTION 6.06. Money Held in Trust. Money held by the Trustee
in trust hereunder need not be segregated from other funds except to the
extent required by law. The Trustee shall be under no liability for
interest on any money received by it hereunder except as otherwise agreed
with the Company.
SECTION 6.07. Compensation and Reimbursement. The Company
agrees
(1) to pay to the Trustee from time to time reasonable
compensation for all services rendered by it herein (which
compensation shall not be limited by any provision of law in regard
to the compensation of a trustee of any express trust);
(2) to reimburse the Trustee upon its request for all
reasonable expenses, disbursements and advances incurred or made by
the Trustee in accordance with any provisions of this Indenture
(including the reasonable compensation and the expenses and
disbursements of its agents and counsel), except any such expense,
disbursement or advance as may be attributable to its negligence or
bad faith; and
(3) to indemnify each of the Trustee and any predecessor
Trustee for, and to hold them harmless against, any loss, liability
or expense (except to the extent due to its negligence or bad faith)
arising out of or in connection with the acceptance or administration
of this trust or the performance of its duties hereunder, including
the costs and expenses of defending itself against any claim or
liability in connection with the exercise or performance of any of
its powers or duties hereunder.
Whenever the Trustee incurs expenses or renders services after
the occurrence of an Event of Default specified in Clause (4) or (5) of
Section 5.01, such expenses and all compensation for such services are
intended to constitute expenses of administration under any applicable
Federal or state bankruptcy, insolvency, reorganization or other similar
law.
SECTION 6.08. Disqualification; Conflicting Interests. (a) If
the Trustee has or shall acquire any conflicting interest, as defined in
this Section, it shall, within 90 days after ascertaining that it has such
conflicting interest, either eliminate such conflicting interest or resign
in the manner and with the effect hereinafter specified in this Article.
(b) In the event that the Trustee shall fail to comply with
the provisions of Subsection (a) of this Section, the Trustee shall,
within 10 days after the expiration of such 90 day period, transmit by
mail to all Holders, as their names and addresses appear in the Security
Register, notice of such failure.
(c) For the purposes of this Section, the Trustee shall be
deemed to have a conflicting interest if
(1) the Trustee is trustee under another indenture under
which any other securities, or certificates of interest or
participation in any other securities, of the Company are
outstanding, unless such other indenture is a collateral trust
indenture under which the only collateral consists of Securities
issued under this Indenture, provided that there shall be excluded
from the operation of this paragraph any indenture or indentures
under which other securities, or certificates of interest or
participation in other securities, of the Company are outstanding, if
(i) this Indenture and such other indenture or
indentures are wholly unsecured and such other indenture or
indentures are hereafter qualified under the Trust Indenture
Act, unless the Commission shall have found and declared by
order pursuant to Section 3.05(b) or Section 3.07(c) of the
Trust Indenture Act that differences exist between the
provisions of this Indenture and the provisions of such other
indenture or indentures which are so likely to involve a
material conflict of interest as to make it necessary in the
public interest or for the protection of investors to disqualify
the Trustee from acting as such under this Indenture or such
other indenture or indentures, or
(ii) the Company shall have sustained the burden of
proving, on application to the Commission and after opportunity
for hearing thereon, that trusteeship under this Indenture and
such other indenture or indentures is not so likely to involve a
material conflict of interest as to make it necessary in the
public interest or for the protection of investors to disqualify
the Trustee from acting as such under one of such indentures;
(2) the Trustee or any of its directors or executive
officers is an obligor upon the Securities or an underwriter for the
Company;
(3) the Trustee directly or indirectly controls or is
directly or indirectly controlled by or is under direct or indirect
common control with the Company or an underwriter for the Company;
(4) the Trustee or any of its directors or executive
officers is a director, officer, partner, employee, appointee or
representative of the Company, or of an underwriter (other than the
Trustee itself) for the Company who is currently engaged in the
business of underwriting, except that (i) one individual may be a
director or a executive or both, of the Trustee and a director or an
executive officer, or both, of the Company but may not be at the same
time an executive officer of both the Trustee and the Company; (ii)
if and so long as the number of directors of the Trustee in office is
more than 9,1 additional individual may be a director or an executive
officer, or both, of the Trustee and a director of the Company; and
(iii) the Trustee may be designated by the Company or by an
underwriter for the Company to act in the capacity of transfer agent,
registrar, custodian, paying agent, fiscal agent, escrow agent and
depositary, or in any other similar capacity, or, subject to the
provisions of paragraph (1) of this Subsection, as trustee, whether
under an indenture or otherwise;
(5) 10% or more of the voting securities of the Trustee is
beneficially owned either by the Company or by any director, partner
or executive officer thereof, or 20% or more of such voting
securities is beneficially owned, collectively, by any two or more of
such persons; or 10% or more of the voting securities of the Trustee
is beneficially owned either by an underwriter for the Company or by
any director, partner or executive officer thereof, or is
beneficially owned, collectively, by any two or more such persons;
(6) the Trustee is the beneficial owner of, or holds as
collateral security for an obligation which is in default (as
hereinafter in this Subsection defined), (i) 5% or more of the voting
securities, or 10% or more of any other class of security, of the
Company not including the Securities issued under this Indenture and
securities under any other indenture under which the Trustee is also
trustee, or (ii) 10% or more of any class of security of a
underwriter for the Company;
(7) the Trustee is the beneficial owner of, or holds as
collateral security for an obligation which is in default (as
hereinafter in this Subsection defined), 5% or more of the voting
securities of any person who, to the knowledge of the Trustee, owns
10% or more of the voting securities of, or controls directly or
indirectly or is under direct or indirect common control with, the
Company;
(8) the Trustee is the beneficial owner of, or holds as
collateral security for an obligation which is in default (as
hereinafter in this Subsection defined), 10% or more of any class of
security of any person who, to the knowledge of the Trustee, owns 50%
or more of the voting securities of the Company; or
(9) the Trustee owns, on April 15th in any calendar year,
in the capacity of executor, administrator, testamentary or inter
vivos trustee, guardian, committee or conservator, or in any other
similar capacity, an aggregate of 25% or more of the voting
securities, or of any class of security, of any person, the
beneficial ownership of a specified percentage of which would have
constituted a conflicting interest under paragraph (6), (7) or (8) of
this Subsection. As to any such securities of which the Trustee
acquired ownership through becoming executor, administrator or
testamentary trustee of an estate which included them, the provisions
of the preceding sentence shall not apply, for a period of two years
from the date of such acquisition, to the extent that such securities
included in such estate do not exceed 25% of such voting securities
or 25% of any such class of security. Promptly after April 15th in
each calendar year, the Trustee shall make a check of its holdings of
such securities in any of the above-mentioned capacities as of such
April 15th. If the Company fails to make payment in full of the
principal of (or premium, if any) or interest on any of the
Securities when and as the same becomes due and payable, and such
failure continues for 30 days thereafter, the Trustee shall make a
prompt check of its holdings of such securities in any of the above-
mentioned capacities as of the date of the expiration of such 30-day
period, and after such date, notwithstanding the foregoing provisions
of this paragraph, all such securities so held by the Trustee, with
sole or joint control over such securities vested in it, shall, but
only so long as such failure shall continue, be considered as though
beneficially owned by the Trustee for the purposes of paragraphs (6),
(7) and (8) of this Subsection.
The specification of percentages in paragraphs (5) to (9),
inclusive, of this Subsection shall not be construed as indicating that
the ownership of such percentages of the securities of a person is or is
not necessary or sufficient to constitute direct or indirect control for
the purposes of paragraph (3) or (7) of this Subsection.
For the purposes of paragraphs (6), (7), (8) and (9) of this
Subsection only, (i) the terms "security" and "securities" shall include
only such securities as are generally known as corporate securities, but
shall not include any note or other evidence of indebtedness issued to
evidence an obligation to repay moneys lent to a person by one or more
banks, trust companies or banking firms, or any certificate of interest or
participation in any such note or evidence of indebtedness; (ii) an
obligation shall be deemed to be "in default" when a default in payment of
principal shall have continued for 30 days or more and shall not have been
cured; and (iii) the Trustee shall not be deemed to be the owner or holder
of (A) any security which it holds as collateral security, as trustee or
otherwise, for an obligation which is not in default as defined in clause
(ii) above, or (B) any security which it holds as collateral security
under this Indenture, irrespective of any default hereunder, or (C) any
security which it holds as agent for collection, or as custodian, escrow
agent or depositary, or in any similar representative capacity.
(d) For the purpose of this Section:
(1) The term "underwriter," when used with reference to
the Company, means every person who, within three years prior to the
time as of which the determination is made, has purchased from the
Company with a view to, or has offered or sold for the Company in
connection with, the distribution of any security of the Company
outstanding at such time, or has participated or has had a direct or
indirect participation in any such undertaking, or has participated
or has had a participation in the direct or indirect underwriting of
any such undertaking, but such term shall not include a person whose
interest was limited to a commission from an underwriter or dealer
not in excess of the usual and customary distributors' or sellers'
commission.
(2) The term "director" means any director of a
corporation or any individual performing similar functions with
respect to any organization, whether incorporated or unincorporated.
(3) The term "person" means an individual, a corporation,
a partnership, an association, a joint-stock company, a trust, an
unincorporated organization or a government or political subdivision
thereof. As used in this paragraph, the term "trust" shall include
only a trust where the interest or interests of the beneficiary or
beneficiaries are evidenced by a security.
(4) The term "voting security" means any security
presently entitling the owner or holder to vote in the direction or
management of the affairs of a person, or any security issued under
or pursuant to any trust, agreement or arrangement whereby a trustee
or trustees or agent or agents for the owner or holder of such
security are presently entitled to vote in the direction or
management of the affairs of a person.
(5) The term "Company" means any obligor upon the
Securities.
(6) The term "executive officer" means the president,
every vice president, every trust officer, the cashier, the secretary
and the treasurer of a corporation, and any individual customarily
performing similar functions with respect to any organization whether
incorporated or unincorporated but shall not include the chairman of
the board of directors.
(e) The percentages of voting securities and other
securities specified in this Section shall be calculated in accordance
with the following provisions:
(1) A specified percentage of the voting securities of the
Trustee, the Company or any other person referred to in this Section
(each of whom is referred to as a "person" in this paragraph) means
such amount of the outstanding voting securities of such person as
entitles the holder or holders thereof to cast such specified
percentage of the aggregate votes which the holders of all the
outstanding voting securities of such person are entitled to cast in
the direction or management of the affairs of such person.
(2) A specified percentage of a class of securities of a
person means such percentage of the aggregate amount of securities of
the class outstanding.
(3) The term "amount," when used in regard to securities,
means the principal amount if relating to evidences of indebtedness,
the number of shares if relating to capital shares and the number of
units if relating to any other kind of security.
(4) The term "outstanding" means issued and not held by or
for the account of the issuer. The following securities shall not be
deemed outstanding within the meaning of this definition:
(i) securities of an issuer held in a sinking fund
relating to securities of the issuer of the same class;
(ii) securities of an issuer held in a sinking fund
relating to another class of securities of the issuer, if the
obligation evidenced by such other class of securities is not in
default as to principal or interest or otherwise;
(iii) securities pledged by the issuer thereof as
security for an obligation of the issuer not in default as to
principal or interest or otherwise; and
(iv) securities held in escrow if placed in escrow by
the issuer thereof;
provided, however, that voting securities of any issuer shall be
deemed outstanding if any person other than the issuer is entitled to
exercise the voting rights thereof.
(5) A security shall be deemed to be of the same class as
another security if both securities confer upon the holder or holders
thereof substantially the same rights and privileges; provided,
however, that, in the ease of secured evidences of indebtedness, all
of which are issued under a single indenture, differences in the
interest rate or maturity dates of various series thereof shall not
be deemed sufficient to constitute such series different classes; and
that, in the case of unsecured evidences of indebtedness, differences
in the interest rates or maturity dates thereof shall not be deemed
sufficient to constitute them securities of different classes,
whether or not they are issued under a single indenture.
SECTION 6.09. Corporate Trustee Required; Eligibility. There
shall at all times be a Trustee hereunder which shall be a corporation
organized and doing business under the laws of the United States of
America, any State thereof or the District of Columbia, authorized under
such laws to exercise corporate trust powers, having a combined capital
and surplus of at least $50,000,000 and subject to supervision or
examination by Federal or State authority. If such corporation publishes
reports of condition at least annually, pursuant to law or the
requirements of said supervising or examining authority, then for the
purposes of this Section, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set
forth in its most recent report of condition so published. If at any time
the Trustee shall cease to be eligible in accordance with the provision of
this Section, it shall resign immediately in the manner and with the
effect hereinafter specified in this Article.
SECTION 6.10. Resignation and Removal; Appointment of
Successor.
(a) No resignation or removal of the Trustee and no
appointment of a successor Trustee pursuant to this Article shall
become effective until the acceptance of appointment by the successor
Trustee under Section 6.11.
(b) The Trustee may resign at any time by giving written
notice thereof to the Company. If an instrument of acceptance by a
successor Trustee shall not have been delivered to the Trustee within
30 days after the giving of such notice of resignation, the resigning
Trustee may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
(c) The Trustee may be removed at any time by Act of the
Holders of a majority in principal amount of the outstanding
Securities, delivered to the Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with Section
6.08(a) after written request therefor by the Company or by any
Holder who has been a bona fide Holder of a Security for at
least six months, or
(2) the Trustee shall cease to be eligible under
Section 6.09 and shall fail to resign after written request
therefor by the Company or by any such Holder, or
(3) the Trustee shall become incapable of acting or
shall be adjudged a bankrupt or insolvent or a receiver of the
Trustee or of its property shall be appointed or any public
officer shall take charge or control of the Trustee or of its
property or affairs for the purpose of rehabilitation,
conservation or liquidation,
then in any such case, (A) the Company by a Board Resolution may remove
the Trustee, or (B) subject to Section 5.14, any Holder who has been a
bona fide Holder of a Security for at least six months may, on behalf of
himself and all others similarly situated, petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a
successor Trustee.
(e) If the Trustee shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of
Trustee for any cause, the Company, by a Board Resolution, shall
promptly appoint a successor Trustee. If, within one year after such
resignation, removal or incapability, or the occurrence of such
vacancy, a Trustee shall be appointed by Act of the Holders of a
majority in principal amount of the Outstanding Securities delivered
to the Company and the retiring Trustee, the Trustee so appointed
shall, forthwith upon its acceptance of such appointment, become the
Trustee and supersede the successor Trustee appointed by the Company.
If no successor Trustee shall have been so appointed by the Company
or the Holders and accepted appointment in the manner hereinafter
provided, any Holder who has been a bona fide Holder for at least six
months may, on behalf of himself and all others similarly situated,
petition any court of competent jurisdiction for the appointment of a
successor Trustee.
(f) The Company shall give notice of each resignation and
each removal of the Trustee and each appointment of a successor
Trustee by mailing written notice of such event by first-class mail,
postage prepaid, to all Holders as their names and addresses appear
in the Security Register. Each notice shall include the name of the
successor Trustee and the address of its Corporate Trust Office.
SECTION 6.11. Acceptance of Appointment by Successor. Every
successor Trustee appointed hereunder shall execute, acknowledge and
deliver to the Company and to the retiring Trustee an instrument accepting
such appointment, and thereupon the resignation or removal of the retiring
Trustee shall become effective and such successor Trustee, without any
further act, deed or conveyance, shall become vested with all the rights,
powers, trusts and duties of the retiring Trustee; but, on request of the
Company or the successor Trustee, such retiring Trustee shall, upon
payment of its charges, execute and deliver an instrument transferring to
such successor Trustee all the rights, powers and trusts of the retiring
Trustee and shall duly assign, transfer and deliver to such successor
Trustee all property and money held by such retiring Trustee hereunder.
Upon request of any successor Trustee, the Company shall execute any and
all instruments for more fully and certainly vesting in and confirming to
such successor Trustee all such rights, power and trusts.
No successor Trustee shall accept its appointment unless at the
time of such acceptance such successor Trustee shall be qualified and
eligible under this Article.
SECTION 6.12. Merger, Conversion, Consolidation or Succession
to Business. Any corporation into which the Trustee may be merged or
converted or with which it may be consolidated, or any corporation
resulting from any merger, conversion or consolidation to which the
Trustee shall be a party, or any corporation succeeding to all or
substantially all the corporate trust business of the Trustee, shall be
the successor of the Trustee hereunder, provided such corporation shall be
otherwise qualified and eligible under this Article, without the execution
or filing of any paper or any further act on the part of any of the
parties hereto. In case any Securities shall have been authenticated, but
not delivered, by the Trustee then in office, any successor by merger,
conversion or consolidation to such authenticating Trustee may adopt such
authentication and deliver the Securities so authenticated with the same
effect as if such successor Trustee had itself authenticated such
Securities.
SECTION 6.13. Preferential Collection of Claims Against
Company. (a) Subject to Subsection (b) of this Section, if the Trustee
shall be or shall become a creditor, directly or indirectly, secured or
unsecured, of the Company within four months prior to a default, as
defined in Subsection (c) of this Section, or subsequent to such a
default, then, unless and until such default shall be cured, the Trustee
shall set apart and hold in a special account for the benefit of the
Trustee individually, the Holders of the Securities and the holders of
other indenture securities, as defined in Subsection (c) of this Section:
(1) an amount equal to any and all reductions in the
amount due and owing upon any claim as such creditor in respect of
principal or interest, effected after the beginning of such four
months' period and valid as against the Company and its other
creditors, except any such reduction resulting from the receipt or
disposition of any property described in paragraph (2) of this
Subsection, or from the exercise of any right of set-off which the
Trustee could have exercised if a petition in bankruptcy had been
filed by or against the Company upon the date of such default; and
(2) all property received by the Trustee in respect of any
claims as such creditor, either as security therefor, or in
satisfaction or composition thereof, or otherwise, after the
beginning of such four months' period, or an amount equal to the
proceeds of any such property, if disposed of; subject, however, to
the rights, if any, of the Company and its other creditors in such
property or such proceeds.
Nothing herein contained, however, shall affect the right of the
Trustee:
(A) to retain for its own account (i) payments made on
account of any such claim by any Person (other than the Company) who
is liable thereon, and (ii) the proceeds of the bona fide sale of any
such claim by the Trustee to a third Person, and (iii) distributions
made in cash, securities or other property in respect of claims flied
against the Company in bankruptcy or receivership or in proceedings
for reorganization pursuant to the Federal Bankruptcy Act or
applicable State law;
(B) to realize, for its own account, upon any property
held by it as security for any such claim, if such property was so
held prior to the beginning of such four months' period;
(C) to realize, for its own account, but only to the
extent of the claim hereinafter mentioned, upon any property held by
it as security for any such claim, if such claim was created after
the beginning of such four months' period and such property was
received as security therefor simultaneously with the creation
thereof, and if the Trustee shall sustain the burden of proving that
at the time such property was so received the Trustee has no
reasonable cause to believe that a default, as defined in Subsection
(c) of this Section, would occur within four months; or
(D) to receive payment on any claim referred to in
paragraph (B)or (C), against the release of any property held as
security for such claim provided in paragraph (B)or (C), as the case
may be, to the extent of the fair value of such property.
For the purposes of paragraphs (B), (C) and (D), property
substituted after the beginning of such four months' period for property
held as security at the time of such substitution shall, to the extent of
the fair value of the property released, have the same status as the
property released, and, to the extent that any claim referred to in any of
such paragraphs is created in renewal of or in substitution for or for the
purpose of repaying or refunding any pre-existing claim of the Trustee as
such creditor, such claim shall have the same status as such pre-existing
claim.
If the Trustee shall be required to account, the funds and
property held in such special account and the proceeds thereof shall be
apportioned among the Trustee, the Holders and the holders of other
indenture securities in such manner that the Trustee, the Holders and the
holders of other indenture securities realize, as a result of payments
from such special account and payments of dividends on claims filed
against the Company in bankruptcy or receivership or in proceedings for
reorganization pursuant to the Federal Bankruptcy Act or applicable State
law, the same percentage of their respective claims, figured before
crediting against the claim of the Trustee anything on account of the
receipt by it from the Company of the funds and property in such special
account and before crediting to the respective claims of the Trustee and
the Holders and the holders of other indenture securities dividends on
claims filed against the Company in bankruptcy or receivership or in
proceedings for reorganization pursuant to the Federal Bankruptcy Act or
applicable State law, but after crediting thereon receipts on account of
the indebtedness presented by their respective claims from all sources
other than from such dividends and from the funds and property so held in
such special account. As used in this paragraph, with respect to any
claim, the term "dividends" shall include any distribution with respect to
such claim, in bankruptcy or receivership or proceedings for
reorganization pursuant to the Federal Bankruptcy Act or applicable State
law, whether such distribution is made in cash, securities or other
property, but shall not include any such distribution with respect to the
secured portion, if any, of such claim. The court in which such
bankruptcy, receivership or proceedings for reorganization are pending
shall have jurisdiction (i) to apportion among the Trustee, the Holders
and the holders of other indenture securities, in accordance with the
provisions of this paragraph, the funds and property held in such special
account and proceeds thereof, or (ii) in lieu of such appointment, in
whole or in part, to give to the provisions of this paragraph due
consideration in determining the fairness of the distributions to be made
to the Trustee and the Holders and the holders of other indenture
securities with respect to their respective claims, in which event it
shall not be necessary to liquidate or to appraise the value of any
securities or other property held in such special account or a security
for any such claim, or to make a specific allocation of such distributions
as between the secured and unsecured portions of such claims, or otherwise
to apply the provisions of this paragraph as a mathematical formula.
Any Trustee which has resigned or been removed after the
beginning of such four months' period shall be subject to the provisions
of this Subsection as though such resignation or removal had not occurred.
If any Trustee has resigned or been removed prior to the beginning of such
four months' period, it shall be subject to the provisions of this
Subsection if and only if the following conditions exist:
(i) the receipt of property or reduction of claim,
which would have given rise to the obligation to account, if
such Trustee had continued as Trustee, occurred after the
beginning of such four months' period; and
(ii) such receipt of property or reduction of claim
occurred within four months after such resignation or removal.
(b) There shall be excluded from the operation of
Subsection (a) of this Section a creditor relationship arising from:
(1) the ownership or acquisition of securities issued
under any indenture, or any security or securities having a maturity
of one year or more at the time of acquisition by the Trustee;
(2) advances authorized by a receivership or bankruptcy
court of competent jurisdiction or by this Indenture, for the purpose
of preserving any property which shall at any time be subject to the
lien of this Indenture or of discharging tax liens or other prior
liens or encumbrances thereon, if notice of such advances and of the
circumstances surrounding the making thereof is given to the Holders
at the time and in the manner provided in this Indenture;
(3) disbursements made in the ordinary course of business
in the capacity of trustee under an indenture, transfer agent,
registrar, custodian, paying agent, fiscal agent or depositary, or
other similar capacity;
(4) an indebtedness created as a result of services
rendered or premises rented, or an indebtedness created as a result
of goods or securities sold in a cash transaction, as defined in
Subsection (c) of this Section;
(5) the ownership of stock or of other securities of a
corporation organized under the provisions of Section 25(a) of the
Federal Reserve Act, as amended, which is directly or indirectly a
creditor of the Company; and
(6) the acquisition, ownership, acceptance or negotiation
of any drafts, bills of exchange, acceptances or obligations which
fall within the classification of self-liquidating paper, as defined
in Subsection (c) of this Section.
(c) For the purposes of this Section only:
(1) the term "default" means any failure to make payment
in full of the principal of or interest on any of the Securities or
upon the other indenture securities when and as such principal or
interest becomes due and payable;
(2) the term "other indenture securities" means securities
upon which the Company is an obligor outstanding under any other
indenture (i) under which the Trustee is also trustee, (ii) which
contains provisions substantially similar to the provisions of this
Section, and (iii) under which a default exists at the time of the
appointment of the funds and property held in such special account;
(3) the term "cash transaction" means any transaction in
which full payment for goods or securities sold is made within seven
days after delivery of the goods or securities in currency or in
checks or other orders drawn upon banks or bankers and payable upon
demand;
(4) the-term "self-liquidating paper" means any draft,
bill of exchange, acceptance or obligation which is made, drawn,
negotiated or incurred by the Company for the purpose of financing
the purchase, processing, manufacturing, shipment, storage or sale of
goods, wares or merchandise and which is secured by documents
evidencing title to, possession of, or a lien upon, the goods, wares
or merchandise or the receivables or proceeds arising from the sale
of the goods, wares or merchandise previously constituting the
security, provided the security is received by the Trustee
simultaneously with the creation of the creditor relationship with
the Company arising from the making, drawing, negotiating or
incurring of the draft, bill of exchange, acceptance or obligation;
(5) the term "Company" means any obligor upon the
Securities; and
(6) the term "Federal Bankruptcy Act" means the Bankruptcy
Act or Title 11 of the United States Code.
SECTION 6.14. Appointment of Authenticating Agent. The Trustee
may appoint an Authenticating Agent or Agents which shall be authorized to
and on behalf of the Trustee to authenticate Securities issued upon
original issuance or upon exchange, registration or transfer or partial
redemption or conversion thereof or pursuant to Section 3.06, and
Securities so authenticated shall be entitled to the benefits of this
Indenture and shall be valid and obligatory for all purposes as if
authenticated by the Trustee hereunder. Wherever reference is made in
this Indenture to the authentication and delivery of Securities by the
Trustee or the Trustee's certificate of authentication, such reference
shall be deemed to include authentication and delivery on behalf of the
Trustee by an Authenticating Agent and a certificate of authentication
executed on behalf of the Trustee by an Authenticating Agent. Each
Authenticating Agent shall be acceptable to the Company and shall at all
times be a corporation organized and doing business under the laws of the
United States of America, any State thereof or the District of Columbia,
authorized under such laws to and as Authenticating Agent, having a
combined capital and surplus of not less than $50,000,000 and subject to
supervision or examination by Federal or State authority. If such
Authenticating Agent publishes reports of condition at least annually,
pursuant to law or to the requirements of said supervising or examining
authority, then, for the purposes of this Section, the combined capital
and surplus of such Authenticating Agent shall be deemed to be its
combined capital and surplus as set forth in its most recent report of
condition so published. If at any time an Authenticating Agent shall
cease to be eligible in accordance with the provisions of this Section,
such Authenticating Agent shall resign immediately in the manner and with
the effect specified in this Section.
Any corporation into which an Authenticating Agent may be merged
or converted or with which it may be consolidated, or any corporation
resulting from any merger, conversion or consolidation to which such
Authenticating Agent shall be a party, or any corporation succeeding to
the corporate agency or corporate trust business of an Authenticating
Agent, shall continue to be an Authenticating Agent provided such
corporation shall be otherwise eligible under this Section, without the
execution or filing of any paper or any further act on the part of the
Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written
notice thereof to the Trustee and to the Company. The Trustee may at any
time terminate the agency of an Authenticating Agent by giving written
notice thereof to such Authenticating Agent and to the Company. Upon
receiving such a notice of resignation or upon such a termination, or in
case at any time such Authenticating Agent shall cease to be eligible in
accordance with the provisions of this Section, the Trustee may appoint a
successor Authenticating Agent which shall be acceptable to the Company
and shall mail written notice of such appointment by first-class mail,
postage prepaid, to all Holders as their names and addresses appear in the
Security Register. Any successor Authenticating Agent upon acceptance of
its appointment hereunder shall become vested with all the rights, powers
and duties of its predecessor hereunder, with like effect as if originally
named as an Authenticating Agent. No successor Authenticating Agent shall
be appointed unless eligible under the provisions of this Section.
The Trustee agrees to pay to each Authenticating Agent from time
to time reasonable compensation for its services under this Section, and
the Trustee shall be entitled to be reimbursed for such payments, subject
to the provisions of Section 6.07.
If an appointment is made pursuant to this Section, the
Securities may have endorsed thereon, in addition to the Trustee's
certificate of authentication, an alternative certificate of
authentication in the following form:
This is one of the Debentures described in the within-mentioned
Indenture.
_________________________________
As Trustee
By: ________________________
As Authenticating Agent
By: ________________________
Authorized Officer
ARTICLE VII.
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 7.01. Company to Furnish Trustee Names an Addresses of
Holders. The Company will furnish or cause to be furnished to the Trustee
(1) semi-annually, not more than 15 days after each
Regular Record Date, a list, in such form as the Trustee may
reasonably require, of the names and addresses of the Holders as of
such Regular Record Date, and
(2) at such other times as the Trustee may request in
writing within 30 days after the receipt by the Company of any such
request, a list of similar form and content as of a date not more
than 15 days prior to the time such list is furnished,
excluding from any such list names and addresses received by the Trustee
in its capacity as Security Registrar.
SECTION 7.02. Preservation of Information Communications to
Holders. (a) The Trustee shall preserve, in as current a form as is
reasonably practicable, the names and addresses of Holders contained in
the most recent list furnished to the Trustee as provided in Section 7.01
and the names and addresses of Holders received by the Trustee in its
capacity as Security Registrar. The Trustee may destroy any list
furnished to it as provided in Section 7.01 upon receipt of a new list so
furnished.
(b) If three or more Holders (herein referred to as
"applicants") apply in writing to the Trustee, and furnish to the Trustee
reasonable proof that each such applicant has owned a Security for a
period of at least six months preceding the date of such application, and
such application states that the applicants desire to communicate with
other Holders with respect to their rights under this Indenture or under
the Securities and is accompanied by a copy of the form of proxy or other
communication which such applicants propose to transmit, then the Trustee
shall, within five business days after the receipt of such application, at
its election, either
(1) afford such applicants access to the information
preserved at the time by the Trustee in accordance with Section
7.02(a), or
(2) inform such applicants as to the approximate number of
Holders whose names and addresses appear in the information preserved
at the time by the Trustee in accordance with Section 7.02(a), and as
to the approximate cost of mailing to such Holders the form of proxy
or other communication, if any, specified in such application.
If the Trustee shall elect not to afford such applicants access to
such information, the Trustee shall, upon the written request of such
applicants, mail to each Holder whose name and address appear in the
information preserved at the time by the Trustee in accordance with
Section 7.02(a) a copy of the form of proxy or other communication
which is specified in such request, with reasonable promptness after
a tender to the Trustee of the material to be mailed and of payment,
or provision for the payment, of the reasonable expenses of mailing,
unless within five days after such tender the Trustee shall mail to
such applicants and file with the Commission, together with a copy of
the material to be mailed, a written statement to the effect that, in
the opinion of the Trustee, such mailing would be contrary to the
best interest of the Holders or would be in violation of applicable
law. Such written statement shall specify the basis of such opinion.
If the Commission, after opportunity for a hearing upon the
objections specified in the written statement so filed, shall enter
an order refusing to sustain any of such objections or if, after the
entry of an order sustaining one or more of such objections, the
Commission shall find, after notice and opportunity for hearing, that
all the objections so sustained have been met and shall enter an
order so declaring, the Trustee shall mail copies of such material to
all such Holders with reasonable promptness after the entry of such
order and the renewal of such tender; otherwise the Trustee shall be
relieved of any obligations or duty to such applicants respecting
their application.
(c) Every Holder of Securities, by receiving and holding
the same, agrees with the Company and the Trustee that neither the Company
nor the Trustee nor any agent of either of them shall be held accountable
by reason of the disclosure of any such information as to the names and
addresses of the Holders in accordance with Section 7.02(b), regardless of
the source from which such information was derived, and that the Trustee
shall not be held accountable by reason of mailing any material pursuant
to a request made under Section 7.02(b).
SECTION 7.03. Reports by Trustee. (a) Within 60 days after
April 15th of each calendar year, the Trustee shall transmit by mail to
all Holders, as their names and addresses appear in the Security Register,
a brief report dated as of such April 15th with respect to:
(1) its eligibility under Section 6.09 and its
qualifications under Section 6.08, or in lieu thereof, if to the best
of its knowledge it has continued to be eligible and qualified under
said Sections, a written statement to such effect;
(2) the character and amount of any advances (and if the
Trustee elects so to state, the circumstances surrounding the making
thereof) made by the Trustee (as such) which remain unpaid on the
date of such report, and for the reimbursement of which it claims or
may claim a lien or charge, prior to that of the Securities, on any
property or funds held or collected by it as Trustee, except that the
Trustee shall not be required (but may elect) to report such advances
if such advances so remaining unpaid aggregate not more than 1/2 of 1%
of the principal amount of the Securities outstanding on the date of
such report;
(3) the amount, interest rate and maturity date of all
other indebtedness owing by the Company (or by any other obligor on
the Securities) to the Trustee in its individual capacity, on the
date of such report, with a brief description of any property held as
collateral security therefor, except an indebtedness based upon a
creditor relationship arising in any manner described in Section
6.13(b) (2), (3), (4) or (6);
(4) the property and funds, if any, physically in the
possession of the Trustee as such on the date of such report;
(5) any additional issue of Securities which the Trustee
has not previously reported; and
(6) any action taken by the Trustee in the performance of
its duties hereunder which it has not previously reported and which
in its opinion materially affects the Securities, except action in
respect of a default, notice of which has been or is to be withheld
by the Trustee in accordance with Section 6.02.
(b) The Trustee shall transmit by mail to all
Holders, as their names and addresses appear in the Security
Register, a brief report with respect to the character and
amount of any advances (and if the Trustee elects so to state,
the circumstances surrounding the making thereof) made by the
Trustee (as such) since the date of the last report transmitted
pursuant to Subsection (a) of this Section (or if no such report
has yet been so transmitted, since the date of execution of this
instrument) for the reimbursement of which it claims or may
claim a lien or charge, prior to that of the Securities, on
property or funds held or collected by it as Trustee and which
it has not previously reported pursuant to this Subsection,
except that the Trustee shall not be required (but may elect) to
report such advances if such advances remaining unpaid at any
time aggregate 10% or less of the principal amount of the
Securities Outstanding at such time, such report to be
transmitted within 90 days after such time.
(c) A copy of each such report shall, at the time of
such transmission to Holders, be filed by the Trustee with each
stock exchange upon which the Securities are listed, with the
Commission and with the Company. The Company will notify the
Trustee when the Securities are listed on any stock exchange and
of any delisting thereof.
(d) The Trustee shall transmit by mail to all Holders
who send a written request to the Trustee, as their names and
addresses appear in the Security Register, a copy of the
information, documents and reports filed with the Trustee
pursuant to Section 7.04(1). The Trustee may destroy all
information, documents and reports furnished to it pursuant to
Section 7.04 upon receipt of new information, documents and
reports so furnished.
SECTION 7.04. Reports by Company. The Company shall:
(1) file with the Trustee, within 15 days after the
Company is required to file the same with the Commission, copies of
the annual reports and of the information, documents and other
reports (or copies of such portions of any of the foregoing as the
Commission may from time to time by rules and regulations prescribe)
which the Company may be required to file with the Commission
pursuant to Section 13 or Section 15(d) of the Securities Exchange
Act of 1934, as amended; and, if the Company is not required to file
information, documents or reports pursuant to either of said
Sections, then it shall nonetheless file the same with the Trustee as
if it were required to do so by the Commission;
(2) file with the Trustee and the Commission, in
accordance with rules and regulations prescribed from time to time by
the Commission, such additional information, documents and reports
with respect to compliance by the Company with the conditions and
covenants of this Indenture as may be required from time to time by
such rules and regulations; and
(3) transmit by mail to all Holders, as their names and
addresses appear in the Security Register, within 30 days after the
filing thereof with the Trustee, such summaries of any information,
documents, and reports required to be filed by the Company pursuant
to paragraphs (1) and (2) of this Section as may be required by rules
and regulations prescribed from time to time by the Commission.
ARTICLE VIII.
CONSOLIDATION, MERGER, CONVEYANCE,
TRANSFER OR LEASE
SECTION 8.01. Company May Consolidate, etc. Only on Certain
Terms. The Company shall not consolidate with or merge into any other
Person or convey, transfer or lease its properties and assets
substantially as an entirety (whether such properties and assets are held
by the Company directly or through its Subsidiaries) to any Person,
unless:
(1) the Person formed by such consolidation or into which
the Company is merged or the Person which acquires by conveyance or
transfer, or which leases, the properties and assets of the Company
substantially as a entirety shall be a corporation organized and
existing under the laws of the United States of America, any State
thereof or the District of Columbia and shall expressly assume, by an
indenture supplemental hereto, executed and delivered to the Trustee,
in form satisfactory to the Trustee, the due and punctual payment of
the principal of (and premium, if any) and interest on all the
Securities and the performance of every covenant of this Indenture on
the part of the Company to be performed or observed and shall have
provided for conversion rights in accordance with Section 13.06;
(2) immediately after giving effect to such transaction,
no Event of Default, and no event which, after notice or lapse of
time or both, would become an Event of Default, shall have happened
and be continuing; and
(3) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, conveyance, transfer or lease and, if a
supplemental indenture is required in connection with such
transaction, such supplemental indenture comply with this Article and
that all conditions precedent herein provided for relating to such
transaction have been complied with.
SECTION 8.02. Successor Corporation Substituted. Upon any
consolidation or merger by the Company with or into any other Person or
any conveyance, transfer or lease of the properties and assets of the
Company substantially as a entirety (whether such properties and assets
are held by the Company directly or through its Subsidiaries) to any
Person in accordance with Section 8.01, the successor corporation formed
by such consolidation or into which the Company is merged or to which such
conveyance, transfer or lease is made shall succeed to, and be substituted
for, and may exercise every right and power of the Company under this
Indenture with the same effect as if such successor corporation had been
named as the Company herein, and thereunder, except in the case of a lease
to another Person, the predecessor corporation shall be relieved of all
obligations and covenants under this Indenture and the Securities.
ARTICLE IX.
SUPPLEMENTAL INDENTURES
SECTION 9.01. Supplemental Indentures Without Consent of
Holders. Without the consent of any Holders, the Company, when authorized
by a Board Resolution, and the Trustee, at any time and from time to time,
may enter into one or more indentures supplemental hereto, in form
satisfactory to the Trustee and the Company, for any of the following
purposes:
(1) to evidence the succession of another corporation to
the Company and the assumption by any such successor of the covenants
of the Company herein and in the Securities; or
(2) to add to the covenants of the Company for the benefit
of the Holders, or to surrender any right or power herein conferred
upon the Company; or
(3) to make provision with respect to the conversion
rights of Holders pursuant to the requirements of Section 13.06; or
(4) to cure any ambiguity, to correct or supplement any
provision herein which may be inconsistent with any other provision
herein, or to make any other provisions with respect to matters or
questions arising under this Indenture which shall not be
inconsistent with the provisions of this Indenture; provided,
however, that such action pursuant to this clause (4) shall not
adversely affect the interests of the Holders in any material
respect.
SECTION 9.02. Supplemental Indentures with Consent of Holders.
With the consent of the Holders of not less than two-thirds in principal
amount of the Outstanding Securities, by Act of said Holders delivered to
the Company and the Trustee, the Company, when authorized by a Board
Resolution, and the Trustee may enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this
Indenture or of modifying in any manner the rights of the Holders under
this Indenture; provided, however, that no such supplemental indenture
shall, without the consent of the Holder of each Outstanding Security
affected thereby,
(1) change the Stated Maturity of the principal of, or any
installment of interest on, any Security, or reduce the principal
amount thereof or the rate of interest thereon or any premium payable
upon the redemption thereof, or change the place of payment where, or
the coin or currency in which, any Security or any premium or
interest thereon is payable, or impair the right to institute suit
for the enforcement of any payment on or with respect to any
Securities, or adversely affect the right to convert any Security as
provided in Article XIII or modify the provisions of this Indenture
with respect to the subordination of the Securities in a manner
adverse to the Holders, or
(2) reduce the percentage in principal amount of the
Outstanding Securities, the consent of whose Holders is required for
any such supplemental indenture, or the consent of whose Holders is
required for any waiver (of compliance with certain provisions of
this Indenture or certain defaults hereunder and their consequences)
provided for in this Indenture, or
(3) modify any of the provisions of this Section or
Section 5.13 except to increase any such percentage or to provide
that certain other provisions of this Indenture cannot be modified or
waived without the consent of the Holder of each Outstanding Security
affected thereby.
It shall not be necessary for any Act of Holders under this
Section to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such Act shall approve the
substance thereof.
SECTION 9.03. Execution of Supplemental Indentures. In
executing, or accepting the additional trusts created by, any supplemental
indenture permitted by this Article or the modifications thereby of the
trusts created by this Indenture, the Trustee shall be entitled to
receive, and (subject to Section 6.01) shall be fully protected in relying
upon, an Opinion of Counsel stating that the execution of such
supplemental indenture is authorized or permitted by this Indenture. The
Trustee may, but shall not be obligated to, enter into any supplemental
indenture which affects the Trustee's own rights, duties or immunities
under this Indenture or otherwise.
SECTION 9.04. Effect of Supplemental Indentures. Upon the
execution of any supplemental indenture under this Article, this Indenture
shall be modified in accordance therewith, and such supplemental indenture
shall form a part of this Indenture for all purposes; and every Holder of
Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
SECTION 9.05. Conformity with Trust Indenture Act. Every
supplemental indenture executed pursuant to this Article shall conform to
the requirements of the Trust Indenture Act as then in effect.
SECTION 9.06. Reference in Securities to Supplemental
Indentures. Securities authenticated and delivered after the execution of
any supplemental indenture pursuant to this Article may, and shall if
required by the Trustee, bear a notation in form approved by the Trustee
as to any matter provided for in such supplemental indenture. If the
Company shall so determine, new Securities so modified as to conform, in
the opinion of the Trustee and the Board of Directors, to any such
supplemental indenture may be prepared and executed by the Company and
authenticated and delivered by the Trustee in exchange for Outstanding
Securities.
ARTICLE X.
COVENANTS
SECTION 10.01. Payment of Principal, Premium and Interest. The
Company will duly and punctually pay the principal of (and premium, if
any) and interest on the Securities in accordance with the terms of the
Securities and this Indenture.
SECTION 10.02. Maintenance of Office or Agency. The Company
will maintain an office or agency where Securities may be presented or
surrendered for payment, where Securities may be surrendered for
registration of transfer or exchange, where Securities may be surrendered
for conversion or repurchase, and where notices and demands to or upon the
Company in respect of the Securities and this Indenture may be served.
The Company will give prompt written notice to the Trustee of 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, and the Company hereby appoints
the Trustee as its agent to receive all such presentations, surrenders,
notices and demands.
The Company may also from time to time designate one or more
other offices or agencies where the Securities may be presented or
surrendered for any or all such purposes and may from time to time rescind
such designations. The Company will give prompt written notice to the
Trustee of any such designation or rescission and of any change in the
location of any such other office or agency.
SECTION 10.03. Money for Securities Payments to Be Held in
Trust. If the Company shall at any time act as its own Paying Agent, it
will, on or before each due date of the principal of (and premium, if any)
or interest (if payable in cash) on any of the Securities, segregate and
hold in trust for the benefit of the Persons entitled thereto a sum
sufficient to pay the principal (and premium, if any) or interest on any
of the Securities, segregate and hold in trust for the benefit of the
Persons entitled thereto a sum sufficient to pay the principal (and
premium, if any) or interest so becoming due until such sums shall be paid
to such Persons or otherwise disposed of as herein provided and will
promptly notify the Trustee of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents, it
will, prior to each due date of the principal of (and premium, if any) or
interest (if payable in cash) on any Securities, deposit with a Paying
Agent a sum sufficient to pay the principal (and premium, if any) or
interest so becoming due, such sum to be held in trust for the benefit of
the Persons entitled to such principal, premium or interest, and (unless
such Paying Agent is the Trustee) the Company will promptly notify the
Trustee of its action or failure so to act.
The Company will cause each Paying Agent other than the Trustee
to execute and deliver to the Trustee an instrument in which such Paying
Agent shall agree with the Trustee, subject to the provisions of this
Section, that such Paying Agent will:
(1) hold all sums held by it for the payment of the
principal of (and premium, if any) or interest on Securities in trust
for the benefit of the Persons entitled thereto until such sums shall
be paid to such Persons or otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by the Company
(or any other obligor upon the Securities) in the making of any
payment of principal (and premium, if any) or interest; and
(3) at any time during the continuance of any such
default, upon the written request of the Trustee, forthwith pay to
the Trustee all sums so held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose,
pay, or by Company Order direct any Paying Agent to pay, to the Trustee
all sums held by the Trustee upon the same trusts as those upon which such
sums were held by the Company or such Paying Agent; and, upon such payment
by any Paying Agent to the Trustee, such Paying Agent shall be released
from all further liability with respect to such money.
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
(and premium, if any) or interest on any Security 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 Company Request, or
(if then held by the Company) shall be discharged from such trust; and the
Holder of such Security shall thereafter, as an unsecured general
creditor, look only to the Company for payment thereof, 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 published once, in a newspaper published in the English
language, customarily published on each Business Day and of general
circulation in New York, New York, 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 publication, any unclaimed balance
of such money then remaining will be repaid to the Company.
SECTION 10.04. Statement as to Compliance. The Company will
deliver to the Trustee, within 120 days after the end of each fiscal year,
an Officers' Certificate stating, as to each signer thereof, that
(1) a review of the activities of the Company and its
Subsidiaries during such year and of performance under this Indenture
has been made under his supervision, and
(2) to the best of his knowledge, based on such review,
the Company has fulfilled all its obligations under this Indenture
throughout such year, or, if there has been a default in the
fulfillment of any such obligation, specifying each such default
known to him and the nature and status thereof.
SECTION 10.05. Further Instruments and Acts. From time to time
the Company will, at its own expense and upon request of the Trustee,
execute and deliver or cause to be executed and delivered such further
instruments and do such further acts as may reasonably be necessary or
desirable to carry out the purposes of this Indenture or to secure the
rights and remedies hereunder of the Holders.
ARTICLE XI.
OPTIONAL REDEMPTION OF SECURITIES
SECTION 11.01. Right of Redemption. The Securities may be
redeemed at the election of the Company, as a whole or from time to time
in part, at any time and from time to time at the Redemption Price
specified in the form of Security hereinbefore set forth for optional
redemptions, together with accrued interest to the Redemption Date.
SECTION 11.02. Applicability of Article. Redemption of
Securities at the election of the Company as permitted by any provision of
this Indenture shall be made in accordance with such provision and this
Article.
SECTION 11.03. Election to Redeem; Notice to Trustee. The
election of the Company to redeem any Securities pursuant to Section 11.01
shall be evidenced by a Board Resolution. The Company shall, at least 45
but not more than 60 days prior to the Redemption Date fixed by the
Company (unless a shorter notice shall be satisfactory to the Trustee),
notify the Trustee of such Redemption Date and of the principal amount of
Securities to be redeemed.
SECTION 11.04. Selection by Trustee of Securities to Be
Redeemed. If less than all the Securities are to be redeemed, the
particular Securities to be redeemed shall be selected not more than 60
days prior to the Redemption Date by the Trustee, from the Outstanding
Securities not previously called for redemption, by such method as the
Trustee shall deem fair and appropriate and which may provide for the
selection for redemption of portions (equal to $1.00 or any integral
multiple thereof) of the principal amount of Securities of a denomination
larger than $1.00.
If any Security selected for partial redemption is converted in
part before termination of the conversion right with respect to the
portion of the Security so selected, the converted portion of such
Security shall be deemed (so far as may be) to be the portion selected for
redemption. Securities which have been converted during a selection of
Securities to be redeemed shall be treated by the Trustee as Outstanding
for the purpose of such selection.
The Trustee shall promptly notify the Company and each Security
Registrar in writing of the Securities selected for redemption and, in the
case of any Securities selected for partial redemption, the principal
amount thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Securities shall
relate, in the case of any Securities redeemed or to be redeemed only in
part, to the portion of the principal amount of such Security which has
been or is to be redeemed.
SECTION 11.05. Notice of Redemption. Notice of redemption
shall be given by first-class mail, postage prepaid, mailed not less than
45 nor more than 60 days prior to the Redemption Date, to each
Securityholder to be redeemed, at his address appearing in the Security
Register.
All notices of redemption shall identify the Securities to be
redeemed (including the respective CUSIP Numbers of such Securities) and
state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) if less than all the Outstanding Securities are to be
redeemed, the identification (and, in the case of partial redemption,
the principal amounts) of the particular Securities to be redeemed,
(4) that on the Redemption Date the Redemption Price will
become due and payable upon each such Security to be redeemed and
that interest thereon will cease to accrue on and after said date,
(5) the conversion rate, the date on which the right to
convert the principal of the Securities to be redeemed will terminate
and the place or places where such Securities may be surrendered for
conversion, and
(6) the place or places where such Securities are to be
surrendered for payment of the Redemption Price.
Notice of redemption of Securities to be redeemed at the
election of the Company shall be given by the Company or at the Company's
request, (which request shall be delivered to the Trustee together with
the notice of redemption to the Trustee pursuant to Section 11.03 and
shall set forth the information required by clauses (2), (5) and (6) of
this Section 11.05), by the Trustee in the name and at the expense of the
Company.
SECTION 11.06. Deposit of Redemption Price. Prior to any
Redemption Date, the Company shall deposit with the Trustee or with a
Paying Agent (or, if the Company is acting as its own Paying Agent,
segregate and hold in trust as provided in Section 10.03) an amount of
money sufficient to pay the Redemption Price of, and (except if the
Redemption Date shall be an Interest Payment Date) accrued interest on,
all the Securities which are to be redeemed on that date other than any
Securities called for redemption on that date which have been converted
prior to the date of such deposit.
If any Security called for redemption is converted, any money
deposited with the Trustee or with any Paying Agent or so segregated and
held in trust for the redemption of such Security shall (subject to any
right of the Securityholder or Holder of any Predecessor Security to
receive interest as provided in the last paragraph of Section 3.07) be
paid to the Company upon Company Request or, if then held by the Company,
shall be discharged from such trust.
SECTION 11.07. Securities Payable on Redemption Date. Notice
of redemption having been given as aforesaid, the Securities so to be
redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified, and from and after such date (unless
the Company shall default in the payment of the Redemption Price and any
accrued interest) such Securities shall cease to bear interest. Upon
surrender of any such Security for redemption in accordance with said
notice, such Security shall be paid by the Company at the Redemption
Price, together with accrued interest to the Redemption Date; provided,
however, that installments of interest whose Stated Maturity is on or
prior to the Redemption Date shall be payable to the Holders of the
Securities, or one or more Predecessor Securities, registered as such at
the close of business on the relevant Record Dates according to their
terms and the provisions of Section 3.07.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal (and premium, if any)
shall, until paid, bear interest from the Redemption Date at the rate
borne by the Security.
SECTION 11.08. Securities Redeemed in Part. Any Security which
is to be redeemed only in part shall be surrendered at an office or agency
of the Company designated for that purpose pursuant to Section 10.02
(with, if the Company or the Trustee so requires, due endorsement by, or a
written instrument of transfer in form satisfactory to the Company and the
Trustee duly executed by, the Holder thereof or his attorney duly
authorized in writing), and the Company shall execute, and the Trustee
shall authenticate and deliver to the Holder of such Security without
service charge, a new Security or Securities, of any authorized
denomination as requested by such Securityholder, in aggregate principal
amount equal to and in exchange for the unredeemed portion of the
principal of the Security so surrendered.
ARTICLE XII.
[Reserved]
ARTICLE XIII.
CONVERSION OF SECURITIES
SECTION 13.01. Right of Conversion. The Holder of any Security
or Securities shall have the right at any time prior to maturity, at his
option, to convert, subject to the terms and provisions of this Article
XIII, the principal of any such Security or Securities (or any portion of
the principal thereof which is $1.00 or an integral multiple of $1.00)
into fully paid and nonassessable (except as otherwise provided by law)
shares of Common Stock of the Company at the rate of one share of Common
Stock for each $4.70 principal amount of Securities or, in case an
adjustment therein has taken place pursuant to the provisions of Section
13.04, then at the rate as so adjusted (except that with respect to any
Security or Securities, or any such portion, which shall be called for
redemption, such right shall terminate, except as provided in the last
paragraph of Section 13.02, at the close of business on the fifth Business
Day prior to the Redemption Date for such Security or Securities or
portion, unless the Company shall default in payment due upon redemption
thereof). Such right shall be exercised by the surrender of the Security
or Securities, the principal of which is so to be converted, to the
Company at any time during usual business hours at any office or agency to
be maintained by it in accordance with the provisions of Section 10.02,
accompanied by written notice that the Holder elects to convert such
Security or Securities or any portion thereof and specifying the name or
names (with address) in which a certificate or certificates for Common
Stock are to be issued and (if so required by the Company or the Trustee)
by a written instrument or instruments of transfer in form satisfactory to
the Company and the Trustee duly executed by the Holder or his attorney
duly authorized in writing and transfer tax stamps or funds therefor, if
required pursuant to Section 13.10. For convenience, the conversion of
all or a portion, as the case may be, of the principal of any Security
(including without limitation any Security issued in lieu of interest in
accordance with Section 2.02 hereof) into the Common Stock of the Company
is hereinafter sometimes referred to as the conversion of such Security.
All Securities surrendered for conversion shall, if surrendered to the
Company or any conversion agent, be delivered to the Trustee for
cancellation and canceled by it or, if surrendered to the Trustee, shall
be canceled by it, and, subject to the next succeeding sentence, no
Securities shall be issued in lieu thereof. In the case of any Security
which is converted in part only, upon such conversion the Company shall
execute and the Trustee shall authenticate and deliver to the Holder
thereof a new Security or Securities of authorized denominations in an
aggregate principal amount equal to the unconverted portion of such
Security.
A Security shall continue to be convertible, in whole or in
part, even though the Company may have given notice of redemption with
respect to the Security or any part thereof, so long as the Holder's
election to convert shall have been delivered to the Company prior to the
close of business on the fifth Business Day prior to the Redemption Date
for such Security or portion thereof.
SECTION 13.02. Issuance of Common Stock; Time of Conversion.
As promptly as practicable after the surrender, as herein provided, of any
Security or Securities for conversion, the Company shall deliver or cause
to be delivered at any office or agency to be retained by it in accordance
with the provisions of Section 10.02 to or upon the written order of the
Holder of the Security or Securities so surrendered a certificate or
certificates representing the number of fully paid and nonassessable
(except as otherwise provided by law) shares of Common Stock of the
Company into which such Security or Securities (or portion thereof) may be
converted together with payment in lieu of any fraction of a share, as
provided in Section 13.05. Subject to the following provisions of this
paragraph and of Section 13.04, such conversion shall be deemed to have
been made immediately prior to the close of business on the date that such
Security or Securities shall have been surrendered in satisfactory form
for conversion (except that if such conversion is in connection with an
underwritten public offering of Common Stock, then such conversion shall
be deemed to have been effected upon such surrender), so that the rights
of the Holder as a Holder shall cease with respect to such Security or
Securities (or the portion thereof) being converted at such time, and the
Person or Persons entitled to receive the shares of Common Stock
deliverable upon conversion of such Security or Securities shall be
treated for all purposes as having become the record holder or holders of
such shares of Common Stock at such time, and such conversion shall be at
the conversion rate in effect at such time; provided, however, that no
such surrender on any date when the stock transfer books of the Company
shall be closed shall be effective to constitute the Person or Persons
entitled to receive the shares of Common Stock deliverable upon such
conversion as the record holder or holders of such shares of Common Stock
on such date, but such surrender shall be effective to constitute the
Person or Persons entitled to receive such shares of Common Stock as the
record holder or holders thereof for all purposes immediately prior to the
close of business on the next succeeding day on which such stock transfer
books are open, and such conversion shall be deemed to have been made at,
and shall be made at the conversion rate in effect at, such time on such
next succeeding day.
If the last day for the exercise of the conversion right shall
not be a Business Day, then such conversion right may be exercised on the
next succeeding Business Day.
SECTION 13.03. No Adjustments in Respect of Interest or
Dividends. Securities surrendered for conversion during the period from
the close of business on any Regular Record Date to the opening of
business on the next succeeding Interest Payment Date shall (except in the
case of Securities or portions thereof which have been called for
redemption on a Redemption Date during such period) be accompanied by
payment in New York Clearing House funds or other funds acceptable to the
Company of an amount equal to the interest payable on such Interest
Payment Date on the principal amount of Securities being surrendered for
conversion. Except as provided in the preceding sentence and subject to
the last paragraph of Section 3.07, no payment or adjustment shall be made
upon any conversion on account of any interest accrued on the Securities
surrendered for conversion or on account of any dividends on the shares of
Common Stock issued upon conversion.
Within fifteen (15) Business Days after receipt of any Security
and an election to convert all or a portion of the principal amount of
such Security pursuant to the terms of this Indenture, the Company will
pay to the Holder any unpaid interest, accrued to the date of conversion
of such Security, on the principal amount converted; provided that until
October 15, 1999, such interest may, at the option of the Company, be paid
by the issuance of an additional debenture as described in Section 2.02 of
this Indenture.
SECTION 13.04. Adjustment of Conversion Price. The conversion
rate shall be subject to adjustment as follows:
(a) In case the Company shall (i) pay a dividend on Common
Stock in Common Stock, (ii) subdivide its outstanding shares of
Common Stock, or (iii) combine its outstanding shares of Common Stock
into a smaller number of shares, the conversion rate in effect
immediately prior thereto shall be adjusted retroactively as provided
below so that the Holder of any Security there surrendered for
conversion shall be entitled to receive the number of shares of
Common Stock of the Company which he would have owned or have been
entitled to receive after the happening of any of the events
described above had such Security been converted immediately prior to
the happening of such event. An adjustment made pursuant to this
paragraph (a) shall become effective immediately after the record
date in the case of a dividend and shall become effective immediately
after the effective date in the case of a subdivision or combination.
(b) In case the Company shall issue rights or warrants to
all holders of its Common Stock entitling them to subscribe for or
purchase shares of Common Stock at a price per share less than the
current market price per share (determined as provided in paragraph
(e) of this Section) of the Common Stock on the date fixed for the
determination of stockholders entitled to receive such rights or
warrants, the conversion rate in effect at the opening of business on
the day following the day fixed for such determination shall be
increased by multiplying such conversion rate by a fraction of which
the numerator shall be the number of shares of Common Stock
outstanding at the close of business on the date fixed for such
determination plus the number of shares of Common Stock so offered
for subscription or purchase and the denominator shall be the number
of shares of Common Stock outstanding at the close of business on the
date fixed for such determination plus the number of shares of Common
Stock which the aggregate of the offering price of the total number
of shares of Common Stocks offered for subscription or purchase would
purchase at such current market price, such increase to become
effective immediately after the opening of business on the day
following the date fixed for such determination; provided, however,
in the event that all the shares of Common Stock offered for
subscription or purchase are not delivered upon the exercise of such
rights or warrants, upon the expiration of such rights or warrants
the conversion rate shall be readjusted to the conversion rate which
would have been in effect had the numerator and the denominator of
the foregoing fraction and the resulting adjustment been made based
upon the number of shares of Common Stock actually delivered upon the
exercise of such rights or warrants rather than upon the number of
shares of Common Stock offered for subscription or purchase. For the
purposes of this paragraph (b), the number of shares of Common Stock
at any time outstanding shall not include shares held in the treasury
of the Company.
(c) In case the Company shall, by dividend or otherwise,
distribute to all holders of its Common Stock shares of its capital
stock (other than Common Stock), evidences of its indebtedness or
assets (excluding cash dividends paid out of the retained earnings of
the Company) or rights or warrants to subscribe or purchase
(excluding those referred to in paragraph (b) above), (hereinafter
collectively referred to as "Distributions on Common Stock"), then in
each such case, the Company shall deliver to the Holder the
Distribution on Common Stock to which the Holder would be entitled if
it had converted the Security for Common Stock immediately prior to
the record date for the purpose of determining stockholders entitled
to receive such Distribution on Common Stock.
(d) The reclassification (including any reclassification
upon a merger in which the Company is the continuing corporation) of
Common Stock into securities including other than Common Stock (other
than any reclassification upon a consolidation or merger to which
Section 13.06 applies) shall be deemed to involve (i) a distribution
of such securities other than Common Stock to all holders of Common
Stock (and the effective date of such reclassification shall be
deemed to be "the date fixed for the determination of stockholders
entitled to receive such distribution" and "the date fixed for such
determination" within the meaning of paragraph (e) of this Section),
and (ii) a subdivision or combination, as the case may be, of the
number of shares of Common Stock outstanding immediately prior to
such reclassification into the number of shares of Common Stock
outstanding immediately thereafter.
(e) For the purpose of any computation under paragraphs
(b) and (c) of this Section, the current market price per share of
Common Stock on any date shall be deemed to be the average of the
daily closing prices for the thirty consecutive Business Days
selected by the Company commencing with the forty-fifth Business Day
before the day in question. The closing price for each day shall be
the last reported sales price regular way or, in case no such
reported sale takes place on such day, the average of the reported
closing bid and asked prices regular way, in either case on the
American Stock Exchange or if the Common Stock is listed or admitted
to trading on such Exchange, on the principal national securities
exchange on which the Common Stock is not listed or admitted in
trading or, if not listed or admitted in trading on any national
securities exchange, on the National Association of Securities
Dealers Automated Quotations National Market System or, if the Common
Stock is not listed or admitted to trading on any national securities
exchange or quoted on such National Market System, the average of the
closing bid and asked prices in the over-the-counter market as
furnished by any New York Stock Exchange or American Stock Exchange
member firm selected from time to time by the Company for that
purpose. If the current market price per share of Common Stock
cannot be determined in accordance with the above procedures under
this paragraph (e), such current market price shall be determined in
good faith by the Board of Directors of the Company.
(f) No adjustment in the conversion rate shall be required
unless such adjustment would require an increase or decrease of at
least 1% of such rate; provided, however, that the Company may make
any such adjustment at its election and provided, further, that any
adjustments which by reason of this paragraph (f) are not required to
be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations under this Article XIII
shall be made to the nearest cent or to the nearest one-hundredth of
a share, as the case may be. Anything in this Section 13.04
notwithstanding, the Company may make such reductions in the
conversion rate, in addition to those required by this Section, as it
considers to be advisable in order that any event treated for Federal
income tax purposes as a dividend of stock or stock rights shall not
be taxable to the recipients.
(g) Whenever the conversion rate is adjusted as herein
provided
(1) the Company shall compute the adjusted conversion rate
in accordance with paragraph (a) and shall prepare an Officers'
Certificate setting forth the adjusted conversion rate and showing in
reasonable detail the facts upon which such adjustment is based, and
such certificate shall forthwith be filed at each office or agency
maintained for the purpose of conversion of Securities; and
(2) notice stating that the conversion rate has been
adjusted and setting forth the adjusted conversion rate shall
forthwith be required, and as soon as practicable after it is
required, such notice shall be mailed or caused to be mailed by the
Company to all Holders at their last addresses as they shall appear
in the Security Register.
(h) For the purpose of this Section 13.04, the term
"Common Stock" shall include any stock of any class of the Company
which has no preference in respect of dividends or of amounts payable
in the event of any voluntary or involuntary liquidation, dissolution
or winding up of the Company and which is not subject to redemption
by the Company. However, shares issuable on conversion of shares of
this Series shall include only shares of the class designated as
Common Stock of the Company as of _____________, 1996, or shares of
any class or classes resulting from any reclassification or
reclassifications thereof and which have no preference in respect of
dividends or of amounts payable in the event of any voluntary or
involuntary liquidation, dissolution or winding up of the Company and
which are not subject to redemption by the Company; provided,
however, that if at any time there shall be more than one such
resulting class, the shares of each such class then so issuable shall
be substantially in the proportion which the total number of shares
of such class resulting from all such reclassifications bears to the
total number of shares of all such classes resulting from all such
reclassifications.
SECTION 13.05. No Fractional Shares. No fractional shares of
Common Stock shall be issued upon conversion of Securities. If more than
one Security shall be surrendered for conversion at one time by the same
Holder, the number of full shares which shall be issuable upon conversion
thereof shall be computed on the basis of the aggregate principal amount
of the Securities for specified portions thereof so surrendered. Instead
of any fractional share of Common Stock which would otherwise be issuable
upon conversion of any Security or Securities or specified portions
thereof, the Company shall pay a cash adjustment in respect of such
fraction in amount equal to the same fraction of the current market price
per share of Common Stock (as determined by the Board of Directors or in
any manner prescribed by the Board of Directors) at the close of business
on the day of conversion.
SECTION 13.06. Consolidation, Merger or Sale of Assets. In
case of any consolidation of the Company with, or merger of the Company
into, any other Person, (other than a merger which does not result in any
reclassification, conversion, exchange or cancellation of outstanding
shares of Common Stock of the Company) or any sale or transfer of all or
substantially all of the assets of the Company (whether such assets are
held by the Company directly or indirectly through its Subsidiaries), the
Person formed by such consolidation or resulting from such merger or which
acquires such assets, as the case may be, shall execute and deliver to the
Trustee a supplemental indenture providing that the Holder of each
Security then outstanding shall have the right thereafter, during the
period such Security shall be convertible, pursuant to Section 13.01, to
convert such Security only into the kind and amount of securities, cash
and other property receivable upon such consolidation, merger, sale or
transfer by a holder of the number of shares of Common Stock of the
Company into which such Security might have been converted immediately
prior to such consolidation, merger, sale or transfer assuming such holder
of Common Stock of the Company (i) is not a Person with which the Company
consolidated or into which the Company merged or to which such sale or
transfer was made, as the case may be ("constituent Person"), or an
Affiliate of a constituent Person and (ii) failed to exercise his rights
of election, if any, as to the kind or amount of securities, cash and
other property receivable upon such consolidation, merger, sale or
transfer (provided that if the kind or amount of securities, cash and
other property receivable upon such consolidation, merger, sale or
transfer is not the same for each share of Common Stock of the Company
held immediately prior to such consolidation, merger, sale or transfer by
other than a constituent Person or an Affiliate thereof and in respect of
which such rights of election shall not have been exercised ("non-electing
share") then for the purpose of this Section the kind and amount of
securities, cash and other property receivable upon such consolidation,
merger, sale or transfer by each non-electing share shall be deemed to be
the kind and amount so receivable per share by a plurality of the non-
electing shares). Such supplemental indenture shall provide for
adjustments which, for events subsequent to the effective date of such
supplemental indenture, shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Article. The above
provisions of this Section shall similarly apply to successive
consolidations, mergers, sales or transfers.
Notice of the execution of such a supplemental indenture shall
be given by the Company to each Holder by mailing or causing to be mailed
such notice to his last address appearing on the Security Register.
The Trustee shall not be under any responsibility to determine
the correctness of any provisions contained in any such supplemental
indenture relating either to the kind or amount of shares of stock or
securities or cash or property receivable by Holders of Securities upon
the conversion of their Securities after any such reclassification,
change, consolidation, merger, sale or conveyance or to any such
adjustment, but, subject to the provisions of Section 6.01, may accept as
conclusive evidence of the correctness of any such provisions, and shall
be protected in relying upon, an Opinion of Counsel with respect thereto,
which the Company shall cause to be furnished to the Trustee upon request.
SECTION 13.07. Prior Notice of Certain Events. In case:
(1) the Company shall declare a dividend (or any other
distribution) on its Common Stock (other than cash dividends paid out of
the earned surplus of the Company and dividends payable in Common Stock);
or
(2) the Company shall authorize the granting to the holders of
its Common Stock of rights or warrants to subscribe for or purchase any
shares of stock of any class or of any other rights or warrants; or
(3) of any reclassification of the Common Stock of the Company
(other than a subdivision or combination of its outstanding Common Stock,
or a change in par value, or from par value to no par value, or from no
par value to par value), or of any consolidation or merger to which the
Company is a party and for which approval of any shareholders of the
Company is required, or of the sale or transfer of all or substantially
all of the assets of the Company; or
(4) of the voluntary or involuntary dissolution, liquidation
or winding up of the Company;
then the Company shall cause to be filed with the Trustee and to be mailed
to each Holder of Securities at his last address appearing on the Security
Register, as promptly as possible but in any event at least 15 days prior
to the applicable date hereinafter specified, a notice stating (x) the
date on which a record is to be taken for the purpose of such dividend,
distribution or rights or warrants or, if a record is not to be taken, the
date as of which the holders of Common Stock of record to be entitled to
such dividend, distribution or rights are to be determined, or (y) the
date on which such reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation or winding up is expected to become
effective, and the date as of which it is expected that holders of Common
Stock of record shall be entitled to exchange their shares of Common Stock
for securities or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation or winding
up.
SECTION 13.08. Shares to be Reserved; Accounting Treatment of
Consideration. The Company covenants that it will at all times reserve
and keep available out of its authorized Common Stock, solely for the
purpose of issue upon conversion of Securities as herein provided, such
number of shares of Common Stock as shall then be issuable upon the
conversion of all outstanding Securities. The Company covenants that all
shares of Common Stock which shall be so issuable shall, when issued, be
duly and validly issued and fully paid and nonassessable.
The Company covenants that, upon conversion of Securities as
herein provided, there will be credited to the Common Stock capital
account from the consideration for which the shares of Common Stock
issuable upon such conversion are issued an amount per share of Common
Stock so issued as determined by the Board of Directors, which amount
shall not be less than the amount required by law and by the Company's
articles of incorporation, as amended and restated, as in effect on the
date of such conversion. For the purposes of this covenant the
liquidation preference of the Securities converted, less any cash paid in
respect of fractional share interests upon such conversion, shall be
deemed to be the amount of consideration for which the shares of Common
Stock issuable upon such conversion are issued.
SECTION 13.09. Registration and Listing of Shares. The Company
covenants that if any shares of Common Stock, required to be reserved for
purposes of conversion of Securities hereunder, require registration with
or approval of any governmental authority under any Federal or State law
before such shares may be issued upon conversion, the Company will in good
faith and as expeditiously as possible endeavor to cause such shares to be
duly registered or approved, as the case may be. The Company further
covenants that so long as the Common Stock of the Company is listed on the
American Stock Exchange or any other national securities exchange, the
Company will, if permitted by the rules of such exchange, list and keep
listed on such exchange, upon official notice of issuance, all shares of
Common Stock issuable upon conversion of Securities.
SECTION 13.10. Taxes and Charges. The issuance of certificates
for shares of Common Stock upon the conversion of Securities shall be made
without charge to the converting Holder of Securities for such
certificates or for any tax in respect of the issuance of such
certificates or the securities represented thereby, and such certificates
shall be issued in the respective names of, or in such names as may be
directed by, the Holders of the Securities converted; provided, however,
that the Company shall not be required to pay any tax which may be payable
in respect of any transfer involved in the issuance and delivery of any
such certificate in a name other than that of the Holder of the Security
converted, and the Company shall not be required to issue or deliver such
certificates unless or until the Person or Persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been
paid.
SECTION 13.11. Trustee and Conversion Agents Not Liable.
Neither the Trustee nor any conversion agent shall at any time be under
any duty or responsibility to any Holder of Securities with respect to the
establishment of the conversion rate, or to determine whether any facts
exist which may require any adjustment of the conversion rate, or with
respect to the nature or extent of any such adjustment when made, or with
respect to the method employed, or herein or in any supplemental indenture
provided to be employed, in making the same. Neither the Trustee nor any
conversion agent shall be accountable with respect to the validity or
value (or the kind or amount) of any shares of Common Stock or of any
securities or cash or other property which may at any time be issued or
delivered upon the conversion of any Security, or makes any representation
with respect thereto. Neither the Trustee nor any conversion agent shall
be responsible for any failure of the Company to make any cash payment or
to issue, transfer or deliver any shares of Common Stock or stock
certificates or other securities or property upon the surrender of any
Security for the purpose of conversion, or, subject to Section 6.01, with
any of the covenants of the Company contained in this Article XIII.
ARTICLE XIV.
SUBORDINATION OF SECURITIES
SECTION 14.01. Securities Subordinate to Senior Indebtedness.
The Company covenants and agrees, and each Holder of a Security by his
acceptance thereof likewise covenants and agrees, that, to the extent and
in the manner hereinafter set forth in this Article, the indebtedness
represented by the Securities and the payment of the principal of (and
premium, if any) and interest on each and all of the Securities are hereby
expressly made subordinate and subject in right of payment to the prior
payment in full of all Senior Indebtedness.
SECTION 14.02. Payment Over of Proceeds Upon Dissolution Etc.
Upon any distribution of assets of the Company in the event of (a) any
insolvency or bankruptcy case or proceeding, or any receivership,
liquidation, reorganization or other similar case or proceeding in
connection therewith, relative to the Company or to its creditors, as
such, or to its assets, or (b) any liquidation, dissolution or other
winding up of the Company, whether voluntary or involuntary and whether or
not involving insolvency or bankruptcy, or (c) any assignment for the
benefit of creditors or any other marshalling of assets and liabilities of
the Company, then and in such event the holders of Senior Indebtedness
shall be entitled to receive payment in full of all amounts due or to
become due on or in respect of all Senior Indebtedness, or provision shall
be made for such payment, in money or money's worth, before the Holders of
the Securities are entitled to receive any payment on account of principal
of (or premium, if any) or interest on the Securities, and to that end the
holders of Senior Indebtedness shall be entitled to receive, for
application to the payment thereof, any payment or distribution of any
kind or character, whether in cash, property or securities, including any
such payment or distribution which may be payable or deliverable by reason
of the payment of any other indebtedness of the Company being subordinated
to the payment of the Securities, which may be payable or deliverable in
respect of the Securities in any such case, proceeding, dissolution,
liquidation or other winding up or event.
In the event that, notwithstanding the foregoing provisions of
this Section, the Trustee or the Holder of any Security shall have
received any payment or distribution of assets of the Company of any kind
or character, whether in cash, property or securities, including any such
payment or distribution which may be payable or deliverable by reason of
the payment of any other indebtedness of the Company being subordinated to
the payment of the Securities, before all Senior Indebtedness is paid in
full or payment thereof provided for, and if such fact shall then have
been made known to the Trustee, or, as the case may be, such Holder, then
and in such event such payment or distribution shall be paid over or
delivered forthwith to the trustee in bankruptcy, receiver, liquidating
trustee, custodian, assignee, agent or other Person making payment or
distribution of assets of the Company for application to the payment of
all Senior Indebtedness remaining unpaid, to the extent necessary to pay
all Senior Indebtedness in full, after giving effect to any concurrent
payment or distribution to or for the holders of Senior Indebtedness.
For purposes of this Article only, the words "cash, property or
securities" shall not be deemed to include shares of stock of the Company
as reorganized or readjusted, or securities of the Company or any other
corporation provided for by a plan of reorganization or readjustment the
payment of which is subordinated at least to the extent provided in this
Article with respect to the Securities to the payment of all Senior
Indebtedness which may at the time be outstanding: provided, however,
that (i) Senior Indebtedness is assumed by the new corporation, if any,
resulting from any such reorganization or readjustment, and (ii) the
rights of the holders of the Senior Indebtedness are not, without the
consent of such holders, altered by such reorganization or readjustment.
The consolidation of the Company with, or the merger of the Company into,
another corporation or the liquidation or dissolution of the Company
following the conveyance or transfer of its properties and assets
substantially as an entirety to another Person upon the terms and
conditions set forth in Article VIII shall not be deemed a dissolution,
winding up, liquidation, reorganization, assignment for the benefit of
creditors or marshalling of assets and liabilities of the Company for the
purposes of this Section if the corporation formed by such consolidation
or into which the Company is merged or the Person which acquires by
conveyance or transfer such properties and assets substantially as a
entirety, as the case may be, shall, as a part of such consolidation,
merger, conveyance or transfer, comply with the conditions set forth in
Article VIII.
SECTION 14.03. Prior Payment to Senior Indebtedness Upon
Acceleration of Securities. In the event that any Securities are declared
due and payable before their Stated Maturity, then and in such event the
holders of Senior Indebtedness outstanding at the time such Securities so
become due and payable shall be entitled to receive payment in full of all
amounts due or to become due on or in respect of all such Senior
Indebtedness, or provision shall be made for such payment in money or
money's worth, before the Holders of the Securities are entitled to
receive any payment (including any payment which may be payable by reason
of the payment of any other indebtedness of the Company being subordinated
to the payment of the Securities) by the Company on account of the
principal of (or premium, if any) or interest on the Securities or on
account of the purchase or other acquisition of Securities.
In the event that, notwithstanding the foregoing, the Company
shall make any payment to the Trustee or the Holder of any Securities
prohibited by the foregoing provisions of this Section, and if such facts
shall then have been made known to the Trustee or, as the case may be,
such Holder, then and in such event such payment shall be paid over and
delivered forthwith to the Company for the benefit of the holders of
Senior Indebtedness.
The provisions of this Section shall not apply to any payment
with respect to which Section 14.02 would be applicable.
SECTION 14.04. No Payment When Senior Indebtedness in Default.
(a) In the event and during the continuation of any default in the
payment of principal (or premium, if any) or interest on any Newco
Indebtedness beyond any applicable grace period with respect thereto, or
in the event that any event of default with respect to any Newco
Indebtedness shall have occurred and be continuing permitting the holders
of such Newco Indebtedness (or a trustee on behalf of the holders thereof)
to declare such Newco Indebtedness due and payable prior to the date on
which it would otherwise have become due and payable, unless and until
such event of default shall have been cured or waived or shall have ceased
to exist and such acceleration shall have been rescinded or annulled, or
(b) in the event any judicial proceeding shall be pending with respect to
any such default in payment or event of default, then no payment
(including any payment which may be payable by reason of the payment of
any other indebtedness of the Company being subordinated to the payment of
the Securities) shall be made by the Company on account of principal of
(or premium, if any) or interest on the Securities or on account of the
purchase or other acquisition of Securities.
In the event that, notwithstanding the foregoing, the Company
shall make any payment to the Trustee or the Holder of any Security
prohibited by the foregoing provisions of this Section, and if such fact
shall then have been made known to the Trustee or, as the case may be,
such Holder, then and in such event such payment shall be paid over and
delivered forthwith to the Company for the benefit of the holders of Newco
Indebtedness.
The provisions of this Section shall not apply to any payment
with respect to which Section 14.02 would be applicable.
SECTION 14.05. Payment Permitted if No Default. Nothing
contained in this Article or elsewhere in this Indenture or in any of the
Securities shall prevent (x) the Company, at any time except during the
pendency of any case, proceeding, dissolution, liquidation or other
winding up, assignment for the benefit of creditors or other marshalling
of assets and liabilities of the Company referred to in Section 14.02 or
under the conditions described in Section 14.03 or 14.04, from making
payments at any time of principal of (and premium, if any) or interest on
the Securities, or (y) the application by the Trustee or the retention
thereof by the Holders of any money deposited with it hereunder to the
payment of or on account of the principal of (and premium, if any) or
interest on the Securities if, at the time of such application, the
Trustee did not have knowledge that such payment would have been
prohibited by the provisions of this Article.
SECTION 14.06. Subrogation to Rights of Holders of Senior
Indebtedness. Subject to the payment in full of all Senior Indebtedness,
the Holders of the Securities shall be subrogated to the extent of the
payments or distributions made to the holders of such Senior Indebtedness
pursuant to the provisions of this Article to the rights of the holders of
such Senior Indebtedness to receive payments or distributions of cash,
property or securities applicable to the Senior Indebtedness until the
principal of (and premium, if any) and interest on the Securities shall be
paid in full. For purposes of such subrogation, no payments or
distributions to the holders of the Senior Indebtedness of any cash,
property or securities to which the Holders of the Securities or the
Trustee would be entitled except for the provisions of this Article, and
no payments over pursuant to the provisions of this Article to the Company
or to the holders of Senior Indebtedness by Holders of the Securities or
the Trustee, shall, as between the Company, its creditors other than
holders of Senior Indebtedness and the Holders of the Securities, be
deemed to be a payment or distribution by the Company to or on account of
the Securities.
SECTION 14.07. Provisions Solely to Define Relative Rights.
The provisions of this Article are and are intended solely for the purpose
of defining the relative rights of the Holders of the Securities, on the
one hand, and the holders of Senior Indebtedness, on the other hand.
Nothing contained in this Article or elsewhere in this Indenture or in the
Securities is intended to or shall impair, as between the Company, its
creditors other than the holders of Senior Indebtedness and the Holders of
the Securities, the obligation of the Company, which is absolute and
unconditional, to pay to the Holders of the Securities the principal of
(and premium, if any) and interest on the Securities as and when the same
shall become due and payable in accordance with their terms and which,
subject to the rights under this Article of the holders of Senior
Indebtedness, is intended to rank equally with all other general
obligations of the Company, or is intended to or shall affect the relative
rights against the Company of the Holders of the Securities and creditors
of the Company other than the holders of Senior Indebtedness, nor shall
anything herein or therein prevent the Trustee, or the Holder of any
Security from exercising all remedies otherwise permitted by applicable
law upon default under this Indenture, subject to the rights, if any,
under this Article of the holders of Senior Indebtedness to receive cash,
property or securities otherwise payable or deliverable to the Trustee or
such Holder, and nothing herein shall prevent the conversion of any
Security (or part thereof) in accordance with the terms hereof.
SECTION 14.08. Trustee to Effectuate Subordination. Each
Holder of a Security by his acceptance thereof authorizes and directs the
Trustee on his behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided in this Article and
appoints the Trustee his attorney-in-fact for any and all such purposes.
SECTION 14.09. No Waiver of Subordination Provisions. No right
of any present or future holder of any Senior Indebtedness to enforce
subordination herein provided shall at any time in any way be prejudiced
or impaired by any act or failure to act on the part of the Company or by
any act or failure to act, in good faith, by any such holder, or by any
noncompliance by the Company with the terms, provisions and covenants of
this Indenture, regardless of any knowledge thereof any such holder may
have or be otherwise charged with.
Without in any way limiting the generality of the foregoing
paragraph, the holders of Senior Indebtedness may, at any time and from
time to time, without the consent of or notice to the Trustee or the
Holders of the Securities, without incurring responsibility to the Holders
of the Securities and without impairing or releasing the subordination
provided in this Article or the obligations hereunder of the Holders of
the Securities to the holders of Senior Indebtedness, do any one or more
of the following: (i) change the manner, place or terms of payment or
extend the time of payment of, or renew or alter, Senior Indebtedness, or
otherwise amend or supplement in any manner Senior Indebtedness or any
instrument evidencing the same or any agreement under which Senior
Indebtedness is outstanding; (ii) sell, exchange, release otherwise or
otherwise deal with any property pledged, mortgaged or securing Senior
Indebtedness; (iii) release any Person liable in any manner for the
collection of Senior Indebtedness; and (iv) exercise or refrain from
exercising any rights against the Company and any other Person.
SECTION 14.10. Notice to Trustee. The Company shall give
prompt written notice to the Trustee of any fact known to the Company
which would prohibit the making of any payment to or by the Trustee in
respect of the Securities. Failure to give such notice shall not affect
the subordination of the Securities to Senior Indebtedness.
Notwithstanding the provisions of this Article or any other provision of
this Indenture, the Trustee shall not be charged with knowledge of the
existence of any facts which would prohibit the making of any payment to
or by the Trustee in respect of the Securities, unless and until the
Trustee shall have received written notice thereof from the Company or a
holder of Senior Indebtedness or from any trustee therefor; and, prior to
the receipt of any such written notice, the Trustee, subject to the
provisions of Section 6.01, shall be entitled in all respects to assume
that no such facts exist; provided, however, that if the Trustee shall not
have received at least three Business Days prior to the date upon which by
the terms hereof any such money may become payable for any purpose
(including, without limitation, the payment of the principal of (and
premium, if any) or interest on any Security), the notice with respect to
such money provided for in this Section, then, anything herein contained
to the contrary notwithstanding, the Trustee shall have full power and
authority to receive such money and to apply the same to the purpose for
which such money was received and shall not be affected by any notice to
the contrary which may be received by it within three Business Days prior
to such date.
Subject to the provisions of Section 6.01, 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 trustee
on behalf of such holder) to establish that such notice has been given by
a bolder of Senior Indebtedness (or a trustee 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 as 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.
SECTION 14.11. Reliance on Judicial Order or Certificate of
Liquidating Agent. Upon any payment or distribution of assets of the
Company referred to in this Article, the Trustee, subject to the
provisions of Section 6.01, and the Holders of the Securities shall be
entitled to rely upon any order or decree entered by any court of
competent jurisdiction in which such insolvency, bankruptcy, receivership,
liquidation, reorganization, dissolution, winding up or similar case or
proceeding is pending, or a certificate of the trustee in bankruptcy,
liquidating trustee, custodian, receiver, assignee for the benefit of
creditors, agent or other Person making such payment or distribution,
delivered to the Trustee or to the Holders of Securities, for the purpose
of ascertaining the Persons entitled to participate in such payment or
distribution, the holders of Senior Indebtedness and other indebtedness of
the Company, the amount thereof or payable thereon, amounts paid or
distributed thereon and all other distributions made pursuant to this
Article.
SECTION 14.12. Trustee Not Fiduciary For Holders of Senior
Indebtedness. The Trustee shall not be deemed to have any fiduciary duty
to the holders of Senior Indebtedness and shall not be liable to any such
holders if it shall in good faith mistakenly pay over or distribute to
Holders of Securities or to the Company or to any other Person cash,
property or securities in which any holders of Senior Indebtedness shall
be entitled by virtue of this Article or otherwise.
SECTION 14.13. Rights of Trustee as Holder of Senior
Indebtedness; Preservation of Trustee's Rights. The Trustee in its
individual capacity shall be entitled to all the rights set forth in this
Article with respect to any Senior Indebtedness which may at any time be
held by it to the same degree as any other holder of Senior Indebtedness
and nothing in this Indenture shall deprive the Trustee of any of its
rights as such holder.
Nothing in this Article shall apply to claims on, or payments
to, the Trustee or any predecessor Trustee under or pursuant to Section
6.07.
SECTION 14.14. Article Applicable to Paying Agent. In case at
any time any Paying Agent other than the Trustee shall have been appointed
by the Company and be then acting hereunder, the term "Trustee" as defined
in this Article shall in such case, unless the context otherwise implies,
be construed as extending to and including such Paying Agent in its
meaning as fully for all intents and purposes as if such Paying Agent were
named in this Article in addition to or in place of the Trustee, provided,
however, that Section 14.13 shall not apply to the Company if it acts as
Paying Agent.
ARTICLE XV.
REPURCHASE OF SECURITIES BY THE COMPANY
UPON THE OCCURRENCE OF A CONTINGENT EVENT
SECTION 15.01. Obligation to Repurchase. Upon the occurrence
of any Contingent Event, the Holder shall have the right, at such Holder's
option, to require Company to redeem, all or part of such Holder's
Securities on the date (the "Repurchase Date") that is 90 days after the
mailing of a notice by or on behalf of the Company to the Holder that a
Contingent Event has occurred, at a repurchase price (the "Repurchase
Price") equal to the principal amount of Securities so purchased plus
accrued and unpaid interest on the principal amount of Securities so
purchased to the Repurchase Date. This right to require repurchase is
subject to the restriction that the Company may not buy any Security at
any time when the subordination provisions of this Indenture would not
permit the Company to make a payment of principal, premium or interest on
the Securities.
SECTION 15.02. Notice; Method of Exercising Repurchase Right.
(a) On or before the fifteenth calendar day after the
occurrence of a Contingent Event, the Company or, at the written request
of the Company to be communicated to the Trustee at the same time the
notice referred to in the second to last sentence of this paragraph is
given, the Trustee shall, at the Company's expense, give notice of the
occurrence of a Contingent Event and of the repurchase right set forth
herein arising as a result thereof by first-class mail, postage prepaid,
to each Holder of Securities at such Holder's address appearing in the
Security Register. The Company shall notify the Trustee of the occurrence
of a Contingent Event as promptly as practical (but in no event more than
five days) after such occurrence. No failure of the Company to give the
foregoing notice shall limit the Company's obligation repurchase
Securities.
(b) Such repurchase option shall be exercised by written
notice from the Holder to the Company under subsection (c) hereof given at
any time from the date of receipt by the Holder of written notice through
the thirtieth (30th) day after the Holder receives written notice, from
the Company or Trustee, as the case may be, of such Contingent Event.
(c) In order to exercise its rights to require a repurchase
under this Article XV, the Holder shall send to the Company a written
notice within the time provided in Section 15.02(b) demanding repurchase
under this Section 15.02.
SECTION 15.03. Certain Definitions. As used in this Article:
(1) "Contingent Event" means any one or more of the
following events which shall occur subsequent to the date of the
Indenture:
(i) the Company shall convey, transfer or lease all
or substantially all of its assets (whether held directly or
indirectly through Subsidiaries) to any Person (other than to a
Subsidiary of the Company);
(ii) any Person (other than the Company), including a
"group" (within the meaning of Section 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934, as amended) that includes such
Person, shall acquire, directly or indirectly, beneficial ownership,
in the aggregate, of (x) 50 percent or more of the Common Stock, or
(y) securities representing 50 percent or more of the combined voting
power of the Company's voting securities, in either case, outstanding
on the date immediately prior to the date of the last such
acquisition by such Person; or
(iii) on any day (a "Calculation Date") (x) (A) the
Company shall distribute cash, securities or other properties,
including cash dividends (other than Common Stock, or rights or
warrants to acquire Common Stock or preferred stock substantially
equivalent to Common Stock) to holders of Common Stock, whether by
means of dividend, reclassification, recapitalization or otherwise,
or (B) the Company shall acquire, directly or indirectly, beneficial
ownership of Common Stock; and (y) the sum of the Applicable
Percentages (as defined below) of all such distributions and
acquisitions which have occurred on the Calculation Date and during
the 365-day period immediately preceding the Calculation Date shall
exceed 30 percent.
(2) "Applicable Percentage" means (x) In the case of each
distribution referred to in clause (iii) above, the percentage
determined as of the Calculation Date of each such distribution by
dividing the aggregate fair market value (as determined in good faith
by the Board of Directors, whose determination shall be conclusive)
of such distribution, by the fair market value (based on the then
current market price) of all of the shares of Common Stock
outstanding on the day immediately prior to such Calculation Date;
and (y) in the case of each acquisition referred to in clause (iii)
above, the percentage determined as of the Calculation Date of each
such acquisition by dividing all amounts expended by the Company
(such amounts, if other than in cash, as determined in good faith by
the Board of Directors, whose determination shall be conclusive) in
connection with the acquisition of any shares of Common Stock, by the
fair market value (based on the then current market price) of all of
the shares of Common Stock outstanding on the day immediately prior
to such Calculation Date.
* * * * * *
This instrument may be executed in any number of counterparts,
each of which so executed shall be deemed as an original, but all such
counterparts shall together constitute but one and the same instrument
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed, and their respective corporate seals to be
hereunto affixed and attested, all as of the day and year first above
written.
SWING-N-SLIDE CORP.
By_________________________
Chairman
Attest:
___________________________
Vice President-Finance
_________________________________, as
Trustee
By_________________________
Attest:
___________________________
<PAGE>
STATE OF WISCONSIN )
) ss
COUNTY OF )
On the _____ day of________, 1996, before me personally
came ________________, to me known, who, being by me duly sworn, did
depose and say that he is ______________________________ of Swing-N-
Slide Corp., one of the corporations described in and which executed the
foregoing instrument; that he knows the seal of said corporation; that the
seal affixed to said instrument is such corporate seal; that it was so
affixed by authority of the Board of Directors of said corporation, and
that he signed his name thereto by like authority.
____________________________________
[Notary Seal] Notary Public
_______________ County, Wisconsin
My Commission expires ______________
STATE OF WISCONSIN )
)ss
COUNTY OF MILWAUKEE )
On this ______ day of ___________, 1996, before me personally
came ____________________, to me known, who, being by me duly sworn, did
depose and say that he is _____________________________ of
_____________________________________, one of the corporations or
associations described in and which executed the above instrument; that he
knows the seal of said corporation or association; that one of the seals
affixed to said instrument is such seal; that it was so affixed by
authority of the By-laws of said corporation or association; and that he
signed his name thereto by like authority.
____________________________________
[Notary Seal] Notary Public
Milwaukee, Wisconsin
My Commission expires ______________
<PAGE>
STATE OF WISCONSIN )
) ss
COUNTY OF )
On the ________ day of ________, 1996, before me personally
came _____________________, to me known, who, being by me duly sworn, did
depose and say that he is _________________________ of Swing-N-Slide
Corp., one of the corporations described in and which executed the
foregoing instrument; that he knows the seal of said corporation; that the
seal affixed to said instrument is such corporate seal; that it was so
affixed by authority of the Board of Directors of said corporation, and
that he signed his name thereto by like authority.
____________________________________
[Notary Seal] Notary Public
______________ County, Wisconsin
My Commission expires ______________
STATE OF WISCONSIN )
) ss
COUNTY OF MILWAUKEE )
On this ______ day of _________, 1996, before me personally
came _________________, to me known, who, being by me duly sworn, did
depose and say that he is _______________________________ of
________________________________, one of the corporations or associations
described in and which executed the above instrument; that he knows the
seal of said corporation or association; that one of the seals affixed to
said instrument is such seal; that it was so affixed by authority of the
By-laws of said corporation or association; and that he signed his name
thereto by like authority.
____________________________________
[Notary Seal] Notary Public
Milwaukee County, Wisconsin
My Commission expires ______________
<PAGE>
STATE OF WISCONSIN )
)ss
COUNTY OF )
On the __________ day of ____________, 1996, before me
personally came ________________, to me known, who, being by me duly
sworn, did depose and say that he is ___________ of Swing-N-Slide Corp.,
one of the corporations described in and which executed the foregoing
instrument; that he knows the seal of said corporation; that the seal
affixed to said instrument is such corporate seal; that it was so affixed
by authority of the Board of Directors of said corporation, and that he
signed his name thereto by like authority.
___________________________________
[Notary Seal] Notary Public
______________ County, Wisconsin
My Commission expires______________
STATE OF WISCONSIN )
)ss
COUNTY OF MILWAUKEE )
On this _________ day of _______________, 1996, before me
personally came ___________________ known, who, being by me duly sworn,
did depose and say that he is ______________________ of
___________________________, one of the corporations or associations
described in and which executed the above instrument; that he knows the
seal of said corporation or association; that one of the seals affixed to
said instrument is such seal; that it was so affixed by authority of the
By-laws of said corporation or association; and that he signed his name
thereto by like authority.
___________________________________
[Notary Seal] Notary Public
Milwaukee County, Wisconsin
My Commission expires______________
SWING-N-SLIDE CORP.
10% Convertible Subordinated Debenture due 2004
No.______________ $_________________
Swing-N-Slide Corp., a corporation duly organized and existing
under the laws of Delaware (herein called the "Company," which term
includes any successor corporation under the Indenture hereinafter
referred to), for value received, hereby promises to pay to ____________,
or registered assigns, the principal sum of ______ Dollars on October 15,
2004, and to pay interest thereon from _____________,/1 or from the most
recent Interest Payment Date to which interest has been paid or duly
provided for, semiannually on April 15 and October 15, in each year,
commencing ____________,/2 at the rate of 10% per annum, until the
principal hereof is paid or made available for payment. The interest so
payable, and punctually paid or duly provided for, on any Interest Payment
Date will, as provided in such Indenture, be paid to the Person in whose
name this Debenture (or one or more Predecessor Debentures) is registered
at the close of business on the Regular Record Date for such interest,
which shall be the April 1st and October 1st (whether or not a Business
Day), as the case may be, next preceding such Interest Payment Date. Any
such interest not so punctually paid or duly provided for will forthwith
cease to be payable to the Holder on such Regular Record Date and may
either be paid to the Person in whose name this Debenture (or one or more
Predecessor Debentures) is registered at the close of business on a
Special Record Date for the payment of such Defaulted Interest to be fixed
by the Trustee, notice whereof shall be given to Holders of Debentures not
less than 10 days prior to such Special Record Date, or be paid at any
time in any other lawful manner not inconsistent with the requirement of
any securities exchange on which the Debentures may be listed, and upon
such notice as may be required by such exchange, all as more fully
provided in said Indenture. Payment of the principal of (and premium, if
any) and interest on this Debenture will be made at the office or agency
of the Company maintained for that purpose 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; provided, however, that (i) at the
option of the Company payment of interest may be made by check mailed to
the address of the Person entitled thereto as such address shall appear in
the Security Register and (ii) until October 15, 1999 interest on this
Debenture may, at the option of the Company, be paid by the issuance of an
additional debenture, in the form of this Debenture, in the principal
amount of the interest so payable, dated the Interest Payment Date for
such interest payment, with interest payable as provided herein with a
stated maturity of principal and interest as provided in this Debenture
and otherwise identical to this Debenture.
---------------
/1 Insert the date of issuance.
/2 Insert the first Interest Payment Date after the date of issuance.
Reference is hereby made to the further provisions of this
Debenture set forth on the reverse hereof, which further provisions shall
for all purposes have the same effect as if set forth at this place. The
Indenture includes limitations on the right of the Holder to institute a
proceeding, judicial or otherwise, with respect to the Indenture, for the
appointment of a receiver or trustee, or for any other remedy under the
Indenture.
Unless the certificate of authentication hereon has been
executed by the Trustee referred to on the reverse hereof by manual
signature, this Debenture shall not be entitled to any benefit under the
Indenture or be valid or obligatory for any purpose./3
---------------
/3 Insert disclosure language required, if any, under sections 1271 to
1275 of the Internal Revenue Code (or successor provisions of the
Internal Revenue Code).
IN WITNESS WHEREOF, the Company has caused this instrument to be
duly executed under its corporate seal.
Dated:
[SEAL] SWING-N-SLIDE CORP.
By:
Attest:
<PAGE>
This Debenture is one of a duly authorized issue of Debentures
of the Company designated as its 10% Convertible Subordinated Debentures
due 2004 (herein called the "Debentures"), limited in aggregate principal
amount to $8,333,333 (plus any additional Debentures paid in lieu of cash
interest as permitted herein), issued and to be issued under an Indenture,
dated as of __________, 1996 (herein called the "Indenture"), between
the Company and __________________________________ as Trustee (herein
called the "Trustee," which term includes any successor trustee under the
Indenture), to which Indenture and all indentures supplemental thereto
reference is hereby made for a statement of the respective rights,
limitations of rights, duties and immunities thereunder of the Company,
the Trustee, the holders of Senior Indebtedness and the Holders of the
Debentures and of the terms upon which the Debentures are, and are to be,
authenticated and delivered.
Subject to the provisions of the Indenture, the Holder hereof
has the right, at his option, at any time prior to maturity or at least
ten Business Days prior to a Redemption Date, to convert the principal
amount of this Debenture (or any portion of the principal amount hereof
which is $1.00 or an integral multiple of $1.00 into fully paid and
nonassessable (except as otherwise provided by law) shares of Common Stock
of the Company at the conversion rate of 1.0 shares of Common Stock for
each $4.70 principal amount of Debentures, subject to such adjustment, if
any, of the conversion rate and the securities or other property issuable
upon conversion as may be required by the provisions of the Indenture,
except that, in case this Debenture (or any portion hereof) shall be
called for redemption before maturity, such right shall terminate at the
close of business on the fifth Business Day prior to the Redemption Date
for this Debenture (or such portion hereof), unless in any such case the
Company shall default in payment due upon such redemption, but only upon
surrender of this Debenture for the property of such conversion to the
Company at the designated office or agency of the Company or any other
office or agency designated by the Company for such purpose pursuant to
the provisions of the Indenture, accompanied by written notice that the
Holder elects to convert this Debenture or any portion hereof and
specifying the name or names (with address or addresses) in which a
certificate or certificates for shares of Common Stock are to be issued
and (if so required by the Company or the Trustee) by a written instrument
or instruments of transfer in form satisfactory to the Company and the
Trustee duly executed by the registered Holder or his duly authorized
legal representative and transfer tax stamps or funds therefor, if
required, pursuant to the provisions of the Indenture and in case such
surrender shall be made during the period from the close of business on
any Regular Record Date to the opening of business on the next succeeding
Interest Payment Date (unless this Debenture or the portion thereof being
converted has been called for redemption on a Redemption Date during such
period), also accompanied by payment in New York Clearing House funds or
other funds acceptable to the Company of an amount equal to the interest
payable on such Interest Payment Date on the principal amount of this
Debenture then being converted. Subject to the aforesaid requirement with
respect to payment in the event of conversion after the close of business
on a Regular Record Date, no adjustment is to be made on conversion for
interest accrued hereon or for dividends on shares of Common Stock issued
on conversion. No fractional shares are issuable upon any conversion, but
in lieu thereof the Company shall pay therefor in cash as provided in the
Indenture. Within fifteen (15) Business Days after receipt of any
Debenture and an election to convert all or a portion of the principal
amount of such Debenture pursuant to the terms of the Indenture, the
Company will pay to the Holder any unpaid interest, accrued to the date of
conversion of such Debenture, on the principal amount converted; provided
that until October 15, 1999, such interest may, at the option of the
Company, be paid by the issuance of an additional debenture as described
in subclause (ii) on the face of this Debenture.
The Debentures are subject to redemption upon not less than 45
or more than 60 days' notice by mail, at any time, as a whole or in part,
at the election of the Company, at a Redemption Price equal to 100% of the
principal amount, together with accrued interest to the Redemption Date,
but interest installments whose Stated Maturity is on or prior to such
Redemption Date will be payable to the Holders of such Debentures, or one
or more Predecessor Debentures of record at the close of business on the
relevant Record Dates referred to on the face hereof, all as provided in
the Indenture.
In the event of redemption or conversion of this Debenture in
part only, a new Debenture or Debentures for the unredeemed or unconverted
portion hereof will be issued in the name of the Holder hereof upon the
cancellation hereof.
The indebtedness evidenced by the Debentures is, to the extent
and the manner provided in the Indenture, expressly subordinate and
subject in right of payment to the prior payment in full of any Senior
Indebtedness of the Company or provision for such payment, whether
outstanding at the date of the Indenture or thereafter incurred, and each
Holder of this Debenture, by his acceptance hereof, agrees to and shall be
bound by such provisions of the Indenture and authorizes and directs the
Trustee in his behalf to take such action as may be necessary or
appropriate to effectuate such subordination and appoints the Trustee his
attorney-in-fact for any and all such purposes.
If an Event of Default shall occur and be continuing, the
principal of all the Debentures may be declared due and payable in the
manner and with the effect provided in the Indenture.
The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Company and the Trustee (including the waiver of
compliance by the Company with the provisions of the Indenture and past
defaults under the Indenture and their consequences) with the consent of
the Holders of a majority in aggregate principal amount of the Debentures
at the time Outstanding. Any such consent or waiver by the Holder of this
Debenture shall be conclusive and binding upon such Holder and upon all
future Holders of this Debenture and of any Debenture issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof,
whether or not notation of such consent or waiver is made upon this
Debenture.
No reference herein to the Indenture and no provision of this
Debenture or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of (and
premium, if any) and interest on this Debenture at the times, place and
rate, and in the coin or currency or with another debenture, herein
prescribed or to convert this Debenture as provided in the Indenture.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Debenture is registrable in the
Security Register, upon surrender of this Debenture for registration of
transfer at the office or agency of the Company, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to
the Company and the Security Registrar duly executed by, the Holder hereof
or his attorney duly authorized in writing, and thereupon one or more new
Debentures, of authorized denominations and for the same aggregate
principal amount, will be issued to the designated transferee or
transferees.
The Debentures are issuable only in registered form without
coupons in denominations of $1.00 and any integral multiple thereof, as
provided in the Indenture and subject to certain limitations and
exceptions therein set forth. Debentures are exchangeable for a like
aggregate principal amount of Debentures of a different authorized
denomination, as requested by the Holder surrendering the same.
No service charge shall be made for any such registration of
transfer or exchange, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in
connection therewith.
The Company, the Trustee and any agent of the Company or the
Trustee may treat the Person in whose name this Debenture is registered as
the owner hereof for all purposes, whether or not this Debenture be
overdue, and neither the Company, the Trustee nor any such agent shall be
affected by notice to the contrary.
All terms used in this Debenture which are defined in the
Indenture shall have the meanings assigned to them in the Indenture.
This is one of the Debentures referred to in the within-
mentioned Indenture.
________________________________, as Trustee
By:____________________________
Authorized Signature
SWING-N-SLIDE CORP.
10% Convertible Subordinated Debenture due 2004
$4,300,000 February 15, 1996
Swing-N-Slide Corp., a corporation duly organized and existing
under the laws of Delaware, and its permitted successors and assigns
(herein called the "Company"), for value received, hereby promises to pay
to the order of GreenGrass Holdings, and its successors and assigns (the
"Holder"), the principal sum of FOUR MILLION THREE HUNDRED THOUSAND
DOLLARS on February 15, 2004, and to pay interest thereon commencing April
15, 1996 and on April 15 and September 15, in each year thereafter, at the
rate of 10% per annum, until the principal hereof is paid in full.
Payment of the principal of (and premium, if any) and interest on this
Debenture will be made by check payable in money of the United States of
America that at the time of payment is legal tender for payment of public
and private debts, mailed to the Holder at its principal office in
Chicago, Illinois or such other address as may be designated by the
Holder; provided, however, that until February 15, 1999, at the option of
the Company, interest on this Debenture may be paid by the issuance of an
additional debenture, in the form of this Debenture, in the principal
amount of the interest so payable, dated the interest payment date for
such interest payment, with interest payable as provided herein with a
stated maturity of principal and interest as provided in this Debenture
and otherwise identical to this Debenture. Interest shall be calculated
based on a year composed of 365 days.
Section A. Securities Offering. If debentures are issued to
shareholders of the Company as contemplated by Section 4.8(c) of the
Transaction Agreement, dated January 4, 1996, between the Holder and the
Company, then contemporaneously with the closing of such offer this
Debenture may be exchanged, at the option of the Holder, for debentures
issued under the indenture entered into by the Company in connection with
such offer, at par plus any accrued and unpaid interest, except that any
such debentures issued to the Holder will continue to be convertible at
the Conversion Rate (as defined below) specified below.
Section B. Conversion Rights.
1. General. The Holder shall have the right at any time prior
to maturity, at its option, to convert the principal of this
Debenture (or any portion of the principal thereof which is $1.00 or
an integral multiple of $1.00) into fully paid and nonassessable
(except as otherwise provided by law) shares of Common Stock of the
Company at the rate of one share of Common Stock for each $4.80
principal amount of Debentures or, in case an adjustment to the
number of shares of Common Stock issuable for each $4.80 principal
amount of Debentures (the "Conversion Rate" or "rate") has taken
place pursuant to the provisions hereof, then at the rate as so
adjusted. Such right shall be exercised by the surrender of the
Debenture, the principal of which is so to be converted, to the
Company, accompanied by written notice that the Holder elects to
convert the Debenture or any portion thereof and specifying the name
or names (with address) in which a certificate or certificates for
Common Stock are to be issued. For convenience, the conversion of
all or a portion, as the case may be, of the principal of this
Debenture (and any other Debentures (including without limitation any
Debentures issued in lieu of interest in accordance with the first
paragraph of this Debenture)) into the Common Stock of the Company is
hereinafter sometimes referred to as the conversion of this
Debenture. If this Debenture is converted in part only, upon such
conversion the Company shall execute and deliver to the Holder a new
Debenture or Debentures of authorized denominations in an aggregate
principal amount equal to the unconverted portion of such Debenture.
This Debenture shall continue to be convertible, in whole or in
part, (i) even though the Company or the Holder may have given notice
of prepayment or redemption with respect to this Debenture or any
part thereof pursuant to Sections C or E hereof, so long as this
Debenture and the Holder's election to convert shall have been
delivered to the Company pursuant to this Section B prior to the date
fixed for such prepayment or redemption and (ii) whether or not a
mandatory, optional or mandatory optional prepayment or redemption
prior to the date fixed for such prepayment or redemption, is due on
this Debenture on any date following such time.
2. Issuance of Common Stock; Time of Conversion. As promptly
as practicable after the surrender, as herein provided, of this
Debenture for conversion, the Company shall deliver to the Holder a
certificate or certificates representing the number of fully paid and
nonassessable (except as otherwise provided by law) shares of Common
Stock of the Company into which this Debenture (or portion thereof)
may be converted together with payment in lieu of any fraction of a
share. Subject to the following provisions of this Debenture, such
conversion shall be deemed to have been made immediately prior to the
close of business on the date that this Debenture shall have been
surrendered for conversion (except that if such conversion is in
connection with an underwritten public offering of Common Stock, then
such conversion shall be deemed to have been effected upon such
surrender), so that the rights of the Holder as a Holder shall cease
with respect to this Debenture (or the portion thereof) being
converted at such time, and the Person or Persons entitled to receive
the shares of Common Stock deliverable upon conversion of this
Debenture shall be treated for all purposes as having become the
record holder or holders of such shares of Common Stock at such time,
and such conversion shall be at the conversion rate in effect at such
time; provided, however, that no such surrender on any date when the
stock transfer books of the Company shall be closed shall be
effective to constitute the Person or Persons entitled to receive the
shares of Common Stock deliverable upon such conversion as the record
holder or holders of such shares of Common Stock on such date, but
such surrender shall be effective to constitute the Person or Persons
entitled to receive such shares of Common Stock as the record holder
or holders thereof for all purposes immediately prior to the close of
business on the next succeeding day on which such stock transfer
books are open, and such conversion shall be deemed to have been made
at, and shall be made at the conversion rate in effect at, such time
on such next succeeding day.
If the last day for the exercise of the conversion right shall
not be a business day, then such conversion right may be exercised on
the next succeeding business day.
3. Payment of Accrued Interest. Within ten (10) days after
receipt of any Debenture and an election to convert all or a portion
of the principal amount of such Debenture pursuant to this Section B,
the Company will pay to the Holder any unpaid interest, accrued to
the date of conversion of such Debenture, on the principal amount so
converted.
4. Adjustment of Conversion Price. The conversion rate shall
be subject to adjustment as follows:
a. In case the Company shall (i) pay a dividend on Common
Stock in Common Stock, (ii) subdivide its outstanding shares of
Common Stock, or (iii) combine its outstanding shares of Common
Stock into a smaller number of shares, the conversion rate in
effect immediately prior thereto shall be adjusted retroactively
as provided below so that the Holder shall be entitled to
receive the number of shares of Common Stock of the Company
which it would have owned or have been entitled to receive after
the happening of any of the events described above had this
Debenture been converted immediately prior to the happening of
such event. An adjustment made pursuant to this paragraph (a)
shall become effective immediately after the record date in the
case of a dividend and shall become effective immediately after
the effective date in the case of a subdivision or combination.
b. In case the Company shall issue rights or warrants to
all holders of its Common Stock entitling them to subscribe for
or purchase shares of Common Stock at a price per share less
than the current market price per share (determined as provided
in paragraph (e) of this Section) of the Common Stock on the
date fixed for the determination of stockholders entitled to
receive such rights or warrants, the conversion rate in effect
at the opening of business on the day following the day fixed
for such determination shall be increased by multiplying such
conversion rate by a fraction of which the numerator shall be
the number of shares of Common Stock outstanding at the close of
business on the date fixed for such determination plus the
number of shares of Common Stock so offered for subscription or
purchase and the denominator shall be the number of shares of
Common Stock outstanding at the close of business on the date
fixed for such determination plus the number of shares of Common
Stock which the aggregate of the offering price of the total
number of shares of Common Stocks offered for subscription or
purchase would purchase at such current market price, such
increase to become effective immediately after the opening of
business on the day following the date fixed for such
determination; provided, however, in the event that all the
shares of Common Stock offered for subscription or purchase are
not delivered upon the exercise of such rights or warrants, upon
the expiration of such rights or warrants the conversion rate
shall be readjusted to the conversion rate which would have been
in effect had the numerator and the denominator of the foregoing
fraction and the resulting adjustment been made based upon the
number of shares of Common Stock actually delivered upon the
exercise of such rights or warrants rather than upon the number
of shares of Common Stock offered for subscription or purchase.
For the purposes of this paragraph (b), the number of shares of
Common Stock at any time outstanding shall not include shares
held in the treasury of the Company.
c. In case the Company shall, by dividend or otherwise,
distribute to all holders of its Common Stock shares of its
capital stock (other than Common Stock), or assets (excluding
cash dividends paid out of the retained earnings of the Company)
or rights or warrants to subscribe or purchase (excluding those
referred to in paragraph (b) above) (hereinafter collectively
referred to as "Distributions on Common Stock"), then in each
such case, the Company shall deliver to the Holder the
Distribution on Common Stock to which the Holder would be
entitled if it had converted the Debentures for Common Stock
immediately prior to the record date for the purpose of
determining stockholders entitled to receive such Distribution
on Common Stock.
d. The reclassification (including any reclassification
upon a merger in which the Company is the continuing
corporation) of Common Stock into securities including other
than Common Stock (other than any reclassification upon a
consolidation or merger to which Subsection B(6) applies) shall
be deemed to involve (i) a distribution of such securities other
than Common Stock to all holders of Common Stock (and the
effective date of such reclassification shall be deemed to be
"the date fixed for the determination of stockholders entitled
to receive such distribution" and "the date fixed for such
determination" within the meaning of paragraph (e) of this
Section), and (ii) a subdivision or combination, as the case may
be, of the number of shares of Common Stock outstanding
immediately prior to such reclassification into the number of
shares of Common Stock outstanding immediately thereafter.
e. For the purpose of any computation under paragraphs
(b) and (c) of this Section, the current market price per share
of Common Stock on any date shall be deemed to be the average of
the daily closing prices for the thirty consecutive business
days selected by the Company commencing with the forty-fifth
business day before the day in question. The closing price for
each day shall be the last reported sales price regular way or,
in case no such reported sale takes place on such day, the
average of the reported closing bid and asked prices regular
way, in either case on the American Stock Exchange or if the
Common Stock is not listed or admitted to trading on such
Exchange, on the principal national securities exchange on which
the Common Stock is listed or admitted to trading or, if not
listed or admitted to trading on any national securities
exchange, on the National Association of Securities Dealers
Automated Quotations National Market System or, if the Common
Stock is not listed or admitted to trading on any national
securities exchange or quoted on such National Market System,
the average of the closing bid and asked prices in the over-the-
counter market as furnished by any New York Stock Exchange or
American Stock Exchange member firm selected from time to time
by the Company for that purpose. If the current market price
per share of Common Stock cannot be determined in accordance
with the above procedures under this paragraph (e), such current
market price shall be determined in good faith by the Board of
Directors of the Company.
f. No adjustment in the conversion rate shall be required
unless such adjustment would require an increase or decrease of
at least 1% of such rate; provided, however, that the Company
may make any such adjustment at its election and provided,
further, that any adjustments which by reason of this paragraph
(f) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All
calculations under this Section B shall be made to the nearest
cent or to the nearest one-hundredth of a share, as the case may
be. Anything in this Section B notwithstanding, the Company may
make such reductions in the conversion rate, in addition to
those required by this Section, as it considers to be advisable
in order that any event treated for Federal income tax purposes
as a dividend of stock or stock rights shall not be taxable to
the recipients.
g. Whenever the conversion rate is adjusted as herein
provided
(1) the Company shall compute the adjusted
conversion rate in accordance with paragraph (a); and
(2) notice stating that the conversion rate has
been adjusted and setting forth the adjusted
conversion rate shall forthwith be mailed to the
Holder.
h. For the purpose of this Section B(4), the term "Common
Stock" shall include any stock of any class of the Company which
has no preference in respect of dividends or of amounts payable
in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Company and which is not
subject to redemption by the Company. However, shares issuable
on conversion of shares of this Series shall include only shares
of the class designated as Common Stock of the Company as of
January 1, 1996, or shares of any class or classes resulting
from any reclassification or reclassifications thereof and which
have no preference in respect of dividends or of amounts payable
in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Company and which are not
subject to redemption by the Company; provided, however, that if
at any time there shall be more than one such resulting class,
the shares of each such class then so issuable shall be
substantially in the proportion which the total number of shares
of such class resulting from all such reclassifications bears to
the total number of shares of all such classes resulting from
all such reclassifications.
5. No Fractional Shares. No fractional shares of Common Stock
shall be issued upon conversion of this Debenture. If more than one
Debenture shall be surrendered for conversion at one time by the
Holder, the number of full shares which shall be issuable upon
conversion thereof shall be computed on the basis of the aggregate
principal amount of the Debentures or specified portions thereof so
surrendered. Instead of any fractional share of Common Stock which
would otherwise be issuable upon conversion of this Debenture or any
Debentures or specified portions thereof, the Company shall pay a
cash adjustment in respect of such fraction in amount equal to the
same fraction of the current market price per share of Common Stock
(as determined in accordance with Section B.4.(e) above) at the close
of business on the day of conversion.
6. Consolidation, Merger or Sale of Assets. In case of any
consolidation of the Company with, or merger of the Company into, any
other Person, (other than a merger which does not result in any
reclassification, conversion, exchange or cancellation of outstanding
shares of Common Stock of the Company) or any sale or transfer of all
or substantially all of the assets of the Company (whether such
assets are held by the Company directly or indirectly through its
Subsidiaries), the Person formed by such consolidation or resulting
from such merger or which acquires such assets, as the case may be,
shall execute and deliver to the Holder an instrument providing that
the Holder shall have the right thereafter, during the period this
Debenture shall be convertible to convert this Debenture only into
the kind and amount of securities, cash and other property receivable
upon such consolidation, merger, sale or transfer by a holder of the
number of shares of Common Stock of the Company into which this
Debenture might have been converted immediately prior to such
consolidation, merger, sale or transfer assuming such holder of
Common Stock of the Company (i) is not a Person with which the
Company consolidated or into which the Company merged or to which
such sale or transfer was made, as the case may be ("constituent
Person"), or an Affiliate of a constituent Person and (ii) failed to
exercise his rights of election, if any, as to the kind or amount of
securities, cash and other property receivable upon such
consolidation, merger, sale or transfer (provided that if the kind or
amount of securities, cash and other property receivable upon such
consolidation, merger, sale or transfer is not the same for each
share of Common Stock of the Company held immediately prior to such
consolidation, merger, sale or transfer by other than a constituent
Person or an Affiliate thereof and in respect of which such rights of
election shall not have been exercised ("non-electing share") then
for the purpose of this subsection the kind and amount of securities,
cash and other property receivable upon such consolidation, merger,
sale or transfer by each non-electing share shall be deemed to be the
kind and amount so receivable per share by a plurality of the non-
electing shares). Such instrument shall provide for adjustments
which, for events subsequent to the effective date of such
instrument, shall be as nearly equivalent as may be practicable to
the adjustments provided for in this Section. The above provisions
of this subsection shall similarly apply to successive
consolidations, mergers, sales or transfers.
7. Shares to be Reserved. The Company covenants that it will
at all times reserve and keep available out of its authorized Common
Stock, solely for the purpose of issue upon conversion of Debentures
as herein provided, such number of shares of Common Stock as shall
then be issuable upon the conversion of all outstanding Debentures.
The Company covenants that all shares of Common Stock which shall be
so issuable shall, when issued, be duly and validly issued and fully
paid and nonassessable.
8. Registration and Listing of Shares. The Company covenants
that if any shares of Common Stock, required to be reserved for
purposes of conversion of Debentures hereunder, require registration
with or approval of any governmental authority under any Federal or
State law before such shares may be issued upon conversion, the
Company will in good faith and as expeditiously as possible endeavor
to cause such shares to be duly registered or approved, as the case
may be. The Company further covenants that so long as the Common
Stock of the Company is listed on the American Stock Exchange or any
other national securities exchange, the Company will, if permitted by
the rules of such exchange, list and keep listed on such exchange,
upon official notice of issuance, all shares of Common Stock issuable
upon conversion of Debentures.
9. Taxes and Charges. The issuance of certificates for shares
of Common Stock upon the conversion of Debentures shall be made
without charge to the Holder for such certificates or for any tax in
respect of the issuance of such certificates or the securities
represented thereby, and such certificates shall be issued in the
name of, or in such names as may be directed by, the Holder;
provided, however, that the Company shall not be required to pay any
tax which may be payable in respect of any transfer involved in the
issuance and delivery of any such certificate in a name other than
that of the Holder, and the Company shall not be required to issue or
deliver such certificates unless or until the Person or Persons
requesting the issuance thereof shall have paid to the Company the
amount of such tax or shall have established to the satisfaction of
the Company that such tax has been paid.
Section C. Optional Redemption.
The Debentures are subject to redemption upon not less than 30
or more than 60 days' notice by mail, at any time, as a whole or in
part, at the election of the Company, at a redemption price equal to
100% of the principal amount, together with accrued interest to the
redemption date, but interest installments whose stated maturity is
on or prior to such redemption date will be payable to the Holder.
In the event of redemption or conversion of this Debenture is in
part only, a new Debenture or Debentures for the unredeemed or
unconverted portion hereof will be issued in the name of the Holder
upon the cancellation hereof.
Section D. Subordination.
1. Debentures Subordinate to Senior Indebtedness. The Company
covenants and agrees, and the Holder by its acceptance hereof
likewise covenants and agrees, that, to the extent and in the manner
hereinafter set forth in this Section, the indebtedness represented
by this Debenture and the payment of the principal of (and premium,
if any) and interest on this Debenture are hereby expressly made
subordinate and subject in right of payment to the prior payment in
full of all Senior Indebtedness.
2. Payment Over of Proceeds Upon Dissolution Etc. Upon any
distribution of assets of the Company in the event of (a) any
insolvency or bankruptcy case or proceeding, or any receivership,
liquidation, reorganization or other similar case or proceeding in
connection therewith, relative to the Company or to its creditors, as
such, or to its assets, or (b) any liquidation, dissolution or other
winding up of the Company, whether voluntary or involuntary and
whether or not involving insolvency or bankruptcy, or (c) any
assignment for the benefit of creditors or any other marshalling of
assets and liabilities of the Company, then and in such event the
holders of Senior Indebtedness shall be entitled to receive payment
in full of all amounts due or to become due on or in respect of all
Senior Indebtedness, or provision shall be made for such payment, in
money or money's worth, before the Holder is entitled to receive any
payment on account of principal of (or premium, if any) or interest
on the Debentures, and to that end the holders of Senior Indebtedness
shall be entitled to receive, for application to the payment thereof,
any payment or distribution of any kind or character, whether in
cash, property or securities, including any such payment or
distribution which may be payable or deliverable by reason of the
payment of any other indebtedness of the Company being subordinated
to the payment of the Debentures, which may be payable or deliverable
in respect of the Debentures in any such case, proceeding,
dissolution, liquidation or other winding up or event.
In the event that, notwithstanding the foregoing provisions of
this Subsection, the Holder shall have received any payment or
distribution of assets of the Company of any kind or character,
whether in cash, property or securities, including any such payment
or distribution which may be payable or deliverable by reason of the
payment of any other indebtedness of the Company being subordinated
to the payment of the Debentures, before all Senior Indebtedness is
paid in full or payment thereof provided for, and if such fact shall
then have been made known to the Holder, then and in such event such
payment or distribution shall be paid over or delivered forthwith to
the trustee in bankruptcy, receiver, liquidating trustee, custodian,
assignee, agent or other Person making payment or distribution of
assets of the Company for application to the payment of all Senior
Indebtedness remaining unpaid, to the extent necessary to pay all
Senior Indebtedness in full, after giving effect to any concurrent
payment or distribution to or for the holders of Senior Indebtedness.
For purposes of this Section only, the words "cash, property or
securities" shall not be deemed to include shares of stock of the
Company as reorganized or readjusted, or securities of the Company or
any other corporation provided for by a plan of reorganization or
readjustment the payment of which is subordinated at least to the
extent provided in this Subsection with respect to the Debentures to
the payment of all Senior Indebtedness which may at the time be
outstanding: provided, however, that (i) Senior Indebtedness is
assumed by the new corporation, if any, resulting from any such
reorganization or readjustment, and (ii) the rights of the holders of
the Senior Indebtedness are not, without the consent of such holders,
altered by such reorganization or readjustment. The consolidation of
the Company with, or the merger of the Company into, another
corporation or the liquidation or dissolution of the Company
following the conveyance or transfer of its properties and assets
substantially as an entirety to another Person upon the terms and
conditions set forth in Section G shall not be deemed a dissolution,
winding up, liquidation, reorganization, assignment for the benefit
of creditors or marshalling of assets and liabilities of the Company
for the purposes of this Section if the corporation formed by such
consolidation or into which the Company is merged or the Person which
acquires by conveyance or transfer such properties and assets
substantially as a entirety, as the case may be, shall, as a part of
such consolidation, merger, conveyance or transfer, comply with the
conditions set forth in Section G.
3. Prior Payment to Senior Indebtedness Upon Acceleration of
Debentures. In the event that any of the Debentures are declared due
and payable before their Stated Maturity, then and in such event the
holders of Senior Indebtedness outstanding at the time such
Debentures so become due and payable shall be entitled to receive
payment in full of all amounts due or to become due on or in respect
of all such Senior Indebtedness, or provision shall be made for such
payment in money or money's worth, before the Holder is entitled to
receive any payment (including any payment which may be payable by
reason of the payment of any other indebtedness of the Company being
subordinated to the payment of the Debentures) by the Company on
account of the principal of (or premium, if any) or interest on the
Debentures or on account of the purchase or other acquisition of
Debentures.
In the event that, notwithstanding the foregoing, the Company
shall make any payment to the Holder prohibited by the foregoing
provisions of this Subsection, and if such facts shall then have been
made known to the Holder, then and in such event such payment shall
be paid over and delivered forthwith to the Company for the benefit
of the holders of Senior Indebtedness.
The provisions of this Section shall not apply to any payment
with respect to which Subsection 2 would be applicable.
4. No Payment When Newco Indebtedness in Default. (a) In the
event and during the continuation of any default in the payment of
principal (or premium, if any) or interest on any Newco Indebtedness
beyond any applicable grace period with respect thereto, or in the
event that any event of default with respect to any Newco
Indebtedness shall have occurred and be continuing permitting the
holders of such Newco Indebtedness (or a trustee on behalf of the
holders thereof) to declare such Newco Indebtedness due and payable
prior to the date on which it would otherwise have become due and
payable, unless and until such event of default shall have been cured
or waived or shall have ceased to exist and such acceleration shall
have been rescinded or annulled, or (b) in the event any judicial
proceeding shall be pending with respect to any such default in
payment or event of default, then no payment (including any payment
which may be payable by reason of the payment of any other
indebtedness of the Company being subordinated to the payment of the
Debentures) shall be made by the Company on account of principal of
(or premium, if any) or interest on the Debentures or on account of
the purchase or other acquisition of Debentures.
In the event that, notwithstanding the foregoing, the Company
shall make any payment to the Holder prohibited by the foregoing
provisions of this Subsection, and if such fact shall then have been
made known to the Holder, then and in such event such payment shall
be paid over and delivered forthwith to the Company for the benefit
of the holders of Newco Indebtedness.
The provisions of this Section shall not apply to any payment
with respect to which Subsection D(2) would be applicable.
5. Payment Permitted if No Default. Nothing contained in this
Section or elsewhere or in any of the Debentures shall prevent (x)
the Company, at any time except during the pendency of any case,
proceeding, dissolution, liquidation or other winding up, assignment
for the benefit of creditors or other marshalling of assets and
liabilities of the Company referred to in Subsection D(2) or under
the conditions described in Subsections D(3) or D(4), from making
payments at any time of principal of (and premium, if any) or
interest on the Debentures, or (y) the retention by the Holder of any
money deposited with it hereunder to the payment of or on account of
the principal of (and premium, if any) or interest on the Debentures
if, at the time of such retention the Holder did not have knowledge
that such payment would have been prohibited by the provisions of
this Section.
6. Subrogation to Rights of Holders of Senior Indebtedness.
Subject to the payment in full of all Senior Indebtedness, the Holder
shall be subrogated to the extent of the payments or distributions
made to the holders of such Senior Indebtedness pursuant to the
provisions of this Section to the rights of the holders of such
Senior Indebtedness to receive payments or distributions of cash,
property or securities applicable to the Senior Indebtedness until
the principal of (and premium, if any) and interest on the Debentures
shall be paid in full. For purposes of such subrogation, no payments
or distributions to the holders of the Senior Indebtedness of any
cash, property or securities to which the Holder would be entitled
except for the provisions of this Section, and no payments over
pursuant to the provisions of this Section to the Company or to the
holders of Senior Indebtedness by the Holder, shall, as between the
Company, its creditors other than holders of Senior Indebtedness and
the Holder, be deemed to be a payment or distribution by the Company
to or on account of the Debentures.
7. Provisions Solely to Define Relative Rights. The
provisions of this Section are and are intended solely for the
purpose of defining the relative rights of the Holder, on the one
hand, and the holders of Senior Indebtedness, on the other hand.
Nothing contained in this Section or elsewhere in this Debenture is
intended to or shall impair, as between the Company, its creditors
other than the holders of Senior Indebtedness and the Holder, the
obligation of the Company, which is absolute and unconditional, to
pay to the Holder the principal of (and premium, if any) and interest
on the Debenture as and when the same shall become due and payable in
accordance with their terms and which, subject to the rights under
this Section of the holders of Senior Indebtedness, is intended to
rank equally with all other general obligations of the Company, or is
intended to or shall affect the relative rights against the Company
of the Holder and creditors of the Company other than the holders of
Senior Indebtedness, nor shall anything herein or therein prevent the
Holder from exercising all remedies otherwise permitted by applicable
law upon default under this Debenture, subject to the rights, if any,
under this Section of the holders of Senior Indebtedness to receive
cash, property or securities otherwise payable or deliverable to the
Holder, and nothing herein shall prevent the conversion of this
Debenture (or any part thereof) in accordance with the terms hereof.
8. No Waiver of Subordination Provisions. No right of any
present or future holder of any Senior Indebtedness to enforce
subordination herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of
the Company or by any act or failure to act, in good faith, by any
such holder, or by any noncompliance by the Company with the terms,
provisions and covenants of this Debenture, regardless of any
knowledge thereof any such holder may have or be otherwise charged
with.
Without in any way limiting the generality of the foregoing
paragraph, the holders of Senior Indebtedness may, at any time and
from time to time, without the consent of or notice to the Holder,
without incurring responsibility to the Holder and without impairing
or releasing the subordination provided in this Section or the
obligations hereunder of the Holder to the holders of Senior
Indebtedness, do any one or more of the following: (i) change the
manner, place or terms of payment or extend the time of payment of,
or renew or alter, Senior Indebtedness, or otherwise amend or
supplement in any manner Senior Indebtedness or any instrument
evidencing the same or any agreement under which Senior Indebtedness
is outstanding; (ii) sell, exchange, release otherwise or otherwise
deal with any property pledged, mortgaged or securing Senior
Indebtedness; (iii) release any Person liable in any manner for the
collection of Senior Indebtedness; and (iv) exercise or refrain from
exercising any rights against the Company and any other Person.
9. Notice to Holder. The Company shall give prompt written
notice to the Holder of any fact known to the Company which would
prohibit the making of any payment to the Holder in respect of the
Debentures. Failure to give such notice shall not affect the
subordination of the Debenture to Senior Indebtedness.
Notwithstanding the provisions of this Section or any other provision
of this Debenture, the Holder shall not be charged with knowledge of
the existence of any facts which would prohibit the making of any
payment to the Holder in respect of the Debenture, unless and until
the Holder shall have received written notice thereof from the
Company or a holder of Senior Indebtedness or from any trustee
therefor.
Section E. Optional Mandatory Repurchase.
1. Obligation to Repurchase.
a. Upon the occurrence of any Contingent Event, the
Holder shall have the right, at such Holder's option, to require
the Company to redeem this Debenture in whole or in part at a
repurchase price equal to the principal amount of this Debenture
so repurchased plus accrued and unpaid interest on the principal
amount of this Debenture so repurchased.
Such option under this Section E shall be exercised by written
notice to the Company under Section E.b. hereof given at any
time from and after the thirtieth (30th) day before such
Contingent Event through the thirtieth (30th) day after such
Contingent Event (or, if later, through the thirtieth (30th) day
after the Holder receives written notice from the Company of
such Contingent Event). Promptly (and in any event within ten
(10) days) after the occurrence of any Contingent Event, and not
more than thirty (30) days before such Contingent Event, the
Company shall given written notice to the Holder notifying such
Holder of the occurrence of such Contingent Event and informing
such Holder of its right to exercise an option to require a
repurchase under this Section E.
b. In order to exercise its rights to require a
repurchase under this Section E, the Holder shall send to the
Company a written notice demanding prepayment under this Section
E and specifying the date of such prepayment (which shall not be
less than fifteen (15) days after receipt of such notice by the
Company, but in no event earlier than such Contingent Event,
except that such date may be the same date as a Contingent Event
if requested by the Holder).
c. This obligation to repurchase is subject to the
restriction that the Company may not buy any Debenture at any
time when the subordination provisions of this Debenture would
not permit the Company to make a payment of principal, premium
or interest on the Debentures.
2. Certain Definitions. As used in this Section:
a. "Contingent Event" means any one or more of the
following events which shall occur subsequent to February 15,
1996:
(1) the Company shall convey, transfer or lease all
or substantially all of its assets (whether held directly
or indirectly through Subsidiaries) to any Persons (other
than to a Subsidiary of the Company);
(2) any Person (other than the Company), including a
"group" (within the meaning of Section 13(d) and 14(d)(2)
of the Securities Exchange Act of 1934, as amended) that
includes such Person, shall acquire, directly or
indirectly, beneficial ownership, in the aggregate, of (x)
50 percent or more of the Common Stock, or (y) securities
representing 50 percent or more of the combined voting
power of the Company's voting securities, in either case,
outstanding on the date immediately prior to the date of
the last such acquisition by such Person; or
(3) on any day (a "Calculation Date") (x) (A) the
Company shall distribute cash, securities or other
properties, including cash dividends (other than Common
Stock, or rights or warrants to acquire Common Stock or
preferred stock substantially equivalent to Common Stock)
to holders of Common Stock, whether by means of dividend,
reclassification, recapitalization or otherwise, or (B) the
Company shall acquire, directly or indirectly, beneficial
ownership of Common Stock; and (y) the sum of the
Applicable Percentages (as defined below) of all such
distributions and acquisitions which have occurred on the
Calculation Date and during the 365-day period immediately
preceding the Calculation Date shall exceed 30 percent.
b. "Applicable Percentage" means (x) In the case of each
distribution referred to in clause (3) above, the percentage
determined as of the Calculation Date of each such distribution
by dividing the aggregate fair market value (as determined in
good faith by the Board of Directors), of such distribution, by
the fair market value (based on the then current market price)
of all of the shares of Common Stock outstanding on the day
immediately prior to such Calculation Date; and (y) in the case
of each acquisition referred to in clause (3) above, the
percentage determined as of the Calculation Date of each such
acquisition by dividing all amounts expended by the Company
(such amounts, if other than in cash, as determined in good
faith by the Board of Directors), in connection with the
acquisition of any shares of Common Stock, by the fair market
value (based on the then current market price) of all of the
shares of Common Stock outstanding on the day immediately prior
to such Calculation Date.
Section F. Covenants.
1. Payment of Principal, Premium and Interest. The Company
will duly and punctually pay the principal of (and premium, if any)
and interest on this Debenture in accordance with the terms hereof.
2. Statement as to Compliance. The Company will deliver to
the Holder, within 120 days after the end of each fiscal year, an
Officers' Certificate stating, as to each signer thereof, that
a. a review of the activities of the Company and its
Subsidiaries during such year and of performance under this
Debenture has been made under his supervision, and
b. to the best of his knowledge, based on such review,
the Company has fulfilled all its obligations under this
Debenture throughout such year, or, if there has been a default
in the fulfillment of any such obligation, specifying each such
default known to him and the nature and status thereof.
3. Further Instruments and Acts. From time to time the
Company will, at its own expense and upon request of the Holder,
execute and deliver or cause to be executed and delivered such
further instruments and do such further acts as may reasonably be
necessary or desirable to carry out the purposes of this Debenture.
Section G. Consolidation, Merger, Conveyance, Transfer or Lease.
1. Company May Consolidate, etc. Only on Certain Terms. The
Company shall not consolidate with or merge into any other Person or
convey, transfer or lease its properties and assets substantially as
an entirety (whether such properties and assets are held by the
Company directly or through its Subsidiaries) to any Person, unless:
a. the Person formed by such consolidation or into which
the Company is merged or the Person which acquires by conveyance
or transfer, or which leases, the properties and assets of the
Company substantially as a entirety shall be a corporation
organized and existing under the laws of the United States of
America, any State thereof or the District of Columbia and shall
expressly assume, by an instrument, executed and delivered to
the Holder, in form satisfactory to the Holder, the due and
punctual payment of the principal of (and premium, if any) and
interest on this Debenture and the performance of every
obligation herein on the part of the Company to be performed or
observed and shall have provided for conversion rights in
accordance with Subsection (B)(6).
b. immediately after giving effect to such transaction,
no Event of Default, and no event which, after notice or lapse
of time or both, would become an Event of Default, shall have
happened and be continuing; and
c. the Company has delivered to the Holder an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, conveyance, transfer or lease and, if an
instrument is required hereunder in connection with such
transaction, such instrument comply with this Section and that
all conditions precedent herein provided for relating to such
transaction have been complied with.
2. Successor Corporation Substituted. Upon any consolidation
or merger by the Company with or into any other Person or any
conveyance, transfer or lease of the properties and assets of the
Company substantially as a entirety (whether such properties and
assets are held by the Company directly or through its Subsidiaries)
to any Person in accordance with Subsection (G)(1), the successor
corporation formed by such consolidation or into which the Company is
merged or to which such conveyance, transfer or lease is made shall
succeed to, and be substituted for, and may exercise every right and
power of the Company hereunder with the same effect as if such
successor corporation had been named as the Company herein, and
thereunder, except in the case of a lease to another Person, the
predecessor corporation shall be relieved of all obligations and
covenants under this Debenture.
Section H. Reports by Company. The Company shall mail to
the Holder, within 15 days after the Company is required to file the
same with the Commission, copies of the annual reports and of the
information, documents and other reports (or copies of such portions
of any of the foregoing as the Commission may from time to time by
rules and regulations prescribe) which the Company may be required to
file with the Commission pursuant to Section 13(a) or Section 15(d)
of the Securities Exchange Act of 1934, as amended; and, if the
Company is not required to file information, documents or reports
pursuant to either of said Sections, then it shall nonetheless mail
the same to the Holder as if it were required to do so by the
Commission.
Section I. Remedies.
1. Events of Default. "Event of Default," wherever used
herein, means any one of the following events (whatever the reason
for such Event of Default and whether it shall be occasioned by the
provisions of Section (B) or 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 or any
administrative or governmental body):
a. default in the payment of any interest upon this
Debenture and any other Debenture issued to the Holder when it
becomes due and payable and continuance of such default for a
period of 10 days; or
b. default in the payment of the principal of (or
premium, if any, on) this Debenture and any other Debenture
issued to the Holder at its Maturity whether or not such payment
is prohibited by the subordination provisions of this Debenture
and continuance of such default for a period of 30 days; or
c. default in the performance, or breach, of any covenant
or warranty of the Company in this Debenture (other than a
covenant or warranty a default in whose performance or whose
breach is elsewhere in this Section specifically dealt with),
and continuance of such default or breach for a period of 30
days after there has been given, by registered or certified
mail, to the Company by the Holder a written notice specifying
such default or breach and requiring it to be remedied and
stating that such notice is a "Notice of Default" hereunder; or
d. the entry by a court having jurisdiction in the
premises of (A) a decree or order for relief in respect of the
Company in an involuntary case or proceeding under any
applicable Federal or state bankruptcy, insolvency,
reorganization or other similar law or (B) a decree or order
adjudging the Company a bankrupt or insolvent, or approving as
properly filed a petition seeking reorganization, arrangement,
adjustment or composition of or in respect of the Company under
any applicable Federal or state law, or appointing a custodian,
receiver, liquidator, assignee, trustee, sequestrator or other
similar official of the Company or of any substantial part of
its property, or ordering the winding up or liquidation of its
affairs, and the continuance of any such decree or order for
relief or any such other decree or order unstayed and in effect
for a period of 60 consecutive days; or
e. the commencement by the Company of a voluntary case or
proceeding under any applicable Federal or state bankruptcy,
insolvency, reorganization or other similar law or of any other
case or proceeding to be adjudicated a bankrupt or insolvent, or
the consent by it to the entry of a decree or order for relief
in respect of the Company in an involuntary case or proceeding
under any applicable Federal or state bankruptcy, insolvency,
reorganization or other similar law or to the commencement of
any bankruptcy or insolvency case or proceeding against it, or
the filing by it of a petition or answer or consent seeking
reorganization or relief under any applicable Federal or state
law, or the consent by it to the filing of such petition or to
the appointment of or taking possession by a custodian,
receiver, liquidator, assignee, trustee, sequestrator or similar
official of the Company or of any substantial part of its
property, or the making by it of an assignment for the benefit
of creditors, or the admission by it in writing of its inability
to pay its debts generally as they become due, or the taking of
corporate action by the Company in furtherance of any such
action.
2. Acceleration of Maturity; Rescission and Annulment. If any
Event of Default occurs and is continuing (other than an Event of
Default described in Subsections I(1)(d) and (e)), then and in every
such case the Holder may declare the principal and all accrued and
unpaid interest of all the Debentures issued to the Holder to be due
and payable immediately, by a notice in writing to the Company, and
upon any such declaration such principal shall become immediately due
and payable. If an Event of Default described in Subsections I(1)(d)
and (e) shall occur, then in every such case the unpaid principal
balance hereof and all accrued and unpaid interest shall
automatically become due and payable.
3. Collection of Indebtedness and Suits for Enforcement. The
Company covenants that if
a. default is made in the payment of any installment of
interest on any Debenture issued to the Holder when such
interest become due and payable and such default continues for a
period of 30 days, or
b. default is made in the payment of the principal of (or
premium, if any, on) any Debenture issued to the Holder at the
Maturity thereof,
the Company will, upon demand by the Holder, pay to it, the whole
amount then due and payable on such Debentures for principal (and
premium, if any) and interest, with interest upon the overdue
principal (and premium, if any) and, to the extent that payment of
such interest shall be legally enforceable, upon overdue installments
of interest, at the rate borne by the Debentures and, in addition
thereto, such further amount as shall be sufficient to cover the
costs and expenses of collection, including the reasonable
compensation, expenses and disbursements of the Holder, its agents
and counsel.
If the Company fails to pay such amounts forthwith upon such
demand, the Holder may institute a judicial proceeding for the
collection of the sums so due and unpaid, may prosecute such
proceeding to judgment or final decree and may enforce the same
against the Company or any other obligor upon the Debentures and
collect the moneys adjudged or decreed to be payable in the manner
provided by law out of the property of the Company or any other
obligor upon the Debentures, wherever situated.
If an Event of Default occurs and is continuing, the Holder may
in its discretion proceed to protect and enforce its rights by such
appropriate judicial proceedings as it shall deem most effectual to
protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Debenture or in aid
of the exercise of any power granted herein, or to enforce any other
proper remedy.
4. Application of Money Collected. Subject to Section D, any
money collected by the Holder pursuant to this Section shall be
applied first to the payment of all fees, costs and expenses
(including attorneys fees and expenses) incurred by the Holder
(whether before or after judgment) in the collection of such sums and
second, to the payment of the amounts then due and unpaid for
principal of (and premium, if any) and interest on the Debentures in
respect of which or for the benefit of which such money or
Debentures, as the case may be, has been collected.
5. Unconditional Right of Holder to Receive Principal, Premium
and Interest and to Convert. Notwithstanding any other provision
herein, the Holder shall have the right, which is absolute and
unconditional, to receive payment of the principal of (and premium,
if any) and interest on this Debenture on the date when due (or, in
the case of redemption, on the Redemption Date) and to convert this
Debenture in accordance with Section B and to institute suit for the
enforcement of any such payment and right to convert.
6. Rights and Remedies Cumulative. No right or remedy herein
conferred upon or reserved to the Holder is intended to be exclusive
of any other right or remedy, and every right and remedy shall, to
the extent permitted by law, be cumulative and in addition to every
other right and remedy given hereunder or now or hereafter existing
at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or
remedy.
7. Delay or Omission Not Waiver. No delay or omission of the
Holder to exercise any right or remedy accruing upon any Event of
Default shall impair any such right or remedy or constitute a waiver
of any such Event of Default or an acquiescence therein. Every right
and remedy given by this Section or by law to the Holder may be
exercised from time to time, and as often as may be deemed expedient,
by the Holder.
8. Amendments; Governing Law etc.. This Debenture may be
amended only by a writing signed by the Company and the Holder. The
Article and Section headings herein are for convenience only and
shall not affect the construction hereof. All covenants and
agreements in this Debenture by the Company shall bind its successors
and assigns, whether so expressed or not. In case any provision in
this Debenture 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. This Debenture
shall be governed by and construed in accordance with the laws of the
State of Wisconsin. If any action or proceeding shall be brought by
the Holder in order to enforce any right or remedy under this
Debenture, the Company hereby consents and submits to the
jurisdiction of the courts of the State of Wisconsin and of any
Federal court sitting in The City of Milwaukee, State of Wisconsin.
Any action or proceeding brought by the Company to enforce any right,
assert any claim or obtain any relief whatsoever in connection with
this Debenture shall be brought by the Company exclusively in the
courts of the State of Wisconsin or in any Federal court sitting in
The City of Milwaukee, State of Wisconsin.
No provision of this Debenture shall alter or impair the
obligation of the Company, which is absolute and unconditional, to
pay the principal of (and premium, if any) and interest on this
Debenture at the times, place and rate, and in the coin or currency
or with another debenture, herein prescribed or to convert this
Debenture as provided herein.
Debentures are exchangeable for a like aggregate principal
amount of Debentures of a different authorized denomination, as
requested by the Holder.
No service charge shall be made for any such registration of
transfer or exchange, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in
connection therewith.
9. Definitions. The following terms shall have the meanings
specified below:
"Affiliate" of any specified person means any other Person
directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person. For the purposes of
this definition, "control" when used with respect to any specified Person
means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly
adopted by the Board of Directors and to be in full force and effect on
the date of such certification, and delivered to the Trustee.
"Commission" means the Securities and Exchange Commission, as
from time to time constituted, created under the Securities Exchange Act
of 1934, or, if at any time after the execution of this instrument such
Commission is not existing and performing the duties now assigned to it
under the Trust Indenture Act, then the body performIng such duties at
such time.
"Common Stock" means all shares now or hereafter authorized of
the class of Common Stock of the Company currently authorized and stock of
any other class into which such shares may hereafter have been changed.
"Debentures" means this Debenture and all other Debentures of
the Company issued to the Holder.
"Event of Default" has the meaning specified in Section I.
"Interest Payment Date" means the Stated Maturity of a
installment of interest on the Debentures.
"Maturity" when used with respect to any Debenture means the
date on which the principal of such Debenture becomes due and payable as
therein or herein provided, whether at the Stated Maturity or by
declaration of acceleration, call for redemption or otherwise.
"Newco" means Newco, Inc., a Wisconsin corporation and any
successor thereto.
"Newco Indebtedness" means the principal, premium, if any, and
unpaid interest on indebtedness for money borrowed by Newco and guaranteed
by the Company (at any time and from time to time), whether outstanding on
the date hereof or hereafter, and all renewals, extensions and refundings
of any such Debt; provided, however, that the following shall not
constitute Newco Indebtedness: any Debt which by its terms refers
explicitly to the Debentures issued hereunder and states that such Debt
shall not be senior in right of payment thereto.
"Officers" Certificate" means a certificate signed by the
Chairman of the Board, the President or a Vice President, and by the
Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary
of the Company, and delivered to the Holder.
"Opinion of Counsel" means a written opinion of counsel, who may
be counsel for the Company or other counsel acceptable to the Holder.
"Person" means any individual, corporation, partnership, joint
venture, association, joint stock company, trust, unincorporated
organization or government or any agent or political subdivision thereof.
"Redemption Date," when used with respect to any Debenture to be
redeemed, means the date fixed for such redemption by or pursuant to this
Debenture.
"Redemption Price," when used with respect to any Debenture to
be redeemed, means the price at which it is to be redeemed pursuant to
this Debenture.
"Regular Record Date" for the interest payable on any Interest
Payment Date means the April 1st or the September 1st (whether or not a
Business Day), as the case may be, next preceding such Interest Payment
Date.
"Senior Indebtedness" means all Debts, obligations and
liabilities of the Company arising under the guarantee by the Company of
the Newco Indebtedness, whether such guarantee is outstanding on the date
hereof or hereafter, and all renewals, replacements and extensions
thereof.
"Stated Maturity," when used with respect to any Debenture or
any installment of interest thereon, means the date specified in such
Debenture as the fixed date on which the principal of such Debenture or
such installment of interest is due and payable.
"Subsidiary" means a corporation more than 50% of the
outstanding voting stock of which is owned, directly or indirectly, by the
Company or by one or more other Subsidiaries, or by the Company and one or
more other Subsidiaries. For the purposes of this definition, "voting
stock" means stock which ordinarily has voting power for the election of
directors, whether at all times or only so long as no senior class of
stock has such voting power by reason of any contingency.
IN WITNESS WHEREOF, the Company has caused this instrument to be
duly executed under its corporate seal.
[SEAL] SWING-N-SLIDE CORP.
By:
Print:
Title:
SWING-N-SLIDE CORP.
10% Convertible Subordinated Debenture due 2004
$700,000 April 25, 1996
Swing-N-Slide Corp., a corporation duly organized and existing
under the laws of Delaware, and its permitted successors and assigns
(herein called the "Company"), for value received, hereby promises to pay
to the order of GreenGrass Holdings, and its successors and assigns (the
"Holder"), the principal sum of SEVEN HUNDRED THOUSAND DOLLARS on April
25, 2004, and to pay interest thereon commencing April 25, 1996 and on
April 25 and September 25, in each year thereafter, at the rate of 10% per
annum, until the principal hereof is paid in full. Payment of the
principal of (and premium, if any) and interest on this Debenture will be
made by check payable in money of the United States of America that at the
time of payment is legal tender for payment of public and private debts,
mailed to the Holder at its principal office in Chicago, Illinois or such
other address as may be designated by the Holder; provided, however, that
until April 25, 1999, at the option of the Company, interest on this
Debenture may be paid by the issuance of an additional debenture, in the
form of this Debenture, in the principal amount of the interest so
payable, dated the interest payment date for such interest payment, with
interest payable as provided herein with a stated maturity of principal
and interest as provided in this Debenture and otherwise identical to this
Debenture. Interest shall be calculated based on a year composed of 365
days.
Section A. Securities Offering. If debentures are issued to
shareholders of the Company as contemplated by Section 4.8(c) of the
Transaction Agreement, dated January 4, 1996, between the Holder and the
Company, then contemporaneously with the closing of such offer this
Debenture may be exchanged, at the option of the Holder, for debentures
issued under the indenture entered into by the Company in connection with
such offer, at par plus any accrued and unpaid interest, except that any
such debentures issued to the Holder will continue to be convertible at
the Conversion Rate (as defined below) specified below.
Section B. Conversion Rights.
1. General. The Holder shall have the right at any time prior
to maturity, at its option, to convert the principal of this
Debenture (or any portion of the principal thereof which is $1.00 or
an integral multiple of $1.00) into fully paid and nonassessable
(except as otherwise provided by law) shares of Common Stock of the
Company at the rate of one share of Common Stock for each $4.80
principal amount of Debentures or, in case an adjustment to the
number of shares of Common Stock issuable for each $4.80 principal
amount of Debentures (the "Conversion Rate" or "rate") has taken
place pursuant to the provisions hereof, then at the rate as so
adjusted. Such right shall be exercised by the surrender of the
Debenture, the principal of which is so to be converted, to the
Company, accompanied by written notice that the Holder elects to
convert the Debenture or any portion thereof and specifying the name
or names (with address) in which a certificate or certificates for
Common Stock are to be issued. For convenience, the conversion of
all or a portion, as the case may be, of the principal of this
Debenture (and any other Debentures (including without limitation any
Debentures issued in lieu of interest in accordance with the first
paragraph of this Debenture)) into the Common Stock of the Company is
hereinafter sometimes referred to as the conversion of this
Debenture. If this Debenture is converted in part only, upon such
conversion the Company shall execute and deliver to the Holder a new
Debenture or Debentures of authorized denominations in an aggregate
principal amount equal to the unconverted portion of such Debenture.
This Debenture shall continue to be convertible, in whole or in
part, (i) even though the Company or the Holder may have given notice
of prepayment or redemption with respect to this Debenture or any
part thereof pursuant to Sections C or E hereof, so long as this
Debenture and the Holder's election to convert shall have been
delivered to the Company pursuant to this Section B prior to the date
fixed for such prepayment or redemption and (ii) whether or not a
mandatory, optional or mandatory optional prepayment or redemption
prior to the date fixed for such prepayment or redemption, is due on
this Debenture on any date following such time.
2. Issuance of Common Stock; Time of Conversion. As promptly
as practicable after the surrender, as herein provided, of this
Debenture for conversion, the Company shall deliver to the Holder a
certificate or certificates representing the number of fully paid and
nonassessable (except as otherwise provided by law) shares of Common
Stock of the Company into which this Debenture (or portion thereof)
may be converted together with payment in lieu of any fraction of a
share. Subject to the following provisions of this Debenture, such
conversion shall be deemed to have been made immediately prior to the
close of business on the date that this Debenture shall have been
surrendered for conversion (except that if such conversion is in
connection with an underwritten public offering of Common Stock, then
such conversion shall be deemed to have been effected upon such
surrender), so that the rights of the Holder as a Holder shall cease
with respect to this Debenture (or the portion thereof) being
converted at such time, and the Person or Persons entitled to receive
the shares of Common Stock deliverable upon conversion of this
Debenture shall be treated for all purposes as having become the
record holder or holders of such shares of Common Stock at such time,
and such conversion shall be at the conversion rate in effect at such
time; provided, however, that no such surrender on any date when the
stock transfer books of the Company shall be closed shall be
effective to constitute the Person or Persons entitled to receive the
shares of Common Stock deliverable upon such conversion as the record
holder or holders of such shares of Common Stock on such date, but
such surrender shall be effective to constitute the Person or Persons
entitled to receive such shares of Common Stock as the record holder
or holders thereof for all purposes immediately prior to the close of
business on the next succeeding day on which such stock transfer
books are open, and such conversion shall be deemed to have been made
at, and shall be made at the conversion rate in effect at, such time
on such next succeeding day.
If the last day for the exercise of the conversion right shall
not be a business day, then such conversion right may be exercised on
the next succeeding business day.
3. Payment of Accrued Interest. Within ten (10) days after
receipt of any Debenture and an election to convert all or a portion
of the principal amount of such Debenture pursuant to this Section B,
the Company will pay to the Holder any unpaid interest, accrued to
the date of conversion of such Debenture, on the principal amount so
converted.
4. Adjustment of Conversion Price. The conversion rate shall
be subject to adjustment as follows:
a. In case the Company shall (i) pay a dividend on Common
Stock in Common Stock, (ii) subdivide its outstanding shares of
Common Stock, or (iii) combine its outstanding shares of Common
Stock into a smaller number of shares, the conversion rate in
effect immediately prior thereto shall be adjusted retroactively
as provided below so that the Holder shall be entitled to
receive the number of shares of Common Stock of the Company
which it would have owned or have been entitled to receive after
the happening of any of the events described above had this
Debenture been converted immediately prior to the happening of
such event. An adjustment made pursuant to this paragraph (a)
shall become effective immediately after the record date in the
case of a dividend and shall become effective immediately after
the effective date in the case of a subdivision or combination.
b. In case the Company shall issue rights or warrants to
all holders of its Common Stock entitling them to subscribe for
or purchase shares of Common Stock at a price per share less
than the current market price per share (determined as provided
in paragraph (e) of this Section) of the Common Stock on the
date fixed for the determination of stockholders entitled to
receive such rights or warrants, the conversion rate in effect
at the opening of business on the day following the day fixed
for such determination shall be increased by multiplying such
conversion rate by a fraction of which the numerator shall be
the number of shares of Common Stock outstanding at the close of
business on the date fixed for such determination plus the
number of shares of Common Stock so offered for subscription or
purchase and the denominator shall be the number of shares of
Common Stock outstanding at the close of business on the date
fixed for such determination plus the number of shares of Common
Stock which the aggregate of the offering price of the total
number of shares of Common Stocks offered for subscription or
purchase would purchase at such current market price, such
increase to become effective immediately after the opening of
business on the day following the date fixed for such
determination; provided, however, in the event that all the
shares of Common Stock offered for subscription or purchase are
not delivered upon the exercise of such rights or warrants, upon
the expiration of such rights or warrants the conversion rate
shall be readjusted to the conversion rate which would have been
in effect had the numerator and the denominator of the foregoing
fraction and the resulting adjustment been made based upon the
number of shares of Common Stock actually delivered upon the
exercise of such rights or warrants rather than upon the number
of shares of Common Stock offered for subscription or purchase.
For the purposes of this paragraph (b), the number of shares of
Common Stock at any time outstanding shall not include shares
held in the treasury of the Company.
c. In case the Company shall, by dividend or otherwise,
distribute to all holders of its Common Stock shares of its
capital stock (other than Common Stock), or assets (excluding
cash dividends paid out of the retained earnings of the Company)
or rights or warrants to subscribe or purchase (excluding those
referred to in paragraph (b) above) (hereinafter collectively
referred to as "Distributions on Common Stock"), then in each
such case, the Company shall deliver to the Holder the
Distribution on Common Stock to which the Holder would be
entitled if it had converted the Debentures for Common Stock
immediately prior to the record date for the purpose of
determining stockholders entitled to receive such Distribution
on Common Stock.
d. The reclassification (including any reclassification
upon a merger in which the Company is the continuing
corporation) of Common Stock into securities including other
than Common Stock (other than any reclassification upon a
consolidation or merger to which Subsection B(6) applies) shall
be deemed to involve (i) a distribution of such securities other
than Common Stock to all holders of Common Stock (and the
effective date of such reclassification shall be deemed to be
"the date fixed for the determination of stockholders entitled
to receive such distribution" and "the date fixed for such
determination" within the meaning of paragraph (e) of this
Section), and (ii) a subdivision or combination, as the case may
be, of the number of shares of Common Stock outstanding
immediately prior to such reclassification into the number of
shares of Common Stock outstanding immediately thereafter.
e. For the purpose of any computation under paragraphs
(b) and (c) of this Section, the current market price per share
of Common Stock on any date shall be deemed to be the average of
the daily closing prices for the thirty consecutive business
days selected by the Company commencing with the forty-fifth
business day before the day in question. The closing price for
each day shall be the last reported sales price regular way or,
in case no such reported sale takes place on such day, the
average of the reported closing bid and asked prices regular
way, in either case on the American Stock Exchange or if the
Common Stock is not listed or admitted to trading on such
Exchange, on the principal national securities exchange on which
the Common Stock is listed or admitted to trading or, if not
listed or admitted to trading on any national securities
exchange, on the National Association of Securities Dealers
Automated Quotations National Market System or, if the Common
Stock is not listed or admitted to trading on any national
securities exchange or quoted on such National Market System,
the average of the closing bid and asked prices in the over-the-
counter market as furnished by any New York Stock Exchange or
American Stock Exchange member firm selected from time to time
by the Company for that purpose. If the current market price
per share of Common Stock cannot be determined in accordance
with the above procedures under this paragraph (e), such current
market price shall be determined in good faith by the Board of
Directors of the Company.
f. No adjustment in the conversion rate shall be required
unless such adjustment would require an increase or decrease of
at least 1% of such rate; provided, however, that the Company
may make any such adjustment at its election and provided,
further, that any adjustments which by reason of this paragraph
(f) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All
calculations under this Section B shall be made to the nearest
cent or to the nearest one-hundredth of a share, as the case may
be. Anything in this Section B notwithstanding, the Company may
make such reductions in the conversion rate, in addition to
those required by this Section, as it considers to be advisable
in order that any event treated for Federal income tax purposes
as a dividend of stock or stock rights shall not be taxable to
the recipients.
g. Whenever the conversion rate is adjusted as herein
provided
(1) the Company shall compute the adjusted
conversion rate in accordance with paragraph (a); and
(2) notice stating that the conversion rate has
been adjusted and setting forth the adjusted
conversion rate shall forthwith be mailed to the
Holder.
h. For the purpose of this Section B(4), the term "Common
Stock" shall include any stock of any class of the Company which
has no preference in respect of dividends or of amounts payable
in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Company and which is not
subject to redemption by the Company. However, shares issuable
on conversion of shares of this Series shall include only shares
of the class designated as Common Stock of the Company as of
January 1, 1996, or shares of any class or classes resulting
from any reclassification or reclassifications thereof and which
have no preference in respect of dividends or of amounts payable
in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Company and which are not
subject to redemption by the Company; provided, however, that if
at any time there shall be more than one such resulting class,
the shares of each such class then so issuable shall be
substantially in the proportion which the total number of shares
of such class resulting from all such reclassifications bears to
the total number of shares of all such classes resulting from
all such reclassifications.
5. No Fractional Shares. No fractional shares of Common Stock
shall be issued upon conversion of this Debenture. If more than one
Debenture shall be surrendered for conversion at one time by the
Holder, the number of full shares which shall be issuable upon
conversion thereof shall be computed on the basis of the aggregate
principal amount of the Debentures or specified portions thereof so
surrendered. Instead of any fractional share of Common Stock which
would otherwise be issuable upon conversion of this Debenture or any
Debentures or specified portions thereof, the Company shall pay a
cash adjustment in respect of such fraction in amount equal to the
same fraction of the current market price per share of Common Stock
(as determined in accordance with Section B.4.(e) above) at the close
of business on the day of conversion.
6. Consolidation, Merger or Sale of Assets. In case of any
consolidation of the Company with, or merger of the Company into, any
other Person, (other than a merger which does not result in any
reclassification, conversion, exchange or cancellation of outstanding
shares of Common Stock of the Company) or any sale or transfer of all
or substantially all of the assets of the Company (whether such
assets are held by the Company directly or indirectly through its
Subsidiaries), the Person formed by such consolidation or resulting
from such merger or which acquires such assets, as the case may be,
shall execute and deliver to the Holder an instrument providing that
the Holder shall have the right thereafter, during the period this
Debenture shall be convertible to convert this Debenture only into
the kind and amount of securities, cash and other property receivable
upon such consolidation, merger, sale or transfer by a holder of the
number of shares of Common Stock of the Company into which this
Debenture might have been converted immediately prior to such
consolidation, merger, sale or transfer assuming such holder of
Common Stock of the Company (i) is not a Person with which the
Company consolidated or into which the Company merged or to which
such sale or transfer was made, as the case may be ("constituent
Person"), or an Affiliate of a constituent Person and (ii) failed to
exercise his rights of election, if any, as to the kind or amount of
securities, cash and other property receivable upon such
consolidation, merger, sale or transfer (provided that if the kind or
amount of securities, cash and other property receivable upon such
consolidation, merger, sale or transfer is not the same for each
share of Common Stock of the Company held immediately prior to such
consolidation, merger, sale or transfer by other than a constituent
Person or an Affiliate thereof and in respect of which such rights of
election shall not have been exercised ("non-electing share") then
for the purpose of this subsection the kind and amount of securities,
cash and other property receivable upon such consolidation, merger,
sale or transfer by each non-electing share shall be deemed to be the
kind and amount so receivable per share by a plurality of the non-
electing shares). Such instrument shall provide for adjustments
which, for events subsequent to the effective date of such
instrument, shall be as nearly equivalent as may be practicable to
the adjustments provided for in this Section. The above provisions
of this subsection shall similarly apply to successive
consolidations, mergers, sales or transfers.
7. Shares to be Reserved. The Company covenants that it will
at all times reserve and keep available out of its authorized Common
Stock, solely for the purpose of issue upon conversion of Debentures
as herein provided, such number of shares of Common Stock as shall
then be issuable upon the conversion of all outstanding Debentures.
The Company covenants that all shares of Common Stock which shall be
so issuable shall, when issued, be duly and validly issued and fully
paid and nonassessable.
8. Registration and Listing of Shares. The Company covenants
that if any shares of Common Stock, required to be reserved for
purposes of conversion of Debentures hereunder, require registration
with or approval of any governmental authority under any Federal or
State law before such shares may be issued upon conversion, the
Company will in good faith and as expeditiously as possible endeavor
to cause such shares to be duly registered or approved, as the case
may be. The Company further covenants that so long as the Common
Stock of the Company is listed on the American Stock Exchange or any
other national securities exchange, the Company will, if permitted by
the rules of such exchange, list and keep listed on such exchange,
upon official notice of issuance, all shares of Common Stock issuable
upon conversion of Debentures.
9. Taxes and Charges. The issuance of certificates for shares
of Common Stock upon the conversion of Debentures shall be made
without charge to the Holder for such certificates or for any tax in
respect of the issuance of such certificates or the securities
represented thereby, and such certificates shall be issued in the
name of, or in such names as may be directed by, the Holder;
provided, however, that the Company shall not be required to pay any
tax which may be payable in respect of any transfer involved in the
issuance and delivery of any such certificate in a name other than
that of the Holder, and the Company shall not be required to issue or
deliver such certificates unless or until the Person or Persons
requesting the issuance thereof shall have paid to the Company the
amount of such tax or shall have established to the satisfaction of
the Company that such tax has been paid.
Section C. Optional Redemption.
The Debentures are subject to redemption upon not less than 30
or more than 60 days' notice by mail, at any time, as a whole or in
part, at the election of the Company, at a redemption price equal to
100% of the principal amount, together with accrued interest to the
redemption date, but interest installments whose stated maturity is
on or prior to such redemption date will be payable to the Holder.
In the event of redemption or conversion of this Debenture is in
part only, a new Debenture or Debentures for the unredeemed or
unconverted portion hereof will be issued in the name of the Holder
upon the cancellation hereof.
Section D. Subordination.
1. Debentures Subordinate to Senior Indebtedness. The Company
covenants and agrees, and the Holder by its acceptance hereof
likewise covenants and agrees, that, to the extent and in the manner
hereinafter set forth in this Section, the indebtedness represented
by this Debenture and the payment of the principal of (and premium,
if any) and interest on this Debenture are hereby expressly made
subordinate and subject in right of payment to the prior payment in
full of all Senior Indebtedness.
2. Payment Over of Proceeds Upon Dissolution Etc. Upon any
distribution of assets of the Company in the event of (a) any
insolvency or bankruptcy case or proceeding, or any receivership,
liquidation, reorganization or other similar case or proceeding in
connection therewith, relative to the Company or to its creditors, as
such, or to its assets, or (b) any liquidation, dissolution or other
winding up of the Company, whether voluntary or involuntary and
whether or not involving insolvency or bankruptcy, or (c) any
assignment for the benefit of creditors or any other marshalling of
assets and liabilities of the Company, then and in such event the
holders of Senior Indebtedness shall be entitled to receive payment
in full of all amounts due or to become due on or in respect of all
Senior Indebtedness, or provision shall be made for such payment, in
money or money's worth, before the Holder is entitled to receive any
payment on account of principal of (or premium, if any) or interest
on the Debentures, and to that end the holders of Senior Indebtedness
shall be entitled to receive, for application to the payment thereof,
any payment or distribution of any kind or character, whether in
cash, property or securities, including any such payment or
distribution which may be payable or deliverable by reason of the
payment of any other indebtedness of the Company being subordinated
to the payment of the Debentures, which may be payable or deliverable
in respect of the Debentures in any such case, proceeding,
dissolution, liquidation or other winding up or event.
In the event that, notwithstanding the foregoing provisions of
this Subsection, the Holder shall have received any payment or
distribution of assets of the Company of any kind or character,
whether in cash, property or securities, including any such payment
or distribution which may be payable or deliverable by reason of the
payment of any other indebtedness of the Company being subordinated
to the payment of the Debentures, before all Senior Indebtedness is
paid in full or payment thereof provided for, and if such fact shall
then have been made known to the Holder, then and in such event such
payment or distribution shall be paid over or delivered forthwith to
the trustee in bankruptcy, receiver, liquidating trustee, custodian,
assignee, agent or other Person making payment or distribution of
assets of the Company for application to the payment of all Senior
Indebtedness remaining unpaid, to the extent necessary to pay all
Senior Indebtedness in full, after giving effect to any concurrent
payment or distribution to or for the holders of Senior Indebtedness.
For purposes of this Section only, the words "cash, property or
securities" shall not be deemed to include shares of stock of the
Company as reorganized or readjusted, or securities of the Company or
any other corporation provided for by a plan of reorganization or
readjustment the payment of which is subordinated at least to the
extent provided in this Subsection with respect to the Debentures to
the payment of all Senior Indebtedness which may at the time be
outstanding: provided, however, that (i) Senior Indebtedness is
assumed by the new corporation, if any, resulting from any such
reorganization or readjustment, and (ii) the rights of the holders of
the Senior Indebtedness are not, without the consent of such holders,
altered by such reorganization or readjustment. The consolidation of
the Company with, or the merger of the Company into, another
corporation or the liquidation or dissolution of the Company
following the conveyance or transfer of its properties and assets
substantially as an entirety to another Person upon the terms and
conditions set forth in Section G shall not be deemed a dissolution,
winding up, liquidation, reorganization, assignment for the benefit
of creditors or marshalling of assets and liabilities of the Company
for the purposes of this Section if the corporation formed by such
consolidation or into which the Company is merged or the Person which
acquires by conveyance or transfer such properties and assets
substantially as a entirety, as the case may be, shall, as a part of
such consolidation, merger, conveyance or transfer, comply with the
conditions set forth in Section G.
3. Prior Payment to Senior Indebtedness Upon Acceleration of
Debentures. In the event that any of the Debentures are declared due
and payable before their Stated Maturity, then and in such event the
holders of Senior Indebtedness outstanding at the time such
Debentures so become due and payable shall be entitled to receive
payment in full of all amounts due or to become due on or in respect
of all such Senior Indebtedness, or provision shall be made for such
payment in money or money's worth, before the Holder is entitled to
receive any payment (including any payment which may be payable by
reason of the payment of any other indebtedness of the Company being
subordinated to the payment of the Debentures) by the Company on
account of the principal of (or premium, if any) or interest on the
Debentures or on account of the purchase or other acquisition of
Debentures.
In the event that, notwithstanding the foregoing, the Company
shall make any payment to the Holder prohibited by the foregoing
provisions of this Subsection, and if such facts shall then have been
made known to the Holder, then and in such event such payment shall
be paid over and delivered forthwith to the Company for the benefit
of the holders of Senior Indebtedness.
The provisions of this Section shall not apply to any payment
with respect to which Subsection 2 would be applicable.
4. No Payment When Newco Indebtedness in Default. (a) In the
event and during the continuation of any default in the payment of
principal (or premium, if any) or interest on any Newco Indebtedness
beyond any applicable grace period with respect thereto, or in the
event that any event of default with respect to any Newco
Indebtedness shall have occurred and be continuing permitting the
holders of such Newco Indebtedness (or a trustee on behalf of the
holders thereof) to declare such Newco Indebtedness due and payable
prior to the date on which it would otherwise have become due and
payable, unless and until such event of default shall have been cured
or waived or shall have ceased to exist and such acceleration shall
have been rescinded or annulled, or (b) in the event any judicial
proceeding shall be pending with respect to any such default in
payment or event of default, then no payment (including any payment
which may be payable by reason of the payment of any other
indebtedness of the Company being subordinated to the payment of the
Debentures) shall be made by the Company on account of principal of
(or premium, if any) or interest on the Debentures or on account of
the purchase or other acquisition of Debentures.
In the event that, notwithstanding the foregoing, the Company
shall make any payment to the Holder prohibited by the foregoing
provisions of this Subsection, and if such fact shall then have been
made known to the Holder, then and in such event such payment shall
be paid over and delivered forthwith to the Company for the benefit
of the holders of Newco Indebtedness.
The provisions of this Section shall not apply to any payment
with respect to which Subsection D(2) would be applicable.
5. Payment Permitted if No Default. Nothing contained in this
Section or elsewhere or in any of the Debentures shall prevent (x)
the Company, at any time except during the pendency of any case,
proceeding, dissolution, liquidation or other winding up, assignment
for the benefit of creditors or other marshalling of assets and
liabilities of the Company referred to in Subsection D(2) or under
the conditions described in Subsections D(3) or D(4), from making
payments at any time of principal of (and premium, if any) or
interest on the Debentures, or (y) the retention by the Holder of any
money deposited with it hereunder to the payment of or on account of
the principal of (and premium, if any) or interest on the Debentures
if, at the time of such retention the Holder did not have knowledge
that such payment would have been prohibited by the provisions of
this Section.
6. Subrogation to Rights of Holders of Senior Indebtedness.
Subject to the payment in full of all Senior Indebtedness, the Holder
shall be subrogated to the extent of the payments or distributions
made to the holders of such Senior Indebtedness pursuant to the
provisions of this Section to the rights of the holders of such
Senior Indebtedness to receive payments or distributions of cash,
property or securities applicable to the Senior Indebtedness until
the principal of (and premium, if any) and interest on the Debentures
shall be paid in full. For purposes of such subrogation, no payments
or distributions to the holders of the Senior Indebtedness of any
cash, property or securities to which the Holder would be entitled
except for the provisions of this Section, and no payments over
pursuant to the provisions of this Section to the Company or to the
holders of Senior Indebtedness by the Holder, shall, as between the
Company, its creditors other than holders of Senior Indebtedness and
the Holder, be deemed to be a payment or distribution by the Company
to or on account of the Debentures.
7. Provisions Solely to Define Relative Rights. The
provisions of this Section are and are intended solely for the
purpose of defining the relative rights of the Holder, on the one
hand, and the holders of Senior Indebtedness, on the other hand.
Nothing contained in this Section or elsewhere in this Debenture is
intended to or shall impair, as between the Company, its creditors
other than the holders of Senior Indebtedness and the Holder, the
obligation of the Company, which is absolute and unconditional, to
pay to the Holder the principal of (and premium, if any) and interest
on the Debenture as and when the same shall become due and payable in
accordance with their terms and which, subject to the rights under
this Section of the holders of Senior Indebtedness, is intended to
rank equally with all other general obligations of the Company, or is
intended to or shall affect the relative rights against the Company
of the Holder and creditors of the Company other than the holders of
Senior Indebtedness, nor shall anything herein or therein prevent the
Holder from exercising all remedies otherwise permitted by applicable
law upon default under this Debenture, subject to the rights, if any,
under this Section of the holders of Senior Indebtedness to receive
cash, property or securities otherwise payable or deliverable to the
Holder, and nothing herein shall prevent the conversion of this
Debenture (or any part thereof) in accordance with the terms hereof.
8. No Waiver of Subordination Provisions. No right of any
present or future holder of any Senior Indebtedness to enforce
subordination herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of
the Company or by any act or failure to act, in good faith, by any
such holder, or by any noncompliance by the Company with the terms,
provisions and covenants of this Debenture, regardless of any
knowledge thereof any such holder may have or be otherwise charged
with.
Without in any way limiting the generality of the foregoing
paragraph, the holders of Senior Indebtedness may, at any time and
from time to time, without the consent of or notice to the Holder,
without incurring responsibility to the Holder and without impairing
or releasing the subordination provided in this Section or the
obligations hereunder of the Holder to the holders of Senior
Indebtedness, do any one or more of the following: (i) change the
manner, place or terms of payment or extend the time of payment of,
or renew or alter, Senior Indebtedness, or otherwise amend or
supplement in any manner Senior Indebtedness or any instrument
evidencing the same or any agreement under which Senior Indebtedness
is outstanding; (ii) sell, exchange, release otherwise or otherwise
deal with any property pledged, mortgaged or securing Senior
Indebtedness; (iii) release any Person liable in any manner for the
collection of Senior Indebtedness; and (iv) exercise or refrain from
exercising any rights against the Company and any other Person.
9. Notice to Holder. The Company shall give prompt written
notice to the Holder of any fact known to the Company which would
prohibit the making of any payment to the Holder in respect of the
Debentures. Failure to give such notice shall not affect the
subordination of the Debenture to Senior Indebtedness.
Notwithstanding the provisions of this Section or any other provision
of this Debenture, the Holder shall not be charged with knowledge of
the existence of any facts which would prohibit the making of any
payment to the Holder in respect of the Debenture, unless and until
the Holder shall have received written notice thereof from the
Company or a holder of Senior Indebtedness or from any trustee
therefor.
Section E. Optional Mandatory Repurchase.
1. Obligation to Repurchase.
a. Upon the occurrence of any Contingent Event, the
Holder shall have the right, at such Holder's option, to require
the Company to redeem this Debenture in whole or in part at a
repurchase price equal to the principal amount of this Debenture
so repurchased plus accrued and unpaid interest on the principal
amount of this Debenture so repurchased.
Such option under this Section E shall be exercised by written
notice to the Company under Section E.b. hereof given at any
time from and after the thirtieth (30th) day before such
Contingent Event through the thirtieth (30th) day after such
Contingent Event (or, if later, through the thirtieth (30th) day
after the Holder receives written notice from the Company of
such Contingent Event). Promptly (and in any event within ten
(10) days) after the occurrence of any Contingent Event, and not
more than thirty (30) days before such Contingent Event, the
Company shall given written notice to the Holder notifying such
Holder of the occurrence of such Contingent Event and informing
such Holder of its right to exercise an option to require a
repurchase under this Section E.
b. In order to exercise its rights to require a
repurchase under this Section E, the Holder shall send to the
Company a written notice demanding prepayment under this Section
E and specifying the date of such prepayment (which shall not be
less than fifteen (15) days after receipt of such notice by the
Company, but in no event earlier than such Contingent Event,
except that such date may be the same date as a Contingent Event
if requested by the Holder).
c. This obligation to repurchase is subject to the
restriction that the Company may not buy any Debenture at any
time when the subordination provisions of this Debenture would
not permit the Company to make a payment of principal, premium
or interest on the Debentures.
2. Certain Definitions. As used in this Section:
a. "Contingent Event" means any one or more of the
following events which shall occur subsequent to February 15,
1996:
(1) the Company shall convey, transfer or lease all
or substantially all of its assets (whether held directly
or indirectly through Subsidiaries) to any Persons (other
than to a Subsidiary of the Company);
(2) any Person (other than the Company), including a
"group" (within the meaning of Section 13(d) and 14(d)(2)
of the Securities Exchange Act of 1934, as amended) that
includes such Person, shall acquire, directly or
indirectly, beneficial ownership, in the aggregate, of (x)
50 percent or more of the Common Stock, or (y) securities
representing 50 percent or more of the combined voting
power of the Company's voting securities, in either case,
outstanding on the date immediately prior to the date of
the last such acquisition by such Person; or
(3) on any day (a "Calculation Date") (x) (A) the
Company shall distribute cash, securities or other
properties, including cash dividends (other than Common
Stock, or rights or warrants to acquire Common Stock or
preferred stock substantially equivalent to Common Stock)
to holders of Common Stock, whether by means of dividend,
reclassification, recapitalization or otherwise, or (B) the
Company shall acquire, directly or indirectly, beneficial
ownership of Common Stock; and (y) the sum of the
Applicable Percentages (as defined below) of all such
distributions and acquisitions which have occurred on the
Calculation Date and during the 365-day period immediately
preceding the Calculation Date shall exceed 30 percent.
b. "Applicable Percentage" means (x) In the case of each
distribution referred to in clause (3) above, the percentage
determined as of the Calculation Date of each such distribution
by dividing the aggregate fair market value (as determined in
good faith by the Board of Directors), of such distribution, by
the fair market value (based on the then current market price)
of all of the shares of Common Stock outstanding on the day
immediately prior to such Calculation Date; and (y) in the case
of each acquisition referred to in clause (3) above, the
percentage determined as of the Calculation Date of each such
acquisition by dividing all amounts expended by the Company
(such amounts, if other than in cash, as determined in good
faith by the Board of Directors), in connection with the
acquisition of any shares of Common Stock, by the fair market
value (based on the then current market price) of all of the
shares of Common Stock outstanding on the day immediately prior
to such Calculation Date.
Section F. Covenants.
1. Payment of Principal, Premium and Interest. The Company
will duly and punctually pay the principal of (and premium, if any)
and interest on this Debenture in accordance with the terms hereof.
2. Statement as to Compliance. The Company will deliver to
the Holder, within 120 days after the end of each fiscal year, an
Officers' Certificate stating, as to each signer thereof, that
a. a review of the activities of the Company and its
Subsidiaries during such year and of performance under this
Debenture has been made under his supervision, and
b. to the best of his knowledge, based on such review,
the Company has fulfilled all its obligations under this
Debenture throughout such year, or, if there has been a default
in the fulfillment of any such obligation, specifying each such
default known to him and the nature and status thereof.
3. Further Instruments and Acts. From time to time the
Company will, at its own expense and upon request of the Holder,
execute and deliver or cause to be executed and delivered such
further instruments and do such further acts as may reasonably be
necessary or desirable to carry out the purposes of this Debenture.
Section G. Consolidation, Merger, Conveyance, Transfer or Lease.
1. Company May Consolidate, etc. Only on Certain Terms. The
Company shall not consolidate with or merge into any other Person or
convey, transfer or lease its properties and assets substantially as
an entirety (whether such properties and assets are held by the
Company directly or through its Subsidiaries) to any Person, unless:
a. the Person formed by such consolidation or into which
the Company is merged or the Person which acquires by conveyance
or transfer, or which leases, the properties and assets of the
Company substantially as a entirety shall be a corporation
organized and existing under the laws of the United States of
America, any State thereof or the District of Columbia and shall
expressly assume, by an instrument, executed and delivered to
the Holder, in form satisfactory to the Holder, the due and
punctual payment of the principal of (and premium, if any) and
interest on this Debenture and the performance of every
obligation herein on the part of the Company to be performed or
observed and shall have provided for conversion rights in
accordance with Subsection (B)(6).
b. immediately after giving effect to such transaction,
no Event of Default, and no event which, after notice or lapse
of time or both, would become an Event of Default, shall have
happened and be continuing; and
c. the Company has delivered to the Holder an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, conveyance, transfer or lease and, if an
instrument is required hereunder in connection with such
transaction, such instrument comply with this Section and that
all conditions precedent herein provided for relating to such
transaction have been complied with.
2. Successor Corporation Substituted. Upon any consolidation
or merger by the Company with or into any other Person or any
conveyance, transfer or lease of the properties and assets of the
Company substantially as a entirety (whether such properties and
assets are held by the Company directly or through its Subsidiaries)
to any Person in accordance with Subsection (G)(1), the successor
corporation formed by such consolidation or into which the Company is
merged or to which such conveyance, transfer or lease is made shall
succeed to, and be substituted for, and may exercise every right and
power of the Company hereunder with the same effect as if such
successor corporation had been named as the Company herein, and
thereunder, except in the case of a lease to another Person, the
predecessor corporation shall be relieved of all obligations and
covenants under this Debenture.
Section H. Reports by Company. The Company shall mail to
the Holder, within 15 days after the Company is required to file the
same with the Commission, copies of the annual reports and of the
information, documents and other reports (or copies of such portions
of any of the foregoing as the Commission may from time to time by
rules and regulations prescribe) which the Company may be required to
file with the Commission pursuant to Section 13(a) or Section 15(d)
of the Securities Exchange Act of 1934, as amended; and, if the
Company is not required to file information, documents or reports
pursuant to either of said Sections, then it shall nonetheless mail
the same to the Holder as if it were required to do so by the
Commission.
Section I. Remedies.
1. Events of Default. "Event of Default," wherever used
herein, means any one of the following events (whatever the reason
for such Event of Default and whether it shall be occasioned by the
provisions of Section (B) or 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 or any
administrative or governmental body):
a. default in the payment of any interest upon this
Debenture and any other Debenture issued to the Holder when it
becomes due and payable and continuance of such default for a
period of 10 days; or
b. default in the payment of the principal of (or
premium, if any, on) this Debenture and any other Debenture
issued to the Holder at its Maturity whether or not such payment
is prohibited by the subordination provisions of this Debenture
and continuance of such default for a period of 30 days; or
c. default in the performance, or breach, of any covenant
or warranty of the Company in this Debenture (other than a
covenant or warranty a default in whose performance or whose
breach is elsewhere in this Section specifically dealt with),
and continuance of such default or breach for a period of 30
days after there has been given, by registered or certified
mail, to the Company by the Holder a written notice specifying
such default or breach and requiring it to be remedied and
stating that such notice is a "Notice of Default" hereunder; or
d. the entry by a court having jurisdiction in the
premises of (A) a decree or order for relief in respect of the
Company in an involuntary case or proceeding under any
applicable Federal or state bankruptcy, insolvency,
reorganization or other similar law or (B) a decree or order
adjudging the Company a bankrupt or insolvent, or approving as
properly filed a petition seeking reorganization, arrangement,
adjustment or composition of or in respect of the Company under
any applicable Federal or state law, or appointing a custodian,
receiver, liquidator, assignee, trustee, sequestrator or other
similar official of the Company or of any substantial part of
its property, or ordering the winding up or liquidation of its
affairs, and the continuance of any such decree or order for
relief or any such other decree or order unstayed and in effect
for a period of 60 consecutive days; or
e. the commencement by the Company of a voluntary case or
proceeding under any applicable Federal or state bankruptcy,
insolvency, reorganization or other similar law or of any other
case or proceeding to be adjudicated a bankrupt or insolvent, or
the consent by it to the entry of a decree or order for relief
in respect of the Company in an involuntary case or proceeding
under any applicable Federal or state bankruptcy, insolvency,
reorganization or other similar law or to the commencement of
any bankruptcy or insolvency case or proceeding against it, or
the filing by it of a petition or answer or consent seeking
reorganization or relief under any applicable Federal or state
law, or the consent by it to the filing of such petition or to
the appointment of or taking possession by a custodian,
receiver, liquidator, assignee, trustee, sequestrator or similar
official of the Company or of any substantial part of its
property, or the making by it of an assignment for the benefit
of creditors, or the admission by it in writing of its inability
to pay its debts generally as they become due, or the taking of
corporate action by the Company in furtherance of any such
action.
2. Acceleration of Maturity; Rescission and Annulment. If any
Event of Default occurs and is continuing (other than an Event of
Default described in Subsections I(1)(d) and (e)), then and in every
such case the Holder may declare the principal and all accrued and
unpaid interest of all the Debentures issued to the Holder to be due
and payable immediately, by a notice in writing to the Company, and
upon any such declaration such principal shall become immediately due
and payable. If an Event of Default described in Subsections I(1)(d)
and (e) shall occur, then in every such case the unpaid principal
balance hereof and all accrued and unpaid interest shall
automatically become due and payable.
3. Collection of Indebtedness and Suits for Enforcement. The
Company covenants that if
a. default is made in the payment of any installment of
interest on any Debenture issued to the Holder when such
interest become due and payable and such default continues for a
period of 30 days, or
b. default is made in the payment of the principal of (or
premium, if any, on) any Debenture issued to the Holder at the
Maturity thereof,
the Company will, upon demand by the Holder, pay to it, the whole
amount then due and payable on such Debentures for principal (and
premium, if any) and interest, with interest upon the overdue
principal (and premium, if any) and, to the extent that payment of
such interest shall be legally enforceable, upon overdue installments
of interest, at the rate borne by the Debentures and, in addition
thereto, such further amount as shall be sufficient to cover the
costs and expenses of collection, including the reasonable
compensation, expenses and disbursements of the Holder, its agents
and counsel.
If the Company fails to pay such amounts forthwith upon such
demand, the Holder may institute a judicial proceeding for the
collection of the sums so due and unpaid, may prosecute such
proceeding to judgment or final decree and may enforce the same
against the Company or any other obligor upon the Debentures and
collect the moneys adjudged or decreed to be payable in the manner
provided by law out of the property of the Company or any other
obligor upon the Debentures, wherever situated.
If an Event of Default occurs and is continuing, the Holder may
in its discretion proceed to protect and enforce its rights by such
appropriate judicial proceedings as it shall deem most effectual to
protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Debenture or in aid
of the exercise of any power granted herein, or to enforce any other
proper remedy.
4. Application of Money Collected. Subject to Section D, any
money collected by the Holder pursuant to this Section shall be
applied first to the payment of all fees, costs and expenses
(including attorneys fees and expenses) incurred by the Holder
(whether before or after judgment) in the collection of such sums and
second, to the payment of the amounts then due and unpaid for
principal of (and premium, if any) and interest on the Debentures in
respect of which or for the benefit of which such money or
Debentures, as the case may be, has been collected.
5. Unconditional Right of Holder to Receive Principal, Premium
and Interest and to Convert. Notwithstanding any other provision
herein, the Holder shall have the right, which is absolute and
unconditional, to receive payment of the principal of (and premium,
if any) and interest on this Debenture on the date when due (or, in
the case of redemption, on the Redemption Date) and to convert this
Debenture in accordance with Section B and to institute suit for the
enforcement of any such payment and right to convert.
6. Rights and Remedies Cumulative. No right or remedy herein
conferred upon or reserved to the Holder is intended to be exclusive
of any other right or remedy, and every right and remedy shall, to
the extent permitted by law, be cumulative and in addition to every
other right and remedy given hereunder or now or hereafter existing
at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or
remedy.
7. Delay or Omission Not Waiver. No delay or omission of the
Holder to exercise any right or remedy accruing upon any Event of
Default shall impair any such right or remedy or constitute a waiver
of any such Event of Default or an acquiescence therein. Every right
and remedy given by this Section or by law to the Holder may be
exercised from time to time, and as often as may be deemed expedient,
by the Holder.
8. Amendments; Governing Law etc.. This Debenture may be
amended only by a writing signed by the Company and the Holder. The
Article and Section headings herein are for convenience only and
shall not affect the construction hereof. All covenants and
agreements in this Debenture by the Company shall bind its successors
and assigns, whether so expressed or not. In case any provision in
this Debenture 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. This Debenture
shall be governed by and construed in accordance with the laws of the
State of Wisconsin. If any action or proceeding shall be brought by
the Holder in order to enforce any right or remedy under this
Debenture, the Company hereby consents and submits to the
jurisdiction of the courts of the State of Wisconsin and of any
Federal court sitting in The City of Milwaukee, State of Wisconsin.
Any action or proceeding brought by the Company to enforce any right,
assert any claim or obtain any relief whatsoever in connection with
this Debenture shall be brought by the Company exclusively in the
courts of the State of Wisconsin or in any Federal court sitting in
The City of Milwaukee, State of Wisconsin.
No provision of this Debenture shall alter or impair the
obligation of the Company, which is absolute and unconditional, to
pay the principal of (and premium, if any) and interest on this
Debenture at the times, place and rate, and in the coin or currency
or with another debenture, herein prescribed or to convert this
Debenture as provided herein.
Debentures are exchangeable for a like aggregate principal
amount of Debentures of a different authorized denomination, as
requested by the Holder.
No service charge shall be made for any such registration of
transfer or exchange, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in
connection therewith.
9. Definitions. The following terms shall have the meanings
specified below:
"Affiliate" of any specified person means any other Person
directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person. For the purposes of
this definition, "control" when used with respect to any specified Person
means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly
adopted by the Board of Directors and to be in full force and effect on
the date of such certification, and delivered to the Trustee.
"Commission" means the Securities and Exchange Commission, as
from time to time constituted, created under the Securities Exchange Act
of 1934, or, if at any time after the execution of this instrument such
Commission is not existing and performing the duties now assigned to it
under the Trust Indenture Act, then the body performIng such duties at
such time.
"Common Stock" means all shares now or hereafter authorized of
the class of Common Stock of the Company currently authorized and stock of
any other class into which such shares may hereafter have been changed.
"Debentures" means this Debenture and all other Debentures of
the Company issued to the Holder.
"Event of Default" has the meaning specified in Section I.
"Interest Payment Date" means the Stated Maturity of a
installment of interest on the Debentures.
"Maturity" when used with respect to any Debenture means the
date on which the principal of such Debenture becomes due and payable as
therein or herein provided, whether at the Stated Maturity or by
declaration of acceleration, call for redemption or otherwise.
"Newco" means Newco, Inc., a Wisconsin corporation and any
successor thereto.
"Newco Indebtedness" means the principal, premium, if any, and
unpaid interest on indebtedness for money borrowed by Newco and guaranteed
by the Company (at any time and from time to time), whether outstanding on
the date hereof or hereafter, and all renewals, extensions and refundings
of any such Debt; provided, however, that the following shall not
constitute Newco Indebtedness: any Debt which by its terms refers
explicitly to the Debentures issued hereunder and states that such Debt
shall not be senior in right of payment thereto.
"Officers" Certificate" means a certificate signed by the
Chairman of the Board, the President or a Vice President, and by the
Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary
of the Company, and delivered to the Holder.
"Opinion of Counsel" means a written opinion of counsel, who may
be counsel for the Company or other counsel acceptable to the Holder.
"Person" means any individual, corporation, partnership, joint
venture, association, joint stock company, trust, unincorporated
organization or government or any agent or political subdivision thereof.
"Redemption Date," when used with respect to any Debenture to be
redeemed, means the date fixed for such redemption by or pursuant to this
Debenture.
"Redemption Price," when used with respect to any Debenture to
be redeemed, means the price at which it is to be redeemed pursuant to
this Debenture.
"Regular Record Date" for the interest payable on any Interest
Payment Date means the April 1st or the September 1st (whether or not a
Business Day), as the case may be, next preceding such Interest Payment
Date.
"Senior Indebtedness" means all Debts, obligations and
liabilities of the Company arising under the guarantee by the Company of
the Newco Indebtedness, whether such guarantee is outstanding on the date
hereof or hereafter, and all renewals, replacements and extensions
thereof.
"Stated Maturity," when used with respect to any Debenture or
any installment of interest thereon, means the date specified in such
Debenture as the fixed date on which the principal of such Debenture or
such installment of interest is due and payable.
"Subsidiary" means a corporation more than 50% of the
outstanding voting stock of which is owned, directly or indirectly, by the
Company or by one or more other Subsidiaries, or by the Company and one or
more other Subsidiaries. For the purposes of this definition, "voting
stock" means stock which ordinarily has voting power for the election of
directors, whether at all times or only so long as no senior class of
stock has such voting power by reason of any contingency.
IN WITNESS WHEREOF, the Company has caused this instrument to be
duly executed under its corporate seal.
[SEAL] SWING-N-SLIDE CORP.
By:
Print:
Title:
CREDIT AGREEMENT
Dated as of January 19, 1995
among
NEWCO, INC.
THE INSTITUTIONS FROM TIME TO TIME
PARTY HERETO AS LENDERS
and
THE FIRST NATIONAL BANK OF CHICAGO,
as Agent
<PAGE>
TABLE OF CONTENTS
ARTICLE I: DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Certain Defined Terms. . . . . . . . . . . . . . . . . . . 1
1.2 References . . . . . . . . . . . . . . . . . . . . . . . . 25
1.3 Supplemental Disclosure . . . . . . . . . . . . . . . . . . 25
ARTICLE II: THE CREDITS . . . . . . . . . . . . . . . . . . . . . . 25
2.1 Term Loans . . . . . . . . . . . . . . . . . . . . . . . . 25
2.2 Revolving Loans . . . . . . . . . . . . . . . . . . . . . . 26
2.3 Ratable Loans . . . . . . . . . . . . . . . . . . . . . . . 27
2.4 Rate Options for all Advances . . . . . . . . . . . . . . . 27
2.5 Optional Payments; Mandatory Prepayments . . . . . . . . . 27
(A) Optional Payments . . . . . . . . . . . . . . . . . . 27
(B) Mandatory Prepayments . . . . . . . . . . . . . . . . 27
2.6 Reduction of Commitments . . . . . . . . . . . . . . . . . 29
2.7 Method of Borrowing . . . . . . . . . . . . . . . . . . . . 29
2.8 Method of Selecting Types and Interest Periods for
Advances . . . . . . . . . . . . . . . . . . . . . . . . . 29
2.9 Minimum Amount of Each Advance . . . . . . . . . . . . . . 29
2.10 Method of Selecting Types and Interest Periods for
Conversion and Continuation of Advances . . . . . . . . . . 30
(A) Right to Convert . . . . . . . . . . . . . . . . . . . 30
(B) Automatic Conversion and Continuation . . . . . . . . 30
(C) No Conversion Post-Default or Post-Unmatured Default . 30
(D) Conversion/Continuation Notice . . . . . . . . . . . . 30
2.11 Default Rate . . . . . . . . . . . . . . . . . . . . . . . 30
2.12 Collections Account Arrangements . . . . . . . . . . . . . 30
2.13 Method of Payment . . . . . . . . . . . . . . . . . . . . 31
2.14 Notes, Telephonic Notices . . . . . . . . . . . . . . . . 31
2.15 Promise to Pay; Interest and Fees; Interest Payment Dates;
Interest and Fee Basis; Taxes; Loan and Control Accounts . 31
(A) Promise to Pay . . . . . . . . . . . . . . . . . . . . 31
(B) Interest Payment Dates . . . . . . . . . . . . . . . . 31
(C) Fees . . . . . . . . . . . . . . . . . . . . . . . . . 32
(D) Interest and Fee Basis . . . . . . . . . . . . . . . . 32
(E) Taxes . . . . . . . . . . . . . . . . . . . . . . . . 32
(F) Loan Account . . . . . . . . . . . . . . . . . . . . . 35
(G) Control Account . . . . . . . . . . . . . . . . . . . 35
(H) Entries Binding . . . . . . . . . . . . . . . . . . . 35
2.16 Notification of Advances, Interest Rates, Prepayments and
Aggregate Revolving Loan Commitment Reductions . . . . . . 35
2.17 Lending Installations . . . . . . . . . . . . . . . . . . 35
2.18 Non-Receipt of Funds by the Agent . . . . . . . . . . . . 36
2.19 Termination Date . . . . . . . . . . . . . . . . . . . . . 36
2.20 Replacement of Certain Lenders . . . . . . . . . . . . . . 36
2.21 Letter of Credit Facility . . . . . . . . . . . . . . . . 37
2.22 Letter of Credit Reimbursement Obligations . . . . . . . . 37
2.23 Letter of Credit Participation . . . . . . . . . . . . . . 38
2.24 Cash Collateral . . . . . . . . . . . . . . . . . . . . . 38
2.25 Letter of Credit Fees . . . . . . . . . . . . . . . . . . 39
2.26 Indemnification; Exoneration . . . . . . . . . . . . . . . 39
ARTICLE III: CHANGE IN CIRCUMSTANCES . . . . . . . . . . . . . . . . 40
3.1 Yield Protection . . . . . . . . . . . . . . . . . . . . . 40
3.2 Changes in Capital Adequacy Regulations . . . . . . . . . . 41
3.3 Availability of Types of Advances . . . . . . . . . . . . . 42
3.4 Funding Indemnification . . . . . . . . . . . . . . . . . . 42
3.5 Lender Statements; Survival of Indemnity . . . . . . . . . 42
ARTICLE IV: CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . 43
4.1 Initial Advances and Letters of Credit . . . . . . . . . . 43
4.2 Each Advance and Letter of Credit . . . . . . . . . . . . . 44
ARTICLE V: REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . 44
5.1 Organization; Corporate Powers . . . . . . . . . . . . . . 44
5.2 Authority . . . . . . . . . . . . . . . . . . . . . . . . . 45
5.3 No Conflict; Governmental Consents . . . . . . . . . . . . 45
5.4 Financial Statements . . . . . . . . . . . . . . . . . . . 46
5.5 No Material Adverse Change . . . . . . . . . . . . . . . . 46
5.6 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
(A) Tax Examinations . . . . . . . . . . . . . . . . . . . 47
(B) Payment of Taxes . . . . . . . . . . . . . . . . . . . 47
5.7 Litigation; Loss Contingencies and Violations . . . . . . . 47
5.8 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . 47
5.9 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
5.10 Accuracy of Information . . . . . . . . . . . . . . . . . 49
5.11 Securities Activities . . . . . . . . . . . . . . . . . . 49
5.12 Material Agreements . . . . . . . . . . . . . . . . . . . 49
5.13 Compliance with Laws . . . . . . . . . . . . . . . . . . . 49
5.14 Assets and Properties . . . . . . . . . . . . . . . . . . 49
5.15 Statutory Indebtedness Restrictions . . . . . . . . . . . 49
5.16 Post-Retirement Benefits . . . . . . . . . . . . . . . . . 50
5.17 Insurance . . . . . . . . . . . . . . . . . . . . . . . . 50
5.18 Contingent Obligations . . . . . . . . . . . . . . . . . . 50
5.19 Restricted Junior Payments . . . . . . . . . . . . . . . . 50
5.20 Labor Matters . . . . . . . . . . . . . . . . . . . . . . 50
5.21 Environmental Matters. . . . . . . . . . . . . . . . . . . 50
ARTICLE VI: COVENANTS . . . . . . . . . . . . . . . . . . . . . . . 51
6.1 Reporting . . . . . . . . . . . . . . . . . . . . . . . . . 51
(A) Financial Reporting . . . . . . . . . . . . . . . . . 51
(B) Notice of Default . . . . . . . . . . . . . . . . . . 53
(C) Lawsuits . . . . . . . . . . . . . . . . . . . . . . . 53
(D) Insurance . . . . . . . . . . . . . . . . . . . . . . 54
(E) ERISA Notices . . . . . . . . . . . . . . . . . . . . 54
(F) Labor Matters . . . . . . . . . . . . . . . . . . . . 56
(G) Other Indebtedness . . . . . . . . . . . . . . . . . . 56
(H) Other Reports . . . . . . . . . . . . . . . . . . . . 56
(I) Environmental Notices . . . . . . . . . . . . . . . . 56
(J) Borrowing Base Certificate . . . . . . . . . . . . . . 56
(K) Other Information . . . . . . . . . . . . . . . . . . 57
6.2 Affirmative Covenants . . . . . . . . . . . . . . . . . . . 57
(A) Corporate Existence, Etc. . . . . . . . . . . . . . . 57
(B) Corporate Powers; Conduct of Business . . . . . . . . 57
(C) Compliance with Laws, Etc. . . . . . . . . . . . . . . 57
(D) Payment of Taxes and Claims; Tax Consolidation . . . . 57
(E) Insurance . . . . . . . . . . . . . . . . . . . . . . 57
(F) Inspection of Property; Books and Records;
Discussions . . . . . . . . . . . . . . . . . . . . . 58
(G) Insurance and Condemnation Proceeds . . . . . . . . . 58
(H) ERISA Compliance . . . . . . . . . . . . . . . . . . . 59
(I) Maintenance of Property . . . . . . . . . . . . . . . 59
(J) Environmental Compliance . . . . . . . . . . . . . . . 59
(K) Use of Proceeds . . . . . . . . . . . . . . . . . . . 59
(L) Interest Rate Agreements . . . . . . . . . . . . . . . 60
6.3 Negative Covenants . . . . . . . . . . . . . . . . . . . . 60
(A) Indebtedness . . . . . . . . . . . . . . . . . . . . . 60
(B) Sales of Assets . . . . . . . . . . . . . . . . . . . 62
(C) Liens . . . . . . . . . . . . . . . . . . . . . . . . 62
(D) Investments . . . . . . . . . . . . . . . . . . . . . 63
(E) Contingent Obligations . . . . . . . . . . . . . . . . 63
(F) Restricted Junior Payments . . . . . . . . . . . . . . 63
(G) Conduct of Business; Subsidiaries; Acquisitions . . . 64
(H) Transactions with Shareholders and Affiliates . . . . 64
(I) Restriction on Fundamental Changes . . . . . . . . . . 65
(J) Sales and Leasebacks . . . . . . . . . . . . . . . . . 65
(K) Margin Regulations . . . . . . . . . . . . . . . . . . 65
(L) ERISA . . . . . . . . . . . . . . . . . . . . . . . . 65
(M) Issuance of Capital Stock . . . . . . . . . . . . . . 66
(N) Corporate Documents . . . . . . . . . . . . . . . . . 66
(O) Other Indebtedness . . . . . . . . . . . . . . . . . . 66
(P) Fiscal Year . . . . . . . . . . . . . . . . . . . . . 66
(Q) Subsidiary Covenants . . . . . . . . . . . . . . . . . 66
(R) Rate Hedging Obligations . . . . . . . . . . . . . . . 67
(S) Subordinated Indebtedness. . . . . . . . . . . . . . . 67
(T) Change of Deposit Accounts. . . . . . . . . . . . . . 67
6.4 Financial Covenants . . . . . . . . . . . . . . . . . . . . 67
(A) Defined Terms for Financial Covenants . . . . . . . . 67
(B) Interest Coverage Ratio . . . . . . . . . . . . . . . 68
(C) Fixed Charge Coverage Ratio . . . . . . . . . . . . . 69
(D) Maximum Leverage Ratio . . . . . . . . . . . . . . . . 69
(E) Capital Expenditures . . . . . . . . . . . . . . . . . 70
(F) Rentals . . . . . . . . . . . . . . . . . . . . . . . 70
ARTICLE VII: DEFAULTS . . . . . . . . . . . . . . . . . . . . . . . 70
7.1 Defaults . . . . . . . . . . . . . . . . . . . . . . . . . 70
ARTICLE VIII: ACCELERATION, DEFAULTING LENDERS; WAIVERS, AMENDMENTS
AND REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . 73
8.1 Termination of Commitments; Acceleration . . . . . . . . . 73
8.2 Defaulting Lender . . . . . . . . . . . . . . . . . . . . . 73
8.3 Amendments . . . . . . . . . . . . . . . . . . . . . . . . 74
8.4 Preservation of Rights . . . . . . . . . . . . . . . . . . 75
ARTICLE IX: GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . 76
9.1 Survival of Representations . . . . . . . . . . . . . . . . 76
9.2 Governmental Regulation . . . . . . . . . . . . . . . . . . 76
9.3 Performance of Obligations . . . . . . . . . . . . . . . . 76
9.4 Headings . . . . . . . . . . . . . . . . . . . . . . . . . 76
9.5 Entire Agreement . . . . . . . . . . . . . . . . . . . . . 77
9.6 Several Obligations; Benefits of this Agreement . . . . . . 77
9.7 Expenses; Indemnification . . . . . . . . . . . . . . . . . 77
(A) Expenses . . . . . . . . . . . . . . . . . . . . . . . 77
(B) Indemnity . . . . . . . . . . . . . . . . . . . . . . 77
(C) Waiver of Certain Claims; Settlement of Claims . . . . 78
(D) Survival of Agreements . . . . . . . . . . . . . . . . 78
9.8 Numbers of Documents . . . . . . . . . . . . . . . . . . . 78
9.9 Accounting . . . . . . . . . . . . . . . . . . . . . . . . 79
9.10 Severability of Provisions . . . . . . . . . . . . . . . . 79
9.11 Nonliability of Lenders . . . . . . . . . . . . . . . . . 79
9.12 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . 79
9.13 CONSENT TO JURISDICTION; SERVICE OF PROCESS; JURY TRIAL . . 79
(A) EXCLUSIVE JURISDICTION . . . . . . . . . . . . . . . . 79
(B) OTHER JURISDICTIONS . . . . . . . . . . . . . . . . . 79
(C) SERVICE OF PROCESS . . . . . . . . . . . . . . . . . . 80
(D) WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . 80
(E) WAIVER OF BOND . . . . . . . . . . . . . . . . . . . . 80
(F) ADVICE OF COUNSEL . . . . . . . . . . . . . . . . . . 81
9.14 No Strict Construction . . . . . . . . . . . . . . . . . . 81
ARTICLE X: THE AGENT . . . . . . . . . . . . . . . . . . . . . . . . 81
10.1 Appointment; Nature of Relationship . . . . . . . . . . . 81
10.2 Powers . . . . . . . . . . . . . . . . . . . . . . . . . . 81
10.3 General Immunity . . . . . . . . . . . . . . . . . . . . . 81
10.4 No Responsibility for Loans, Creditworthiness, Collateral,
Recitals, Etc. . . . . . . . . . . . . . . . . . . . . . . 82
10.5 Action on Instructions of Lenders . . . . . . . . . . . . 82
10.6 Employment of Agents and Counsel . . . . . . . . . . . . . 82
10.7 Reliance on Documents; Counsel . . . . . . . . . . . . . . 82
10.8 The Agent's Reimbursement and Indemnification . . . . . . 82
10.9 Rights as a Lender . . . . . . . . . . . . . . . . . . . . 83
10.10 Lender Credit Decision . . . . . . . . . . . . . . . . . 83
10.11 Successor Agent . . . . . . . . . . . . . . . . . . . . . 83
10.12 Collateral Documents . . . . . . . . . . . . . . . . . . . 83
ARTICLE XI: SETOFF; RATABLE PAYMENTS . . . . . . . . . . . . . . . . 84
11.1 Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . 84
11.2 Ratable Payments . . . . . . . . . . . . . . . . . . . . . 84
11.3 Application of Payments . . . . . . . . . . . . . . . . . 84
11.4 Relations Among Lenders . . . . . . . . . . . . . . . . . 85
ARTICLE XII: BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS . . . 85
12.1 Successors and Assigns . . . . . . . . . . . . . . . . . . 85
12.2 Participations . . . . . . . . . . . . . . . . . . . . . . 86
(A) Permitted Participants; Effect . . . . . . . . . . . . 86
(B) Voting Rights . . . . . . . . . . . . . . . . . . . . 86
(C) Benefit of Setoff . . . . . . . . . . . . . . . . . . 86
12.3 Assignments . . . . . . . . . . . . . . . . . . . . . . . 87
(A) Permitted Assignments . . . . . . . . . . . . . . . . 87
(B) Effect; Effective Date . . . . . . . . . . . . . . . . 87
(C) The Register . . . . . . . . . . . . . . . . . . . . . 88
12.4 Confidentiality . . . . . . . . . . . . . . . . . . . . . 88
12.5 Dissemination of Information . . . . . . . . . . . . . . . 88
ARTICLE XIII: NOTICES . . . . . . . . . . . . . . . . . . . . . . . 88
13.1 Giving Notice . . . . . . . . . . . . . . . . . . . . . . 88
13.2 Change of Address . . . . . . . . . . . . . . . . . . . . 88
ARTICLE XIV: COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . 89
<PAGE>
EXHIBITS AND SCHEDULES
Exhibits
EXHIBIT A -- Borrowing Base Certificate
(Definitions)
EXHIBIT B -- Commitments
(Definitions)
EXHIBIT C -- Form of Revolving Note
(Definitions)
EXHIBIT D -- Form of Term Note
(Definitions)
EXHIBIT E -- Form of Assignment Agreement
(Sections 2.19, 12.3)
EXHIBIT F -- List of Closing Documents
(Section 4.1)
EXHIBIT G -- Form of Officer's Certificate
(Sections 4.2, 6.1(A)(iv))
EXHIBIT H -- Form of Compliance Certificate
(Sections 4.2, 6.1(A)(iv))
EXHIBIT I -- Pro Forma Financial Statements
(Section 5.4(A))
EXHIBIT J -- Money Transfer Instructions
(Section 4.1)
<PAGE>
Schedules
Schedule 1.1.1 -- Permitted Existing Contingent Obligations
(Definitions)
Schedule 1.1.2 -- Permitted Existing Indebtedness (Definitions)
Schedule 1.1.3 -- Permitted Existing Investments (Definitions)
Schedule 1.1.4 -- Permitted Existing Liens (Definitions)
Schedule 5.3 -- Conflicts; Governmental Consents (Section 5.3)
Schedule 5.7 -- Litigation; Loss Contingencies (Section 5.7)
Schedule 5.8 -- Subsidiaries (Section 5.8)
Schedule 5.17 -- Insurance (Sections 5.17, 6.2(E))
Schedule 5.18 -- Contingent Obligations (Sections 5.7, 5.18)
Schedule 5.20 -- Labor Matters; Compensation Agreements
(Section 5.20)
Schedule 5.21 -- Environmental Matters (Section 5.21)
<PAGE>
CREDIT AGREEMENT
This Credit Agreement dated as of January 19, 1995 is entered into among
Newco, Inc., a Wisconsin corporation, the institutions from time to time a
party hereto as Lenders, whether by execution of this Agreement or an
assignment and acceptance pursuant to Section 12.3, and The First National
Bank of Chicago, in its capacity as contractual representative for itself
and the other Lenders. The parties hereto agree as follows:
ARTICLE I: DEFINITIONS
1.1 Certain Defined Terms. In addition to the terms defined above, the
following terms used in this Agreement shall have the following meanings,
applicable both to the singular and the plural forms of the terms defined:
As used in this Agreement:
"Accommodation Obligations" is defined in the definition "Contingent
Obligation" below.
"Account Debtor" means the account debtor or obligor with respect to any
of the Receivables and/or the prospective purchaser with respect to any
contract right, and/or any party who enters into or proposes to enter into
any contract or other arrangement with Borrower.
"Acquisition" means any transaction, or any series of related
transactions, consummated on or after the date of this Agreement, by which
Borrower or any of its Subsidiaries (i) acquires any going business or all
or substantially all of the assets of any firm, corporation or division
thereof, whether through purchase of assets, merger or otherwise or (ii)
directly or indirectly acquires (in one transaction or as the most recent
transaction in a series of transactions at least a majority (in number of
vote) of the securities of a corporation which have ordinary voting power
for the election of directors (other than securities having such power
only by reason of the happening of a contingency) or a majority (by
percentage of voting power) of the outstanding partnership interests of a
partnership.
"Advance" means a borrowing hereunder consisting of the aggregate amount
of the several Loans made by the Lenders to Borrower of the same Type and,
in the case of Eurodollar Rate Advances, for the same Interest Period.
"Affected Lender" is defined in Section 2.20 hereof.
"Affiliate" of any Person means any other Person directly or indirectly
controlling, controlled by or under common control with such Person. A
Person shall be deemed to control another Person if the controlling Person
is the "beneficial owner" (as defined in Rule 13d-3 under the Securities
Exchange Act) of greater than twenty percent (20%) or more of any class of
voting securities (or other voting interests) of the controlled Person or
possesses, directly or indirectly, the power to direct or cause the
direction of the management or policies of the controlled Person, whether
through ownership of stock, by contract or otherwise.
"Agent" means First Chicago in its capacity as contractual
representative for itself and the Lenders pursuant to Article X hereof and
any successor Agent appointed pursuant to Article X hereof.
"Aggregate Revolving Loan Commitment" means the aggregate of the
Revolving Loan Commitments of all the Lenders, as reduced from time to
time pursuant to the terms hereof. The initial Aggregate Revolving Loan
Commitment is Ten Million and 00/100 Dollars ($10,000,000.00).
"Aggregate Term Loan Commitment" means the aggregate of the Term Loan
Commitments of all the Lenders. The Aggregate Term Loan Commitment is
Forty Five Million and 00/100 Dollars ($45,000,000.00).
"Agreement" means this Credit Agreement, as it may be amended, restated
or otherwise modified and in effect from time to time.
"Agreement Accounting Principles" means generally accepted accounting
principles as in effect as of the date of this Agreement, applied in a
manner consistent with that used in preparing the financial statements
referred to in Section 5.4(B)(1) hereof.
"Alternate Base Rate" means, for any day, a fluctuating rate of interest
per annum equal to the higher of (i) the Corporate Base Rate for such day
and (ii) the sum of (a) the Federal Funds Effective Rate for such day and
(b) one-half of one percent (0.5%) per annum.
"Asset Sale" means, with respect to any Person, (i) the sale, lease,
conveyance, disposition or other transfer by such Person of any of its
assets (including by way of a sale-leaseback transaction and including the
sale or other transfer of any of the capital stock of any Subsidiary of
such Person) or (ii) the issuance, sale, conveyance, disposition or other
transfer by such Person of any Capital Stock of such Person; provided,
however, that notwithstanding the foregoing, the term "Asset Sale" shall
not include the sale, lease, conveyance, disposition or other transfer of
any assets in the ordinary course of business.
"Authorized Officer" means any of the President, Vice President Finance,
Chief Financial Officer and Treasurer of Borrower, acting singly.
"Benefit Plan" means a defined benefit plan as defined in Section 3(35)
of ERISA (other than a Multiemployer Plan) that is subject to Title IV of
ERISA in respect of which Holdings, Borrower or any other member of the
Controlled Group is, or within the immediately preceding six (6) years
was, an "employer" as defined in Section 3(5) of ERISA.
"Borrower" means Newco, Inc., a Wisconsin corporation, and its
successors and assigns, including a debtor-in-possession on behalf of
Borrower.
"Borrowing Base" means, as of any date of calculation, an amount, as set
forth on the most current Borrowing Base Certificate delivered to the
Agent, equal to:
(i) seventy-five percent (75%) of the Gross Amount of Eligible
Receivables (other than Dated Receivables); plus
(ii) seventy percent (70%) of the lesser of (A) $15,000,000 and (B)
the Gross Amount of Eligible Receivables consisting of Dated
Receivables; plus
(iii) the lesser of:
(A) (1) $10,000,000 for the period from and including the Closing
Date through December 31, 1995; (2) $11,000,000 for the period from
and including January 1, 1996 through December 31, 1996; and (3)
$12,000,000 thereafter; and
(B) the sum of:
(1) forty-five percent (45%) of the Gross Amount of Eligible
Inventory consisting of Eligible Consumer Inventory;
(2) forty-five percent (45%) of the Gross Amount of Eligible
Inventory consisting of Eligible Fabrication Raw Materials
Inventory; and
(3) sixty percent (60%) of the Gross Amount of Eligible
Fabrication Inventory.
The Agent shall give Borrower commercially reasonable notice, taking into
account all facts and circumstances known by the Agent at such time, of
any change in the criteria to determine the eligibility of any Receivables
or Inventory of Borrower or of the establishment by the Agent of any
reserves which, in any such case, might reasonably be expected to
materially decrease the amount of the Borrowing Base, it being expressly
understood and agreed that any such change in criteria or establishment of
reserves shall be made based upon the Agent's reasonable credit judgment
(which credit judgment shall be exercised in a manner that is not
arbitrary or capricious).
"Borrowing Base Certificate" means a certificate, in substantially the
form of Exhibit A attached hereto and made a part hereof, setting forth
the Borrowing Base and the component calculations thereof.
"Borrowing Date" means a date on which an Advance is made hereunder.
"Borrowing Notice" is defined in Section 2.8 hereof.
"Business Activity Report" means (A) a Notice of Business Activities
Report from the State of Minnesota, Department of Revenue, (B) a Notice of
Business Activities Report from the State of New Jersey, Division of
Taxation, or (C) any similar report required by any other State relating
to the ability of Borrower or its Subsidiaries to enforce their accounts
receivable claims against account debtors located in any such state.
"Business Day" means (i) with respect to any borrowing, payment or rate
selection of Loans bearing interest at the Eurodollar Rate, a day (other
than a Saturday or Sunday) on which banks are open for business in Chicago
and New York and on which dealings in United States Dollars are carried on
in the London interbank market and (ii) for all other purposes a day
(other than a Saturday or Sunday) on which banks are open for business in
Chicago, Illinois and New York, New York.
"Capital Expenditures" is defined in Section 6.4(A) hereof.
"Capitalized Lease" of a Person means any lease of property by such
Person as lessee which would be capitalized on a balance sheet of such
Person prepared in accordance with Agreement Accounting Principles.
"Capitalized Lease Obligations" of a Person means the amount of the
obligations of such Person under Capitalized Leases which would be
capitalized on a balance sheet of such Person prepared in accordance with
Agreement Accounting Principles.
"Capital Stock", with respect to any Person, means any capital stock of
such Person, regardless of class or designation, and all warrants,
options, purchase rights, conversion or exchange rights, voting rights,
calls or claims of any character with respect thereto.
"Cash Equivalents" means (i) marketable direct obligations issued or
unconditionally guaranteed by the United States government and backed by
the full faith and credit of the United States government; (ii) domestic
and Eurodollar certificates of deposit and time deposits, bankers'
acceptances and floating rate certificates of deposit issued by any
commercial bank organized under the laws of the United States, any state
thereof, the District of Columbia, any foreign bank, or its branches or
agencies (fully protected against currency fluctuations for any such
deposits with a term of more than ten (10) days); (iii) shares of money
market, mutual or similar funds having assets in excess of $100,000,000
and the investments of which are limited to investment grade securities
(i.e., securities rated at least Baa by Moody's Investors Service, Inc. or
at least BBB by Standard & Poor's Corporation) and (iv) commercial paper
of United States and foreign banks and bank holding companies and their
subsidiaries and United States and foreign finance, commercial industrial
or utility companies which, at the time of acquisition, are rated A-1 (or
better) by Standard & Poor's Corporation or P-1 (or better) by Moody's
Investors Services, Inc.; provided that the maturities of such Cash
Equivalents shall not exceed 365 days.
"Cash Flow Period" means the period from January 1, 1995 through the end
of Borrower's fiscal year ending December 31, 1995 and, thereafter, as
separate periods, each subsequent 12-month period ending on December 31 of
each calendar year.
"Change" is defined in Section 3.2 hereof.
"CHS" means Code, Hennessy & Simmons Limited Partnership, an Illinois
limited partnership and each of its Affiliates, and its successors and
assigns.
"Closing Date" means the date on which the Term Loans and the initial
Revolving Loans are advanced hereunder.
"Code" means the Internal Revenue Code of 1986, as amended, reformed or
otherwise modified from time to time.
"Collateral" means all property and interests in property now owned or
hereafter acquired by Holdings, Borrower or any of its Subsidiaries in or
upon which a security interest, lien or mortgage is granted to the Agent,
for the benefit of the Holders of Secured Obligations, or to the Agent,
for the benefit of the Lenders, whether under the Security Agreement,
under any of the other Collateral Documents or under any of the other Loan
Documents.
"Collateral Documents" means all agreements, instruments and documents
executed in connection with this Agreement, including, without limitation
the Security Agreement, the Mortgage, the Pledge Agreement, the Guaranty,
the Patent Security Agreement, the Trademark Security Agreement, the
Collection Account Agreement(s) and all other security agreements, loan
agreements, notes, guarantees, subordination agreements, pledges, powers
of attorney, consents, assignments, contracts, fee letters, notices,
leases, financing statements and all other written matter whether
heretofore, now, or hereafter executed by or on behalf of Holdings,
Borrower or any of its Subsidiaries and delivered to the Agent or any of
the Lenders, together with all agreements and documents referred to
therein or contemplated thereby.
"Collection Account" means each lock-box and blocked depository account
maintained by Borrower, subject to a Collection Account Agreement, for the
collection of Receivables and other proceeds of Collateral.
"Collection Account Agreement" means a written agreement among Borrower,
the Agent, and, as applicable, each of the banks at which Borrower
maintains a Collection Account substantially in the form attached to the
Security Agreement or in such other form as may be acceptable to the
Agent.
"Collection Account Blockage Date" means the date, following the
occurrence of a Default on which the Agent or the Required Lenders, in the
Agent's or the Required Lenders' sole discretion, instruct(s) any
financial institution party to a Collection Account Agreement as described
in the application Collection Account Agreement to remit, during the
continuance of such Default, all amounts deposited in the Collection
Account to the Agent or as the Agent shall direct.
"Commission" means the Securities and Exchange Commission and any Person
succeeding to the functions thereof.
"Commitment" means, for each Lender, collectively, such Lender's
Revolving Loan Commitment and Term Loan Commitment.
"Contaminant" means any waste, pollutant, hazardous substance, toxic
substance, hazardous waste, special waste, petroleum or petroleum-derived
substance or waste, asbestos, polychlorinated biphenyls ("PCBs"), or any
constituent of any such substance or waste, and includes but is not
limited to these terms as defined in Environmental, Health or Safety
Requirements of Law.
"Contingent Obligation", as applied to any Person, means (i) any
Contractual Obligation, contingent or otherwise, of that Person with
respect to any Indebtedness of another or other obligation or liability of
another, including, without limitation, any such Indebtedness, obligation
or liability of another directly or indirectly guaranteed, endorsed
(otherwise than for collection or deposit in the ordinary course of
business), co-made or discounted or sold with recourse by that Person, or
in respect of which that Person is otherwise directly or indirectly
liable, including Contractual Obligations (contingent or otherwise)
arising through any agreement to purchase, repurchase, or otherwise
acquire such Indebtedness, obligation or liability or any security
therefor, or to provide funds for the payment or discharge thereof
(whether in the form of loans, advances, stock purchases, capital
contributions or otherwise), or to maintain solvency, assets, level of
income, or other financial condition, or to make payment other than for
value received (such obligations under this clause (i) being sometimes
referred to as "Accommodation Obligations") and (ii) any other contingent
obligation or liability of such Person, whether or not reflected in
financial statements of such Person as a liability.
"Contractual Obligation", as applied to any Person, means any provision
of any equity or debt securities issued by that Person or any indenture,
mortgage, deed of trust, security agreement, pledge agreement, guaranty,
contract, undertaking, agreement or instrument, in any case in writing, to
which that Person is a party or by which it or any of its properties is
bound, or to which it or any of its properties is subject.
"Controlled Group" means the group consisting of (i) any corporation
which is a member of the same controlled group of corporations (within the
meaning of Section 414(b) of the Code) as Borrower; (ii) a partnership or
other trade or business (whether or not incorporated) which is under
common control (within the meaning of Section 414(c) of the Code) with
Borrower; and (iii) a member of the same affiliated service group (within
the meaning of Section 414(m) of the Code) as Borrower, any corporation
described in clause (i) above or any partnership or trade or business
described in clause (ii) above.
"Conversion/Continuation Notice" is defined in Section 2.10(D) hereof.
"Corporate Base Rate" means the corporate base rate of interest
announced by First Chicago from time to time, changing when and as said
corporate base rate changes.
"Cure Loan" is defined in Section 8.2(iii) hereof.
"Customary Permitted Liens" means:
(i) Liens (other than Environmental Liens and Liens in favor of the
IRS or the PBGC) with respect to the payment of taxes, assessments or
governmental charges in all cases which are not yet due or which are
being contested in good faith by appropriate proceedings and with
respect to which adequate reserves or other appropriate provisions are
being maintained in accordance with Agreement Accounting Principles;
(ii) statutory Liens of landlords and Liens of suppliers,
mechanics, carriers, materialmen, warehousemen or workmen and other
similar Liens imposed by law created in the ordinary course of business
for amounts not yet due or which are being contested in good faith by
appropriate proceedings and with respect to which adequate reserves or
other appropriate provisions are being maintained in accordance with
Agreement Accounting Principles;
(iii) Liens (other than Environmental Liens and Liens in favor of
the IRS or the PBGC) incurred or deposits made in the ordinary course of
business in connection with worker's compensation, unemployment
insurance or other types of social security benefits or to secure the
performance of bids, tenders, sales, contracts (other than for the
repayment of borrowed money), surety, appeal and performance bonds;
provided that (A) all such Liens do not in the aggregate materially
detract from the value of Borrower's or such Subsidiary's assets or
property taken as a whole or materially impair the use thereof in the
operation of the businesses taken as a whole, and (B) all Liens securing
bonds to stay judgments or in connection with appeals do not secure at
any time an aggregate amount exceeding $500,000;
(iv) Liens arising with respect to zoning restrictions, easements,
licenses, reservations, covenants, rights-of-way, utility easements,
building restrictions and other similar charges or encumbrances on the
use of real property which do not interfere in any material respect with
the ordinary conduct of the business of Borrower or any of its
Subsidiaries;
(v) Liens of attachment or judgment with respect to judgments,
writs or warrants of attachment, or similar process against Borrower or
any of its Subsidiaries which do not constitute a Default under Section
7.1(h);
(vi) Liens arising from leases or subleases granted to others which
do not interfere in any material respect with the business of Borrower
or any of its Subsidiaries; and
(vii) any interest or title of the lessor in the property subject
to any operating lease entered into by Borrower or any of its
Subsidiaries in the ordinary course of business.
"Dated Receivables" means Receivables of Borrower arising from early
orders accepted in the ordinary course of Borrower's business and
consistent with past practice during the period from November 1 of each
year through February 28 of the following year provided the Account Debtor
is obligated to pay such Receivable not later than the immediately
following April 10.
"Decision Period" is defined in Section 6.2(G) hereof.
"Decision Reserve" is defined in Section 6.2(G) hereof.
"Default" means an event described in Article VII hereof.
"DOL" means the United States Department of Labor and any Person
succeeding to the functions thereof.
"EBITA" is defined in Section 6.4(A) hereof.
"Eligible Consumer Inventory" means Eligible Inventory of Borrower's
consumer division (recorded and determined in a manner consistent with
Borrower's past practice) consisting of raw materials and finished goods
Inventory.
"Eligible Fabrication Inventory" means Eligible Inventory of Borrower's
fabrication division (recorded and determined in a manner consistent with
Borrower's past practice) consisting of work in process and finished goods
Inventory.
"Eligible Inventory" means Inventory of Borrower which is held for sale
or lease or furnished under any contract of service by Borrower which
shall at all times meet and shall continue to meet the eligibility
standards established by the Agent from time to time in accordance with
the terms of this Agreement. Standards of eligibility may be fixed and
revised from time to time by the Agent in the Agent's reasonable credit
judgment (which credit judgment shall be exercised in a manner that is not
arbitrary or capricious). In general, without limiting the foregoing, the
following inventory, is not Eligible Inventory: (i) (to the extent not
provided for by reserves described in the definition of the Gross Amount
of Eligible Inventory) Inventory which is obsolete, not in good condition,
not either currently usable or currently saleable in the ordinary course
of Borrower's business or does not meet all material standards imposed by
any Governmental Authority having regulatory authority over such item of
Inventory, its use or its sale; (ii) Inventory which the Agent determines,
in the exercise of its reasonable discretion (which discretion shall not
be exercised in a manner that is arbitrary or capricious), to be
unacceptable due to age, type, category and/or quantity; (iii) Inventory
consisting of packaging material, supplies, raw materials (other than raw
materials consisting of Eligible Consumer Inventory and Eligible
Fabrication Raw Material Inventory) and work in process (other than work
in process consisting of Eligible Fabrication Inventory); (iv) Inventory
which (a) is consigned to a third party for sale or (b) is on consignment
from a third party to Borrower for sale; (v) Inventory which has been held
by Borrower for more than one (1) year; (vi) Inventory which consists of
goods in transit; (vii) Inventory which is subject to a Lien in favor of
any Person other than the Agent; (viii) Inventory with respect to which
the Agent does not have a first and valid fully-perfected security
interest; (ix) Inventory which is not located either (a) on Borrower's
owned premises in the United States listed on Schedule 2 to the Security
Agreement or (b) in other owned or leased premises, warehouses or with
bailees in the United States not listed on Schedule 2 to the Security
Agreement permitted to be established under the Security Agreement or
established in connection with a Permitted Acquisition, in each case in
connection with which the Agent shall have received landlord, mortgagee,
bailee and/or warehousemen's access and lien waiver agreements, as
applicable, in each case in form and substance acceptable to the Agent;
(x) Inventory which is evidenced by a Receivable; and (xi) Inventory which
is not in full conformity with the representations and warranties made by
Borrower to the Agent with respect thereto whether contained in this
Agreement or the Security Agreement. Without limiting the foregoing, (i)
Inventory of Borrower which is acquired pursuant to a Permitted
Acquisition shall not be deemed Eligible Inventory unless and until the
Agent and the Required Lenders, after concluding any due diligence they
reasonably deem necessary, shall be satisfied as to the condition thereof
and that such Inventory would otherwise meet the standards of eligibility
set forth herein (including, without limitation, perfection of the Agent's
security interests in such Inventory) but for the fact that it was
acquired by the Company outside of the ordinary course of business and
(ii) Inventory acquired pursuant to such Permitted Acquisition may be
deemed Eligible Inventory from and after such Permitted Acquisition if the
foregoing determinations have been made to the Agent's and the Required
Lenders' satisfaction.
"Eligible Fabrication Raw Material Inventory" means Eligible Inventory
of Borrower's fabrication division (recorded and determined in a manner
consistent with Borrower's past practice) consisting of raw materials
Inventory.
"Eligible Receivables" means Receivables created by Borrower in the
ordinary course of its business arising out of the sale of goods or
rendition of services by Borrower, which Receivables at all times meet and
shall continue to meet the eligibility standards established by the Agent
from time to time in accordance with the terms of this Agreement.
Standards of eligibility may be fixed and revised from time to time by the
Agent in the Agent's reasonable credit judgment (which credit judgment
shall be exercised in a manner that is not arbitrary or capricious). In
general, without limiting the foregoing, the following Receivables are not
Eligible Receivables:
(i) Receivables which remain unpaid ninety (90) days after the date
of the original applicable invoice; provided that the provisions of this
clause (i) shall not render ineligible any Dated Receivables which
otherwise meet the eligibility standards applicable with respect to
Receivables;
(ii) all Receivables owing by a single Account Debtor (including a
Receivable which remains unpaid fewer than ninety (90) days after the
date of the original applicable invoice) if twenty-five percent (25%) of
the balance owing by such Account Debtor, calculated without taking into
account any credit balances of such Account Debtor, remains unpaid
ninety (90) days after the date of the original applicable invoice or
has otherwise become, or has been determined by the Agent to be
ineligible;
(iii) Receivables from any single Account Debtor and its Affiliates
which otherwise constitute Eligible Receivables comprising more than ten
percent (10%) of all Eligible Receivables; provided that the provisions
of this clause (iii) shall not render ineligible any Receivables from
any of Lowes, Menards, Builders Square, Payless Cashways and 84 Lumber
and their respective Affiliates, which otherwise meet the eligibility
standards applicable with respect to Receivables created from orders
accepted in the ordinary course of Borrower's business and consistent
with past practice during the period from November 1 of each year
through March 31 of the following year;
(iv) Receivables with respect to which the Account Debtor is a
director, officer, employee, Subsidiary or Affiliate of Borrower;
(v) Receivables with respect to which the Account Debtor is any
federal Governmental Authority, the United States of America, or, in
each case, any department, agency or instrumentality thereof, unless
with respect to any such Account, Borrower has complied to the Agent's
satisfaction with the provisions of the Federal Assignment of Claims Act
or other applicable statutes, including, without limitation, executing
and delivering to Agent all statements of assignment and/or notification
which are in form and substance acceptable to Agent and which are deemed
necessary by Agent to effectuate the assignment to the Agent of such
Accounts on behalf of the Lenders;
(vi) Receivables with respect to which the Account Debtor is any
state or municipal Governmental Authority or any agency or
instrumentality thereof;
(vii) Receivables not denominated in U.S. Dollars or Receivables
with respect to which the Account Debtor is not a resident of the United
States or a resident of one of the Canadian provinces which have adopted
the Personal Property Security Act unless the Account Debtor has
supplied Borrower with an irrevocable letter of credit, issued by a
financial institution satisfactory to the Agent, sufficient to cover
such Receivable in form and substance satisfactory to the Agent;
(viii) Receivables with respect to which the Account Debtor has (a)
asserted a counterclaim, (b) a right of setoff or (c) a receivable owing
from Borrower but only to the extent of such counterclaim, setoff or
receivable;
(ix) Receivables for which the prospect of payment or performance
by the Account Debtor is or will be impaired as determined by the Agent
in the exercise of its reasonable credit judgment (which credit judgment
shall not be exercised in a manner that is arbitrary or capricious);
(x) Receivables with respect to which the Agent does not have a
first and valid fully perfected and enforceable security interest;
(xi) Receivables with respect to which the Account Debtor is the
subject of bankruptcy or a similar insolvency proceeding or has made an
assignment for the benefit of creditors or whose assets have been
conveyed to a receiver, trustee or assignee for the benefit of
creditors;
(xii) Receivables with respect to which the Account Debtor's
obligation to pay the Receivable is conditional upon the Account
Debtor's approval or is otherwise subject to any repurchase obligation
or return right, as with sales made on a bill-and-hold, guaranteed sale,
sale-and-return, sale on approval (except with respect to Receivables in
connection with which Account Debtors are entitled to return Inventory
on the basis of the quality of such Inventory) or consignment basis;
(xiii) Receivables with respect to which the Account Debtor is
located in New Jersey or Minnesota (or any other jurisdiction which
adopts a statute or other requirement with respect to which any Person
that obtains business from within such jurisdiction or is otherwise
subject to such jurisdiction's tax law requiring such Person to file a
Business Activity Report or make any other required filings in a timely
manner in order to enforce its claims in such jurisdiction's courts or
arising under such jurisdiction's laws); provided, however, such
Receivables shall nonetheless be eligible if Borrower has filed a
Business Activity Report (or other applicable report) with the
applicable state office or is qualified to do business in such
jurisdiction and, at the time the Receivable was created, was qualified
to do business in such jurisdiction or had on file with the applicable
state office a current Business Activity Report (or other applicable
report);
(xiv) Receivables with respect to which the Account Debtor's
obligation does not constitute its legal, valid and binding obligation,
enforceable against it in accordance with its terms;
(xv) Receivables with respect to which Borrower has not yet shipped
the applicable goods, performed the applicable service or issued the
applicable invoice;
(xvi) Receivables which the Agent, exercising reasonable discretion
(which discretion shall not be exercised in a manner that is arbitrary
or capricious), has determined to be unacceptable to it;
(xvii) any Receivable which is not in conformity with the
representations and warranties made by Borrower to the Agent with
respect thereto whether contained in this Agreement or the Security
Agreement;
(xviii) Receivables in connection with which Borrower has not
complied with all material requirements contained in the charter and by-
laws or other organizational or governing documents of Borrower, and any
law, rule or regulation, or determination of an arbitrator or a court or
other Governmental Authority, in each case applicable to or binding upon
Borrower or any of its property or to which Borrower or any of its
property is subject, including, without limitation, all laws, rules,
regulations and orders of any Governmental Authority or judicial
authority relating to truth in lending, billing practices, fair credit
reporting, equal credit opportunity, debt collection practices and
consumer debtor protection, applicable to such Receivable (or any
related contracts) or affecting the collectibility of such Receivables;
and
(xix) Receivables in connection with which Borrower or any other
party to such Receivable, is in default in the performance or observance
of any of the terms thereof in any material respect.
Without limiting the foregoing, (i) Receivables of Borrower which are
acquired pursuant to a Permitted Acquisition shall not be deemed Eligible
Receivables unless and until the Agent and the Required Lenders, after
concluding any due diligence they reasonably deem necessary, shall be
satisfied as to the quality and creditworthiness thereof and that such
Receivables would otherwise meet the standards of eligibility set forth
herein (including, without limitation, perfection and priority of the
Agent's security interests in such Receivables) but for the fact that they
were acquired by Borrower outside of the ordinary course of business and
(ii) Receivables acquired pursuant to such Permitted Acquisition may be
deemed Eligible Receivables from and after such Permitted Acquisition if
the foregoing determinations have been made to the Agent's and the
Required Lenders' satisfaction.
"Environmental, Health or Safety Requirements of Law" means all
applicable Requirements of Law derived from or relating to federal, state
and local laws or regulations addressing pollution or protection of the
environment, or protection of worker health or safety, including, but not
limited to, the Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. Section 9601 et seq., the Occupational Safety
and Health Act of 1970, 29 U.S.C. Section 651 et seq., and the Resource
Conservation and Recovery Act of 1976, 42 U.S.C. Section 6901 et seq., in
each case including any amendments thereto, any successor statutes, and
any regulations or guidance promulgated thereunder, and any state or local
equivalent thereof.
"Environmental Lien" means a lien in favor of any Governmental Authority
for (a) any liability under Environmental, Health or Safety Requirements
of Law, or (b) damages arising from, or costs incurred by such
Governmental Authority in response to, a Release or threatened Release of
a Contaminant into the environment.
"Environmental Property Transfer Act" means any applicable requirement
of law that conditions, restricts, prohibits or requires any notification
or disclosure triggered by the cessation of any activity or the transfer,
sale or lease of any property or deed or title for any property for
environmental reasons, including, but not limited to, any so-called
"Industrial Site Recovery Act" or "Responsible Property Transfer Act."
"Equipment" means all of Borrower's present and future (i) equipment,
including, without limitation, machinery, manufacturing, distribution,
selling, data processing and office equipment, assembly systems, tools,
molds, dies, fixtures, appliances, furniture, furnishings, vehicles,
vessels, aircraft, aircraft engines, and trade fixtures, (ii) other
tangible personal property (other than Borrower's Inventory), and
(iii) any and all accessions, parts and appurtenances attached to any of
the foregoing or used in connection therewith, and any substitutions
therefor and replacements, products and proceeds thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time including (unless the context otherwise
requires) any rules or regulations promulgated thereunder.
"Eurodollar Base Rate" means, with respect to a Eurodollar Rate Loan for
the relevant Interest Period, the rate determined by the Agent to be the
rate at which deposits in U.S. Dollars are offered by First Chicago to
first-class banks in the London interbank market at approximately 11 a.m.
(London time) two Business Days prior to the first day of such Interest
Period, in the approximate amount of First Chicago's relevant Eurodollar
Rate Loan and having a maturity approximately equal to such Interest
Period, as adjusted for Reserves.
"Eurodollar Margin" means two and three-quarters percent (2.75%) per
annum.
"Eurodollar Rate" means, with respect to a Eurodollar Rate Loan for the
relevant Interest Period, the Eurodollar Base Rate applicable to such
Interest Period plus the Eurodollar Margin. The Eurodollar Rate shall be
rounded to the next higher multiple of 1/16 of 1% if the rate is not such
a multiple.
"Eurodollar Rate Advance" means an Advance which bears interest at the
Eurodollar Rate.
"Eurodollar Rate Loan" means a Loan, or portion thereof, which bears
interest at the Eurodollar Rate.
"Excess Cash Flow" means, for any Cash Flow Period, an amount equal to
Borrower's and its Subsidiaries' consolidated (i) EBITA for such period
plus (ii) depreciation for such period, plus (iii) the net reduction, if
any, in Working Capital during such period, minus (iv) the net increase,
if any, in Working Capital during such period, minus (v) income taxes for
such period, whether paid in cash or accrued, minus (vi) Capital
Expenditures, whether paid in cash or accrued during such period, minus
(vii) Interest Expense for such period, minus (viii) scheduled
amortization of the principal portion of the Term Loans and scheduled
amortization of the principal portion of all other Indebtedness of
Borrower and its Subsidiaries during such period, minus (ix) the aggregate
amount (without duplication) of (y) cash dividends or cash redemptions
paid during such period with respect to Borrower's Capital Stock, and (z)
Restricted Junior Payments paid during such period pursuant to Section
6.3(F), minus (x) all prepayments of Loans made during such period (other
than ordinary course repayments of the Revolving Loans) and the aggregate
amount of all permanent reductions in the Aggregate Revolving Loan
Commitment made during such period; plus or minus (xi) reductions or
increases in long-term assets, as calculated in accordance with Agreement
Accounting Principles and not otherwise accounted for herein (excluding
therefrom reductions resulting in Net Cash Proceeds for which the Lenders
have received a mandatory prepayment pursuant to Section 2.5(B)(i)(a)),
plus or minus (xii) increases or decreases in long-term liabilities, as
calculated in accordance with Agreement Accounting Principles and not
otherwise accounted for herein. All such amounts shall be calculated
assuming that Borrower has conducted its business in the ordinary course
and in accordance with past practices.
"Federal Funds Effective Rate" means, for any day, an interest rate per
annum equal to the weighted average of the rates on overnight Federal
funds transactions with members of the Federal Reserve System arranged by
Federal funds brokers on such day, as published for such day (or, if such
day is not a Business Day, for the immediately preceding Business Day) by
the Federal Reserve Bank of New York, or, if such rate is not so published
for any day which is a Business Day, the average of the quotations at
approximately 10 a.m. (Chicago time) on such day on such transactions
received by the Agent from three Federal funds brokers of recognized
standing selected by the Agent in its sole discretion.
"Fees" is defined in Section 6.4(A) hereof.
"First Chicago" means The First National Bank of Chicago, in its
individual capacity, and its successors.
"Fixed Charge Coverage Ratio" is defined in Section 6.4(C) hereof.
"Floating Rate" means, for any day for any Loan, a rate per annum equal
to (i) the Alternate Base Rate for such day plus (ii) the Floating Rate
Margin applicable to such Loan, changing when and as the Alternate Base
Rate changes.
"Floating Rate Advance" means an Advance which bears interest at the
Floating Rate.
"Floating Rate Loan" means a Loan, or portion thereof, which bears
interest at the Floating Rate.
"Floating Rate Margin" means one and one-half percent (1.50%) per annum.
"Foreign Employee Benefit Plan" means any employee benefit plan as
defined in Section 3(3) of ERISA which is maintained or contributed to for
the benefit of the employees of Holdings, Borrower or any of their
respective Subsidiaries which is a member of the Controlled Group, but
which is not covered by ERISA pursuant to Section 4(b)(4) of ERISA;
provided, however, that any government sponsored and administered benefit
program to which Holdings, Borrower or such Subsidiary is required to
contribute by law shall not be considered a Foreign Employee Benefit Plan.
"Governmental Acts" is defined in Section 2.26(a) hereof.
"Governmental Authority" means any nation or government, any federal,
state, local or other political subdivision thereof and any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"Gross Amount of Eligible Inventory" means Eligible Inventory valued at
the lower of cost determined on a first-in-first-out basis (determined in
accordance with Agreement Accounting Principles, consistently applied) or
market value less (i) the value of reserves which have been recorded by
Borrower with respect to obsolete, slow-moving or excess Inventory and
(ii) such other reserves as the Agent elects to establish in accordance
with its reasonable credit judgment (which credit judgment shall be
exercised in a manner that is not arbitrary or capricious).
"Gross Amount of Eligible Receivables" means the outstanding face amount
of Eligible Receivables, determined in accordance with Agreement
Accounting Principles, consistently applied, less (i) all finance charges,
late fees and other fees that are unearned, (ii) the value of any accrual
which has been recorded by Borrower with respect to downward price
adjustments, (iii) the aggregate amount of all accrued advertising
expenses and accrued volume rebates, and (iv) such other reserves as the
Agent elects to establish in accordance with its reasonable credit
judgment (which credit judgment shall be exercised in a manner that is not
arbitrary or capricious).
"Gross Negligence" means recklessness, the absence of the slightest care
or the complete disregard of consequences. Gross Negligence does not mean
the absence of ordinary care or diligence, or an inadvertent act or
inadvertent failure to act. If the term "gross negligence" is used with
respect to the Agent or any Lender or any indemnitee in any of the other
Loan Documents, it shall have the meaning set forth herein.
"Guaranty" means that certain Guaranty of even date herewith executed by
Holdings in favor of the Agent for the benefit of the Holders of Secured
Obligations as amended, restated or otherwise modified from time to time.
"Holders of Secured Obligations" is defined as set forth in the Security
Agreement.
"Holdings" means Swing-N-Slide Corp., a Delaware corporation, and its
successors and assigns, including a debtor-in-possession on behalf of
Holdings.
"Indebtedness" of any Person means (i) any indebtedness of such Person,
contingent or otherwise, in respect of borrowed money including all
principal, interest, fees and expenses with respect thereto (whether or
not the recourse of the lender is to the whole of the assets of such
Person or only to a portion thereof), or evidenced by bonds, notes,
acceptances, debentures or other instruments or letters of credit (or
reimbursement obligations with respect thereto, including, in the case of
Borrower, Reimbursement Obligations under the Letters of Credit) or
representing the balance deferred and unpaid of the purchase price of any
property (including pursuant to Capitalized Leases) or services, if and to
the extent any of the foregoing indebtedness would appear as a liability
upon a balance sheet of such Person prepared in accordance with Agreement
Accounting Principles (except that any such balance that constitutes a
trade payable and/or an accrued liability arising in the ordinary course
of business shall not be considered Indebtedness); (ii) to the extent not
otherwise included, (a) interest accruing after the commencement of any
bankruptcy, insolvency, receivership or similar proceedings and other
interest that would have accrued but for the commencement of such
proceedings, (b) any Capitalized Lease Obligations, (c) the maximum fixed
repurchase price of any Redeemable Stock, (d) obligations, whether or not
assumed, secured by Liens or payable out of the proceeds or production
from property now or hereafter owned or acquired by such Person, (e)
Contingent Obligations (exclusive of whether such items would appear upon
such balance sheet) and (f) Rate Hedging Obligations. For purposes of the
preceding sentence, the maximum fixed repurchase price of any Redeemable
Stock which does not have a fixed repurchase price shall be calculated in
accordance with the terms of such Redeemable Stock as if such Redeemable
Stock were repurchased on any date on which Indebtedness shall be required
to be determined pursuant to this Agreement, provided that if such
Redeemable Stock is not then permitted to be repurchased, the repurchase
price shall be the book value of such Redeemable Stock. The amount of
Indebtedness of any Person at any date shall be without duplication (i)
the outstanding balance at such date of all unconditional obligations as
described above and the maximum liability of any such Contingent
Obligations at such date and (ii) in the case of Indebtedness of others
secured by a Lien to which the property or assets owned or held by such
Person is subject, the lesser of the fair market value at such date of any
asset subject to a Lien securing the Indebtedness of others and the amount
of the Indebtedness secured.
"Indemnified Matters" is defined in Section 9.7(B) hereof.
"Indemnitees" is defined in Section 9.7(B) hereof.
"Interest Coverage Ratio" is defined in Section 6.4(B) hereof.
"Interest Expense" is defined in Section 6.4(A) hereof.
"Interest Period" means, with respect to a Eurodollar Rate Loan, a
period of one (1), two (2), three (3) months or six (6) months commencing
on a Business Day selected by Borrower pursuant to this Agreement. Such
Interest Period shall end on (but exclude) the day which corresponds
numerically to such date one, two, three or six months thereafter;
provided, however, that if there is no such numerically corresponding day
in such next, second, third or sixth succeeding month, such Interest
Period shall end on the last Business Day of such next, second, third or
sixth succeeding month. If an Interest Period would otherwise end on a
day which is not a Business Day, such Interest Period shall end on the
next succeeding Business Day, provided, however, that if said next
succeeding Business Day falls in a new calendar month, such Interest
Period shall end on the immediately preceding Business Day.
"Interest Rate Agreements" is defined in Section 6.3(R) hereof.
"Inventory" shall mean any and all goods, including, without limitation,
goods in transit, wheresoever located, whether now owned or hereafter
acquired by Borrower, which are held for sale or lease, furnished under
any contract of service or held as raw materials, work in process or
supplies, and all materials used or consumed in Borrower's business, and
shall include such property the sale or other disposition of which has
given rise to Receivables and which has been returned to or repossessed or
stopped in transit by Borrower.
"Investment" means, with respect to any Person, (i) any purchase or
other acquisition by that Person of stock, partnership interest, notes,
debentures or other securities, or of a beneficial interest in stock,
partnership interest, notes, debentures or other securities, issued by any
other Person, (ii) any purchase by that Person of all or substantially all
of the assets of a business conducted by another Person, and (iii) any
loan, advance (other than deposits with financial institutions available
for withdrawal on demand, prepaid expenses, accounts receivable, advances
to employees and similar items made or incurred in the ordinary course of
business) or capital contribution by that Person to any other Person,
including all Indebtedness to such Person arising from a sale of property
by such Person other than in the ordinary course of its business.
"IRS" means the Internal Revenue Service and any Person succeeding to
the functions thereof.
"Issuer Tender Offer Statement" means the Issuer Tender Offer Statement
on Schedule 13E-4 filed by Holdings with the Commission on November 15,
1994 pursuant to Section 13(e)(1) of the Securities Exchange Act 1994,
together with all schedules and exhibits filed in connection therewith.
"Issuing Lender" is defined in Section 2.21 hereof.
"L/C Draft" means a draft drawn on any Issuing Lender pursuant to a
Letter of Credit.
"L/C Interest" shall have the meaning ascribed to such term in Section
2.23.
"L/C Obligations" means, without duplication, an amount equal to the sum
of (i) the aggregate of the amount then available for drawing under each
of the Letters of Credit, (ii) the face amount of all outstanding L/C
Drafts corresponding to the Letters of Credit, which L/C Drafts have been
accepted by the applicable Issuing Lender, (iii) the aggregate outstanding
amount of all Reimbursement Obligations at such time and (iv) the
aggregate face amount of all Letters of Credit requested by Borrower but
not yet issued (unless the request for an unissued Letter of Credit has
been denied).
"Lenders" means the lending institutions listed on the signature pages
of this Agreement and their respective successors and assigns. Unless the
context otherwise requires, references in this Agreement to a Lender or to
the Lenders shall be to such lending institutions in their capacity as a
Lender or an Issuing Lender hereunder.
"Lending Installation" means, with respect to a Lender or the Agent, any
office, branch, subsidiary or affiliate of such Lender or the Agent.
"Letter(s) of Credit" means the letters of credit to be issued by one or
more of the Issuing Lenders pursuant to Section 2.21 hereof.
"Leverage Ratio" is defined in Section 6.4(D) below.
"Lien" means any lien (statutory or other), mortgage, pledge,
hypothecation, assignment, deposit arrangement, encumbrance or preference,
priority or security agreement or preferential arrangement of any kind or
nature whatsoever (including, without limitation, the interest of a vendor
or lessor under any conditional sale, Capitalized Lease or other title
retention agreement).
"Loan(s)" means, with respect to a Lender, such Lender's portion of any
Advance made pursuant to Section 2.1 or Section 2.2, as applicable, and
collectively all Term Loans and Revolving Loans, whether made or continued
as or converted to Floating Rate Loans or Eurodollar Rate Loans.
"Loan Account" is defined in Section 2.15(F) hereof.
"Loan Documents" means this Agreement, the Notes and the other
Collateral Documents and all other documents, instruments and agreements
executed in connection therewith or contemplated thereby, as the same may
be amended, restated or otherwise modified and in effect from time to
time.
"Margin Stock" shall have the meaning ascribed to such term in
Regulation U.
"Material Adverse Effect" means a material adverse effect upon (a) the
business, condition (financial or otherwise), operations, performance or
properties of Borrower, or Borrower and its Subsidiaries, taken as a
whole, (b) the ability of Borrower or any of its Subsidiaries to perform
their payment obligations under the Loan Documents, or (c) the ability of
the Lenders, or the Agent to enforce in any material respect the
Obligations or their rights with respect to the Collateral.
"Maximum Revolving Credit Amount" means, at any particular time: (i) the
lesser of (A) the Aggregate Revolving Loan Commitment at such time minus
the aggregate outstanding L/C Obligations at such time and (B) the
Borrowing Base at such time minus the aggregate outstanding L/C
Obligations at such time minus (ii) the amount of any Decision Reserve in
effect at such time.
"Mortgage" means that certain Mortgage, Security Agreement, Financing
Statement & Assignment of Rents and Leases of even date herewith executed
by Borrower in favor of the Agent for the benefit of the Holders of
Secured Obligations as amended, restated or otherwise modified from time
to time.
"Multiemployer Plan" means a "Multiemployer Plan" as defined in
Section 4001(a)(3) of ERISA which is, or within the immediately preceding
six (6) years was, contributed to by Holdings, Borrower or any other
member of the Controlled Group.
"Net Cash Proceeds" means, with respect to any Asset Sale of any Person,
(a) cash (freely convertible into U.S. Dollars) received by such Person or
any Subsidiary of such Person from such Asset Sale (including cash
received as consideration for the assumption or incurrence of liabilities
incurred in connection with or in anticipation of such Asset Sale), after
(i) provision for all income or other taxes measured by or resulting from
such Asset Sale, (ii) payment of all brokerage commissions and other fees
and expenses related to such Asset Sale, (iii) all amounts used to repay
Indebtedness secured by a Lien on any asset disposed of in such Asset Sale
or which is or may be required (by the express terms of the instrument
governing such Indebtedness) to be repaid in connection with such Asset
Sale (including payments made to obtain or avoid the need for the consent
of any holder of such Indebtedness), and (iv) deduction of appropriate
amounts to be provided by such Person or a Subsidiary of such Person as a
reserve, in accordance with Agreement Accounting Principles, against any
liabilities associated with the assets sold or disposed of in such Asset
Sale and retained by such Person or a Subsidiary of such Person after such
Asset Sale, including, without limitation, pension and other post-
employment benefit liabilities and liabilities related to environmental
matters or against any indemnification obligations associated with the
assets sold or disposed of in such Asset Sale; and (b) cash payments in
respect of any Indebtedness, Capital Stock or other consideration received
by such Person or any Subsidiary of such Person from such Asset Sale upon
receipt of such cash payments by such Person or such Subsidiary.
"Net Income" is defined in Section 6.4(A) hereof.
"Non Pro Rata Loan" is defined in Section 8.2 hereof.
"Notes" means the Revolving Notes and the Term Notes.
"Notice of Assignment" is defined in Section 12.3(B) hereof.
"Obligations" means all Loans, advances, debts, liabilities,
obligations, covenants and duties owing by Borrower to the Agent, any
Lender, any Issuing Lender, any Affiliate of the Agent, any Lender or any
Issuing Lender, or any Indemnitee, of any kind or nature, present or
future, arising under this Agreement, the Notes, the Letters of Credit,
the Collateral Documents, any other Loan Document, whether or not
evidenced by any note, guaranty or other instrument, whether or not for
the payment of money, whether arising by reason of an extension of credit,
loan, guaranty, indemnification, or in any other manner, whether direct or
indirect (including those acquired by assignment), absolute or contingent,
due or to become due, now existing or hereafter arising and however
acquired. The term includes, without limitation, all interest, charges,
expenses, fees, attorneys' fees and disbursements, paralegals' fees (in
each case whether or not allowed), and any other sum chargeable to
Borrower under this Agreement or any other Loan Document.
"Other Taxes" is defined in Section 2.15(E)(ii) hereof.
"Participants" is defined in Section 12.2(A) hereof.
"Patent Security Agreement" means that certain Patent Security Agreement
of even date herewith executed by Borrower in favor of the Agent for the
benefit of the Holders of Secured Obligations as amended, restated or
otherwise modified from time to time.
"Payment Date" means the last Business Day of each calendar quarter.
"PBGC" means the Pension Benefit Guaranty Corporation, or any successor
thereto.
"Permitted Acquisition" is defined in Section 6.3(G) hereof.
"Permitted Existing Contingent Obligations" means the Contingent
Obligations of Borrower and its Subsidiaries identified as such on
Schedule 1.1.1 to this Agreement.
"Permitted Existing Indebtedness" means the Indebtedness of Borrower and
its Subsidiaries identified as such on Schedule 1.1.2 to this Agreement.
"Permitted Existing Investments" means the Investments of Borrower and
its Subsidiaries identified as such on Schedule 1.1.3 to this Agreement.
"Permitted Existing Liens" means the Liens on assets of Borrower or any
of its Subsidiaries identified as such on Schedule 1.1.4 to this
Agreement.
"Permitted Purchase Money Indebtedness" is defined in Section
6.3(A)(ii)(k) hereof.
"Permitted Subordinated Indebtedness" means Subordinated Indebtedness
permitted pursuant to Section 6.3(A)(ii)(d).
"Person" means any natural person, corporation, firm, joint venture,
partnership, association, enterprise, trust or other entity or
organization, or any government or political subdivision or any agency,
department or instrumentality thereof.
"Plan" means an employee benefit plan defined in Section 3(3) of ERISA
in respect of which Holdings, Borrower or any of their respective
Subsidiaries which is a member of the Controlled Group is, or within the
immediately preceding six (6) years was, an "employer" as defined in
Section 3(5) of ERISA.
"Pledge Agreement" means that certain Pledge Agreement of even date
herewith executed by Holdings in favor of the Agent for the benefit of the
Holders of Secured Obligations as amended, restated or otherwise modified
from time to time.
"Pro Rata Share" means, with respect to any Lender, (i) at any time
prior to the Closing Date, the percentage obtained by dividing (A) such
Lender's Commitments at such time (in each case, as adjusted from time to
time in accordance with the provisions of this Agreement) by (B) the sum
of the Aggregate Term Loan Commitments and the Aggregate Revolving Loan
Commitments at such time and (ii) at any time after the Closing Date, the
percentage obtained by dividing (A) the sum of such Lender's Term Loans
and Revolving Loan Commitment at such time (in each case, as adjusted from
time to time in accordance with the provisions of this Agreement) by
(B) the sum of the aggregate amount of all of the Term Loans and the
Aggregate Revolving Loan Commitment at such time; provided, however, if
all of the Commitments are terminated pursuant to the terms of this
Agreement, then "Pro Rata Share" means the percentage obtained by dividing
(x) the sum of such Lender's Term Loans and Revolving Loans by (y) the
aggregate amount of all Term Loans and Revolving Loans.
"Purchasers" is defined in Section 12.3(A) hereof.
"Rate Hedging Obligations" of a Person means any and all obligations of
such Person, whether absolute or contingent and howsoever and whensoever
created, arising, evidenced or acquired (including all renewals,
extensions and modifications thereof and substitutions therefor), under
(i) any and all agreements, devices or arrangements designed to protect at
least one of the parties thereto from the fluctuations of interest rates,
exchange rates or forward rates applicable to such party's assets,
liabilities or exchange transactions, including, but not limited to,
dollar-denominated or cross-currency interest rate exchange agreements,
forward currency exchange agreements, interest rate cap or collar
protection agreements, forward rate currency or interest rate options,
puts and warrants, and (ii) any and all cancellations, buy backs,
reversals, terminations or assignments of any of the foregoing.
"Rate Option" means the Eurodollar Rate or the Floating Rate.
"Receivable(s)" means and includes all of Borrower's presently existing
and hereafter arising or acquired accounts, accounts receivable, and all
present and future rights of Borrower to payment for goods sold or leased
or for services rendered (except those evidenced by instruments or chattel
paper), whether or not they have been earned by performance, and all
rights in any merchandise or goods which any of the same may represent,
and all rights, title, security and guaranties with respect to each of the
foregoing, including, without limitation, any right of stoppage in
transit.
"Redeemable Stock" means any Capital Stock which by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is
mandatorily redeemable, in whole or in part, prior to the maturity of the
Obligations (including any extensions thereof contemplated by this
Agreement), or is, by its terms or upon the happening of any event,
redeemable at the option of the holder thereof, in whole or in part, prior
to the maturity of the Obligations (including any extensions thereof
contemplated by this Agreement).
"Register" is defined in Section 12.3(C) hereof.
"Regulation G" means Regulation G of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor or
other regulation or official interpretation of said Board of Governors
relating to the extension of credit by nonbank, nonbroker lenders for the
purpose of purchasing or carrying margin stock (as defined therein).
"Regulation T" means Regulation T of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor or
other regulation or official interpretation of said Board of Governors
relating to the extension of credit by and to brokers and dealers of
securities for the purpose of purchasing or carrying margin stock (as
defined therein).
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor or
other regulation or official interpretation of said Board of Governors
relating to the extension of credit by banks for the purpose of purchasing
or carrying Margin Stock applicable to member banks of the Federal Reserve
System.
"Regulation X" means Regulation X of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor or
other regulation or official interpretation of said Board of Governors
relating to the extension of credit by foreign lenders for the purpose of
purchasing or carrying margin stock (as defined therein).
"Reimbursement Obligation" is defined in Section 2.22 hereof.
"Release" means any release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration
into the indoor or outdoor environment, including the movement of
Contaminants through or in the air, soil, surface water or groundwater.
"Rentals" is defined in Section 6.4(A) hereof.
"Replacement Lender" is defined in Section 2.20 hereof.
"Reportable Event" means a reportable event as defined in Section 4043
of ERISA and the regulations issued under such section, with respect to a
Plan, excluding, however, such events as to which the PBGC by regulation
waived the requirement of Section 4043(a) of ERISA that it be notified
within 30 days after such event occurs, provided, however, that a failure
to meet the minimum funding standards of Section 412 of the Code and of
Section 302 of ERISA shall be a Reportable Event regardless of the
issuance of any such waiver of the notice requirement in accordance with
either Section 4043(a) of ERISA or Section 412(d) of the Code.
"Required Lenders" means Lenders whose Pro Rata Shares, in the
aggregate, are greater than sixty-six and two-thirds percent (66-2/3%);
provided, however, that, if any of the Lenders shall have failed to fund
its Pro Rata Share of any Revolving Loan requested by Borrower which such
Lenders are obligated to fund under the terms of this Agreement and any
such failure has not been cured, then for so long as such failure
continues, "Required Lenders" means Lenders (excluding all Lenders whose
failure to fund their respective Pro Rata Shares of such Revolving Loans
have not been so cured) whose Pro Rata Shares represent more than sixty-
six and two-thirds percent (66-2/3%) of the aggregate Pro Rata Shares of
such Lenders; provided, further, however, that, if the Commitments have
been terminated pursuant to the terms of this Agreement, "Required
Lenders" means Lenders (without regard to such Lenders' performance of
their respective obligations hereunder) whose aggregate ratable shares
(stated as a percentage) of the aggregate outstanding principal balance of
all Loans and L/C Obligations are greater than sixty-six and two-thirds
percent (66-2/3%).
"Requirements of Law" means, as to any Person, the charter and by-laws
or other organizational or governing documents of such Person, and any
law, rule or regulation, or determination of an arbitrator or a court or
other Governmental Authority, in each case applicable to or binding upon
such Person or any of its property or to which such Person or any of its
property is subject including, without limitation, the Securities Act, the
Securities Exchange Act, Regulations G, T, U and X, ERISA, the Fair Labor
Standards Act, the Worker Adjustment and Retraining Notification Act,
Americans with Disabilities Act of 1990, and any certificate of occupancy,
zoning ordinance, building, environmental or land use requirement or
Permit or environmental, labor, employment, occupational safety or health
law, rule or regulation, including Environmental, Health or Safety
Requirements of Law.
"Reserves" shall mean the maximum reserve requirement, as prescribed by
the Board of Governors of the Federal Reserve System (or any successor)
with respect to "Eurocurrency liabilities" or in respect of any other
category of liabilities which includes deposits by reference to which the
interest rate on Eurodollar Rate Loans is determined or category of
extensions of credit or other assets which includes loans by a non-United
States office of any Lender to United States residents.
"Restricted Junior Payment" means (i) any dividend or other
distribution, direct or indirect, on account of any shares of any class of
Capital Stock of Borrower now or hereafter outstanding, except a dividend
payable solely in shares of that class of stock or in any junior class of
stock to the holders of that class, (ii) any redemption, retirement,
sinking fund or similar payment, purchase or other acquisition for value,
direct or indirect, of any shares of any class of Capital Stock of
Borrower or any of its Subsidiaries now or hereafter outstanding,
(iii) any payment or prepayment of principal of, premium, if any, or
interest, fees or other charges on or with respect to, and any redemption,
purchase, retirement, defeasance, sinking fund or similar payment and any
claim for rescission with respect to any Permitted Subordinated
Indebtedness, (iv) any payment made to redeem, purchase, repurchase or
retire, or to obtain the surrender of, any outstanding warrants, options
or other rights to acquire shares of any class of Capital Stock of
Borrower or any of its Subsidiaries now or hereafter outstanding (v) any
payment of a claim for the rescission of the purchase or sale of, or for
material damages arising from the purchase or sale of any Permitted
Subordinated Indebtedness or any shares of the Capital Stock of Holdings,
Borrower or any of Borrower's Subsidiaries or of a claim for
reimbursement, indemnification or contribution arising out of or related
to any such claim for damages or rescission and (vi) any payment of
management fees (or other fees of a similar nature) (A) by Borrower to
Holdings or (B) by Borrower or Holdings to CHS, any holder of the Capital
Stock of Holdings or any member of management or their Affiliates.
"Revolving Credit Availability" means, at any particular time, the
amount by which the Maximum Revolving Credit Amount at such time exceeds
the Revolving Loans at such time.
"Revolving Credit Obligations" means, at any particular time, the sum of
(i) the outstanding principal amount of the Revolving Loans at such time,
plus (ii) the L/C Obligations at such time.
"Revolving Loan" is defined in Section 2.2.
"Revolving Loan Commitment" means, for each Lender, the obligation of
such Lender to make Revolving Loans and to purchase participations in
Letters of Credit not exceeding the amount set forth on Exhibit B to this
Agreement opposite its name thereon under the heading "Revolving Loan
Commitment" or the signature page of the Assignment and Acceptance by
which it became a Lender, as such amount may be modified from time to time
pursuant to the terms of this Agreement or to give effect to any
applicable Assignment and Acceptance.
"Revolving Note" means a promissory note, in substantially the form of
Exhibit C hereto, duly executed by Borrower and payable to the order of a
Lender in the amount of its Revolving Loan Commitment, including any
amendment, restatement modification, renewal or replacement of such
Revolving Note.
"Risk-Based Capital Guidelines" is defined in Section 3.2 hereof.
"Secured Obligations" means, collectively, (i) the Obligations and (ii)
all Rate Hedging Obligations owing to one or more of the Lenders.
"Security Agreement" means that certain Security Agreement of even date
herewith executed by Borrower in favor of the Agent for the benefit of the
Holders of Secured Obligations as amended, restated or otherwise modified
from time to time.
"Single Employer Plan" means a Plan maintained Holdings, Borrower or any
member of the Controlled Group for employees of Borrower or any member of
the Controlled Group.
"Stock Repurchase" means the repurchase by Holdings of certain shares of
its Capital Stock on the Closing Date on the terms and conditions set
forth in the Issuer Tender Offer Statement.
"Stock Repurchase Dividend" means dividends in an aggregate amount not
to exceed $39,600,000.00 made by Borrower to Holdings on the date or dates
on which Holdings is required to tender payment for the tendered shares
accepted pursuant to the Issuer Tender Offer Statement in order to effect
the Stock Repurchase.
"Subordinated Indebtedness" means any Indebtedness of Borrower or any
Subsidiary of Borrower the payment of which is subordinated to payment of
the Secured Obligations to the written satisfaction of the Required
Lenders.
"Subsidiary" of a Person means (i) any corporation 50% or more of the
outstanding securities having ordinary voting power of which shall at the
time be owned or controlled, directly or indirectly, by such Person or by
one or more of its Subsidiaries or by such Person and one or more of its
Subsidiaries, or (ii) any partnership, association, joint venture or
similar business organization 50% or more of the ownership interests
having ordinary voting power of which shall at the time be so owned or
controlled. Unless otherwise expressly provided, all references herein to
a "Subsidiary" shall mean a Subsidiary of Borrower.
"Taxes" is defined in Section 2.15(E)(i) hereof.
"Termination Date" means the earlier of (a) January 19, 2001 and (b) the
date of termination of the Commitments pursuant to Section 2.6 or Section
8.1.
"Termination Event" means (i) a Reportable Event with respect to any
Benefit Plan; (ii) the withdrawal of Borrower or any member of the
Controlled Group from a Benefit Plan during a plan year in which Borrower
or such Controlled Group member was a "substantial employer" as defined in
Section 4001(a)(2) of ERISA or the cessation of operations which results
in the termination of employment of twenty percent (20%) of Benefit Plan
participants who are employees of Borrower or any member of the Controlled
Group; (iii) the imposition of an obligation on Borrower or any member of
the Controlled Group under Section 4041 of ERISA to provide affected
parties written notice of intent to terminate a Benefit Plan in a distress
termination described in Section 4041(c) of ERISA; (iv) the institution by
the PBGC of proceedings to terminate a Benefit Plan; (v) any event or
condition which could reasonably constitute grounds under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to
administer, any Benefit Plan; or (vi) the partial or complete withdrawal
of Borrower or any member of the Controlled Group from a Multiemployer
Plan.
"Term Loan" is defined in Section 2.1(a).
"Term Loan Commitment" means, for each Lender, the obligation of such
Lender to make its Term Loan pursuant to the terms and conditions of this
Agreement, and which shall not exceed the principal amount set forth on
Exhibit B to this Agreement opposite its name thereon under the heading
"Term Loan Commitment", as such amount may be modified from time to time
pursuant to the terms hereof.
"Term Loan Termination Date" means January 19, 2001.
"Term Note" means a promissory note, in substantially the form of
Exhibit D hereto, duly executed by Borrower and payable to the order of a
Lender in the amount of its Term Loan Commitment, including any amendment,
restatement modification, renewal or replacement of such Term Note.
"Trademark Security Agreement" means that certain Trademark Security
Agreement of even date herewith executed by Borrower in favor of the Agent
for the benefit of the Holders of Secured Obligations as amended, restated
or otherwise modified from time to time.
"Transaction Costs" means the fees, costs and expenses payable by
Borrower in connection with the execution, delivery and performance of the
Transaction Documents and the consummation of the Stock Repurchase;
provided however, the aggregate amount of Transaction Costs in connection
with the Stock Repurchase shall not in any event exceed $2,500,000.
"Transaction Documents" means the Loan Documents and the documents filed
or entered into in connection with the Stock Repurchase.
"Transferee" is defined in Section 12.5 hereof.
"Type" means, with respect to any Loan, its nature as a Floating Rate
Loan or a Eurodollar Rate Loan.
"Unfunded Liabilities" means the amount (if any) by which the present
value of all vested nonforfeitable benefits under all Single Employer
Plans exceeds the fair market value of all such Plan assets allocable to
such benefits, all determined as of the then most recent valuation date
for such Plans, and (ii) in the case of Multiemployer Plans, the
withdrawal liability that would be incurred by the Controlled Group if all
members of the Controlled Group completely withdrew from all Multiemployer
Plans.
"Unmatured Default" means an event which, but for the lapse of time or
the giving of notice, or both, would constitute a Default.
"Working Capital" means, as at any date of determination, the excess, if
any, of (i) Borrower's consolidated current assets, except cash and Cash
Equivalents, over (ii) Borrower's consolidated current liabilities, except
current maturities of long-term debt and Revolving Credit Obligations as
of such date and all accrued interest as of such date.
The foregoing definitions shall be equally applicable to both the
singular and plural forms of the defined terms. Any accounting terms used
in this Agreement which are not specifically defined herein shall have the
meanings customarily given them in accordance with generally accepted
accounting principles in existence as of the date hereof.
1.2 References. The existence throughout the Agreement of references
to Borrower's Subsidiaries is for a matter of convenience only. Any
references to Subsidiaries of Borrower set forth herein shall not in any
way be construed as consent by the Agent or any Lender to the
establishment, maintenance or acquisition of any Subsidiary.
1.3 Supplemental Disclosure. At any time at the request of the Agent
and at such additional times as Borrower determines, Borrower shall
supplement each schedule or representation herein or in the other Loan
Documents with respect to any matter hereafter arising which, if existing
or occurring at the date of this Agreement, would have been required to be
set forth or described in such schedule or as an exception to such
representation or which is necessary to correct any information in such
schedule or representation which has been rendered inaccurate thereby.
Unless any such supplement to such schedule or representation discloses
the existence or occurrence of events, facts or circumstances which are
not prohibited by the terms of this Agreement or any other Loan Documents,
such supplement to such schedule or representation shall not be deemed an
amendment thereof unless expressly consented to in writing by Agent and
the Required Lenders, and no such amendments, except as the same may be
consented to in a writing which expressly includes a waiver, shall be or
be deemed a waiver by the Agent or any Lender of any Default disclosed
therein.
ARTICLE II: THE CREDITS
2.1. Term Loans. (a) Amount of Term Loans. Subject to the terms and
conditions set forth in this Agreement, each Lender on the Closing Date
severally and not jointly agrees to make on the Closing Date, a term loan,
in Dollars, to Borrower in an amount equal to such Lender's Term Loan
Commitment (each individually, a "Term Loan" and, collectively, the "Term
Loans"). All Term Loans shall be made by the Lenders on the Closing Date
simultaneously and proportionately to their respective Pro Rata Shares, it
being understood that no Lender shall be responsible for any failure by
any other Lender to perform its obligation to make any Term Loan hereunder
nor shall the Term Loan Commitment of any Lender be increased or decreased
as a result of any such failure.
(b) Borrowing Notice. Borrower shall deliver to the Agent a Borrowing
Notice, signed by it, on the Closing Date. Such Borrowing Notice shall
specify (i) the aggregate amount of the Term Loans and (ii) instructions
for the disbursement of the proceeds of the Term Loans. The Term Loans
shall initially be Floating Rate Loans and thereafter may be continued as
Floating Rate Loans or converted into Eurodollar Rate Loans in the manner
provided in Section 2.10 and subject to the other conditions and
limitations therein set forth and set forth in this Article II. Any
Borrowing Notice given pursuant to this Section 2.1(b) shall be
irrevocable.
(c) Making of Term Loans. Promptly after receipt of the Borrowing
Notice under Section 2.1(b) in respect of the Term Loans, the Agent shall
notify each Lender by telex or telecopy, or other similar form of
transmission, of the proposed Advance. Each Lender shall deposit an
amount equal to its Pro Rata Share of the Term Loans with the Agent at its
office in Chicago, Illinois, in immediately available funds, on the
Closing Date specified in the Borrowing Notice. Subject to the
fulfillment of the conditions precedent set forth in Sections 4.1 and 4.2,
the Agent shall make the proceeds of such amounts received by it available
to Borrower at the Agent's office in Chicago, Illinois on such Closing
Date and shall disburse such proceeds in accordance with Borrower's
disbursement instructions set forth in such Borrowing Notice. The failure
of any Lender to deposit the amount described above with the Agent on the
Closing Date shall not relieve any other Lender of its obligations
hereunder to make its Term Loan on the Closing Date.
(d) Repayment of the Term Loans. (i) The Term Loans shall be repaid in
twelve (12) consecutive semi-annual installments payable on the last
calendar day of each June and December commencing June 30, 1995 and
continuing thereafter until December 31, 2000, and the Term Loans shall be
permanently reduced by the amount of each installment on the date payment
thereof is required to be made hereunder. The installments shall be in
the aggregate amounts set forth below:
`
Installment Date Installment Amount
June 30, 1995 $2,500,000
December 31, 1995 $2,500,000
June 30, 1996 $3,000,000
December 31, 1996 $3,000,000
June 30, 1997 $3,500,000
December 31, 1997 $3,500,000
June 30, 1998 $4,000,000
December 31, 1998 $4,000,000
June 30, 1999 $4,500,000
December 31, 1999 $4,500,000
June 30, 2000 $5,000,000
December 31, 2000 $5,000,000
Notwithstanding the foregoing, the final installment shall be in the
amount of the then outstanding principal balance of the Term Loans. In
addition, the then outstanding principal balance of the Term Loans, if
any, shall be due and payable on the Termination Date. No installment of
any Term Loan shall be reborrowed once repaid.
(ii) In addition to the scheduled payments on the Term Loans, Borrower
(a) may make the voluntary prepayments described in Section 2.5(A) for
credit against the scheduled payments on the Term Loans pursuant to
Section 2.5(A) and (b) shall make the mandatory prepayments prescribed in
Section 2.5(B), for credit against such scheduled payments on the Term
Loans pursuant to Section 2.5(B).
2.2 Revolving Loans. Upon the satisfaction of the conditions precedent
set forth in Sections 4.1 and 4.2 hereof, from and including the date of
this Agreement and prior to the Termination Date, each Lender severally
and not jointly agrees, on the terms and conditions set forth in this
Agreement, to make revolving loans to Borrower from time to time, in
Dollars, in an amount not to exceed such Lender's Pro Rata Share of
Revolving Credit Availability at such time (each individually, a
"Revolving Loan" and, collectively, the "Revolving Loans"); provided,
however, at no time shall the Revolving Credit Obligations exceed the
lesser of Aggregate Revolving Loan Commitment and the Borrowing Base.
Subject to the terms of this Agreement, Borrower may borrow, repay and
reborrow at any time prior to the Termination Date. The Revolving Loans
made on the Closing Date shall initially be Floating Rate Loans and
thereafter may be continued as Floating Rate Loans or converted into
Eurodollar Rate Loans in the manner provided in Section 2.10 and subject
to the other conditions and limitations therein set forth and set forth in
this Article II. On the Termination Date, Borrower shall repay in full
the outstanding principal balance of the Revolving Loans.
2.3 Ratable Loans. Each Advance under Section 2.2 shall consist of
Revolving Loans made by each Lender ratably in proportion to such Lender's
respective Pro Rata Share.
2.4 Rate Options for all Advances. The Advances may be Floating Rate
Advances or Eurodollar Rate Advances, or a combination thereof, selected
by Borrower in accordance with Section 2.10; provided, however,
notwithstanding anything herein to the contrary, without the Agent's
consent, Borrower may not select the Eurodollar Rate for any Loans prior
to the earlier of (i) March 22, 1995 and (ii) execution of assignment and
acceptance agreements delivered to the Agent pursuant to Section 12.3 with
respect to not less than $35,000,000 of the loan facilities hereunder.
Borrower may select, in accordance with Section 2.10, Rate Options and
Interest Periods applicable to portions of the Revolving Loans and the
Term Loans; provided that there shall be no more than six (6) Interest
Periods in effect with respect to all of the Loans at any time.
2.5 Optional Payments; Mandatory Prepayments.
(A) Optional Payments. Borrower may from time to time repay or prepay,
without penalty or premium all or any part of outstanding Floating Rate
Advances. A Eurodollar Rate Advance may not be voluntarily repaid or
prepaid prior to the last day of the applicable Interest Period. Unless
the aggregate outstanding principal balance of the Term Loans is to be
prepaid in full, voluntary prepayments of the Term Loans shall be in an
aggregate minimum amount of $500,000 and integral multiples of $250,000 in
excess of that amount. Each voluntary prepayment shall be applied to the
installments of the Term Loan in inverse order of maturity.
(B) Mandatory Prepayments.
(i) Mandatory Prepayments of Term Loans.
(a) Upon the consummation of any Asset Sale by Holdings, Borrower
or any Subsidiary of Borrower, the Net Cash Proceeds of which are
greater than $250,000, within three (3) Business Days after Holdings',
Borrower's or any of its Subsidiaries' (i) receipt of any Net Cash
Proceeds from any such Asset Sale, or (ii) conversion to cash or Cash
Equivalents of non-cash proceeds (whether principal or interest and
including securities, release of escrow arrangements or lease payments)
received from any Asset Sale, Borrower shall make or cause to be made a
mandatory prepayment of the Obligations in an amount equal to (y) one
hundred percent (100%) of such Net Cash Proceeds or such proceeds
converted from non-cash to cash or Cash Equivalents in the case of Asset
Sales other than in connection with the issuance of Capital Stock and
(z) seventy-five percent (75%) of such Net Cash Proceeds or such
proceeds converted from non-cash to cash or Cash Equivalents in the case
of Asset Sales consisting of the issuance of Capital Stock.
(b) Simultaneously with the delivery of the annual audited
financial statements required to be delivered pursuant to Section
6.1(A)(iii) for each Cash Flow Period, Borrower shall calculate Excess
Cash Flow for such Cash Flow Period and shall make a mandatory
prepayment, payable no later than ten (10) days after such calculation
and financial statements are delivered in an amount equal to seventy-
five percent (75%) of such Excess Cash Flow.
(c) Within two (2) Business Days after receipt by Borrower or any
of its Subsidiaries of any proceeds of Indebtedness permitted by Section
6.3(A)(ii)(d), Borrower shall make or cause to be made a mandatory
prepayment in an amount equal to one-hundred percent (100%) of such
proceeds of Indebtedness.
(d) Nothing in this Section 2.5(B)(i) shall be construed to
constitute the Lenders' consent to any transaction referred to in
clauses (a) and (c) above which is not expressly permitted by the terms
of this Agreement.
(e) Each mandatory prepayment required by clauses (a), (b) and (c)
of this Section 2.5(B) shall be referred to herein as a "Designated
Prepayment". Designated Prepayments shall be allocated and applied to
the Obligations as follows:
(I) the amount of each Designated Prepayment shall be
applied to the unpaid installments of the Term Loans in the
inverse order of maturity; and
(II) following the payment in full of the Term Loans,
the amount of each Designated Prepayment shall be applied to
repay Revolving Loans (but shall reduce Revolving Loan
Commitments only at the option of the Required Lenders) and
following the payment in full of the Revolving Loans, the
amount of each Designated Prepayment shall be applied first to
interest on the Reimbursement Obligations, then to principal
on the Reimbursement Obligations, then to fees on account of
Letters of Credit and then, to the extent any L/C Obligations
are contingent, deposited with the Agent as cash collateral in
respect of such L/C Obligations.
(f) On the date any Designated Prepayment is received by the
Agent, such prepayment shall be applied first to Floating Rate Loans and
to any Eurodollar Rate Loans maturing on such date. The Agent shall
hold the remaining portion of such Designated Prepayment as cash
collateral in an interest bearing deposit account and shall apply funds
from such account to subsequently maturing Eurodollar Rate Loans in
order of maturity.
(ii) Mandatory Prepayments of Revolving Loans. In addition to
repayments under Section 2.5(B)(i)(e)(II), if at any time and for any
reason the Revolving Credit Obligations are greater than the lesser of
Aggregate Revolving Loan Commitment and the Borrowing Base, Borrower shall
immediately make a mandatory prepayment of the Obligations in an amount
equal to such excess. In addition, if the Revolving Credit Availability
is at any time less than the amount of contingent L/C Obligations
outstanding at any time, Borrower shall deposit cash collateral with the
Agent in an amount equal to the amount by which such L/C Obligations
exceed such Maximum Revolving Credit Amount.
(iii) Subject to the preceding provisions of this Section 2.5(B), all
of the mandatory prepayments made under this Section 2.5(B) shall be
applied first to Floating Rate Loans and to any Eurodollar Rate Loans
maturing on such date. The Agent shall hold the remaining portion of
such mandatory prepayment as cash collateral in an interest bearing
deposit account and shall apply funds from such account to subsequently
maturing Eurodollar Rate Loans in order of maturity.
2.6 Reduction of Commitments. Borrower may permanently reduce the
Aggregate Revolving Loan Commitment in whole, or in part ratably among the
Lenders, in an aggregate minimum amount of $500,000 and integral multiples
of $250,000 in excess of that amount, upon at least three Business Days'
written notice to the Agent, which notice shall specify the amount of any
such reduction; provided, however, that the amount of the Aggregate
Revolving Loan Commitment may not be reduced below the aggregate principal
amount of the outstanding Revolving Credit Obligations. All accrued
commitment fees shall be payable on the effective date of any termination
of the obligations of the Lenders to make Loans hereunder.
2.7 Method of Borrowing. Not later than 2:00 p.m. (Chicago time) on
each Borrowing Date, each Lender shall make available its Revolving Loan
or Revolving Loans, in funds immediately available in Chicago to the Agent
at its address specified pursuant to Article XIII hereof. The Agent will
promptly make the funds so received from the Lenders available to Borrower
at the Agent's aforesaid address.
2.8 Method of Selecting Types and Interest Periods for Advances.
Borrower shall select the Type of Advance and, in the case of each
Eurodollar Rate Advance, the Interest Period applicable to each Advance
from time to time. Borrower shall give the Agent irrevocable notice (a
"Borrowing Notice") not later than 11:00 a.m. (Chicago time) on the
Borrowing Date of each Floating Rate Advance and three Business Days
before the Borrowing Date for each Eurodollar Rate Advance, specifying:
(i) the Borrowing Date (which shall be a Business Day) of such Advance;
(ii) the aggregate amount of such Advance; (iii) the Type of Advance
selected; and (iv) in the case of each Eurodollar Rate Advance, the
Interest Period applicable thereto. Borrower shall select Interest
Periods so that, to the best of Borrower's knowledge, it will not be
necessary to prepay all or any portion of any Eurodollar Rate Advance
prior to the last day of the applicable Interest Period in order to make
mandatory prepayments as required pursuant to the terms hereof. Each
Floating Rate Advance and all Obligations other than Loans shall bear
interest from and including the date of the making of such Advance to (but
not including) the date of repayment thereof at the Floating Rate,
changing when and as such Floating Rate changes. Changes in the rate of
interest on that portion of any Advance maintained as a Floating Rate Loan
will take effect simultaneously with each change in the Alternate Base
Rate. Each Eurodollar Rate Advance shall bear interest from and including
the first day of the Interest Period applicable thereto to (but not
including) the last day of such Interest Period at the interest rate
determined as applicable to such Eurodollar Rate Advance.
2.9 Minimum Amount of Each Advance. Each Eurodollar Rate Advance shall
be in the minimum amount of $1,000,000 (and in multiples of $500,000 if in
excess thereof), and each Floating Rate Advance shall be in the minimum
amount of $500,000 (and in multiples of $100,000 if in excess thereof),
provided, however, that any Floating Rate Advance may be in the amount of
the unused Aggregate Revolving Loan Commitment.
2.10 Method of Selecting Types and Interest Periods for Conversion and
Continuation of Advances.
(A) Right to Convert. Borrower may elect from time to time, subject to
the provisions of Section 2.4 and this Section 2.10, to convert all or any
part of a Loan of any Type into any other Type or Types of Loans; provided
that any conversion of any Eurodollar Rate Advance shall be made on, and
only on, the last day of the Interest Period applicable thereto.
(B) Automatic Conversion and Continuation. Floating Rate Loans shall
continue as Floating Rate Loans unless and until such Floating Rate Loans
are converted into Eurodollar Rate Loans. Eurodollar Rate Loans shall
continue as Eurodollar Rate Loans until the end of the then applicable
Interest Period therefor, at which time such Eurodollar Rate Loans shall
be automatically converted into Floating Rate Loans unless Borrower shall
have given the Agent notice in accordance with Section 2.10(D) requesting
that, at the end of such Interest Period, such Eurodollar Rate Loans
continue as a Eurodollar Rate Loan.
(C) No Conversion Post-Default or Post-Unmatured Default.
Notwithstanding anything to the contrary contained in Section 2.10(A) or
Section 2.10(B), no Loan may be converted into or continued as a
Eurodollar Rate Loan (except with the consent of the Required Lenders)
when any Default or Unmatured Default has occurred and is continuing.
(D) Conversion/Continuation Notice. Borrower shall give the Agent
irrevocable notice (a "Conversion/Continuation Notice") of each conversion
of a Floating Rate Loan into a Eurodollar Rate Loan or continuation of a
Eurodollar Rate Loan not later than 11:00 a.m. (Chicago time) three
Business Days prior to the date of the requested conversion or
continuation, specifying: (1) the requested date (which shall be a
Business Day) of such conversion or continuation; (2) the amount and Type
of the Loan to be converted or continued; and (3) the amount of Eurodollar
Rate Loan(s) into which such Loan is to be converted or continued and the
duration of the Interest Period applicable thereto.
2.11 Default Rate. After the occurrence and during the continuance of
a Default, at the option of the Agent or at the direction of the Required
Lenders, the interest rate(s) applicable to the Obligations and the fees
payable under Section 2.25 with respect to Letters of Credit shall be
increased by two percent (2.0%) per annum above the Floating Rate,
Eurodollar Rate or the rate established for such fees, as applicable.
2.12 Collections Account Arrangements. (a) All collections of
Receivables included in the Collateral and other proceeds of Collateral
shall be deposited in a Collection Account which is subject to a
Collection Account Agreement or pursuant to another similar arrangement
for the collection of such amounts established by Borrower and Agent and
shall be transferred in accordance with the provisions of the respective
Collection Account Agreements. On or prior to the Closing Date, Borrower
shall have entered into and shall thereafter maintain lock-box services
agreements with banks which are parties to Collection Account Agreements
and to which lock-boxes Account Debtors shall directly remit all payments
on Receivables. Any of the foregoing collections received by Borrower and
not so deposited, shall be deemed to have been received by Borrower as the
Agent's trustee and, upon Borrower's receipt thereof, Borrower shall
immediately transfer all such amounts into a Collection Account in their
original form. Such deposits shall be remitted to the Agent, Borrower or
as the Agent may direct, all in accordance with the provisions of the
Collection Account Agreements.
(b) Following the Collection Account Blockage Date and during the
continuance of a Default giving rise thereto, (i) all payments received by
the Agent, all collections of Receivables included in the Collateral
received by the Agent, and all proceeds of other Collateral received by
the Agent, whether through payment or otherwise, will be the sole property
of the Agent for the benefit of the Holders of Secured Obligations and
will be deemed received by the Agent for application to the Obligations
pursuant to the terms of this Agreement.
2.13 Method of Payment. All payments of principal, interest, and fees
hereunder shall be made, without setoff, deduction or counterclaim, in
immediately available funds to the Agent at the Agent's address specified
pursuant to Article XIII, or at any other Lending Installation of the
Agent specified in writing by the Agent to Borrower, by 2:00 p.m. (Chicago
time) on the date when due and shall be made ratably among the Lenders
(unless such amount is not to be shared ratably in accordance with the
terms hereof). Each payment delivered to the Agent for the account of any
Lender shall be delivered promptly by the Agent to such Lender in the same
type of funds which the Agent received at its address specified pursuant
to Article XIII or at any Lending Installation specified in a notice
received by the Agent from such Lender. Borrower authorizes the Agent to
charge the account of Borrower maintained with First Chicago for each
payment of principal, interest and fees as it becomes due hereunder.
2.14 Notes, Telephonic Notices. Each Lender is authorized to record
the principal amount of each of its Loans and each repayment with respect
to its Loans on the schedule attached to its respective Note; provided,
however, that the failure to so record shall not affect Borrower's
obligations under any such Note. Borrower authorizes the Lenders and the
Agent to extend Advances, effect selections of Types of Advances and to
transfer funds based on telephonic notices made by any person or persons
the Agent or any Lender in good faith believes to be acting on behalf of
Borrower. Borrower agrees to deliver promptly to the Agent a written
confirmation, signed by an Authorized Officer, if such confirmation is
requested by the Agent or any Lender, of each telephonic notice. If the
written confirmation differs in any material respect from the action taken
by the Agent and the Lenders, (i) the telephonic notice shall govern
absent manifest error and (ii) the Agent or the Lender, as applicable,
shall promptly notify the Authorizing Officer who provided such
confirmation of such difference.
2.15 Promise to Pay; Interest and Fees; Interest Payment Dates;
Interest and Fee Basis; Taxes; Loan and Control Accounts.
(A) Promise to Pay. Borrower unconditionally promises to pay when due
the principal amount of each Loan and all other Obligations incurred by
it, and to pay all unpaid interest accrued thereon, in accordance with the
terms of this Agreement and the Notes.
(B) Interest Payment Dates. Interest accrued on each Floating Rate
Loan shall be payable on each Payment Date, commencing with the first such
date to occur after the date hereof, on any date on which the Floating
Rate Loan is prepaid, whether due to acceleration or otherwise, and at
maturity (whether by acceleration or otherwise). Interest accrued on each
Eurodollar Rate Loan shall be payable on the last day of its applicable
Interest Period, on any date on which the Eurodollar Rate Loan is prepaid,
whether by acceleration or otherwise, and at maturity. Interest accrued
on each Eurodollar Rate Loan having an Interest Period longer than three
months shall also be payable on the last day of each three-month interval
during such Interest Period. Interest accrued on the principal balance of
all other Obligations shall be payable in arrears (i) on the last day of
each calendar quarter, commencing on the first such day following the
incurrence of such Obligation, (ii) upon repayment thereof in full or in
part, and (iii) if not theretofore paid in full, at the time such other
Obligation becomes due and payable (whether by acceleration or otherwise).
(C) Fees. (i) Borrower shall pay to the Agent, for the account of the
Lenders in accordance with their Pro Rata Shares, a commitment fee
accruing at the rate of one-half of one percent (0.50%) per annum from and
after the Closing Date until the Revolving Loan Termination Date on the
amount by which (A) the Aggregate Revolving Loan Commitment in effect from
time to time exceeds (B) the Revolving Credit Obligations in effect from
time to time. All such commitment fees payable under this clause (C)
shall be payable quarterly in arrears on the last calendar day of each
March, June, September and December occurring after the Closing Date and,
in addition, on the Revolving Loan Termination Date.
(ii) Borrower agrees to pay to the Agent for the sole account of the
Agent (unless otherwise agreed between the Agent and any Lender) the fees
set forth in the letter agreement between the Agent and Borrower dated
November 14, 1994, payable at the times and in the amounts set forth
therein.
(D) Interest and Fee Basis. Interest and fees shall be calculated for
actual days elapsed on the basis of a 360-day year. Interest shall be
payable for the day an Obligation is incurred but not for the day of any
payment on the amount paid if payment is received prior to 2:00 p.m.
(Chicago time) at the place of payment. If any payment of principal of or
interest on a Loan or any payment of any other Obligations shall become
due on a day which is not a Business Day, such payment shall be made on
the next succeeding Business Day and, in the case of a principal payment,
such extension of time shall be included in computing interest in
connection with such payment.
(E) Taxes.
(i) Any and all payments by Borrower hereunder shall be made free
and clear of and without deduction for any and all present or future
taxes, levies, imposts, deductions, charges or withholdings or any
liabilities with respect thereto including those arising after the date
hereof as a result of the adoption of or any change in any law, treaty,
rule, regulation, guideline or determination of a Governmental Authority
or any change in the interpretation or application thereof by a
Governmental Authority but excluding, in the case of each Lender and the
Agent, such taxes (including income taxes, franchise taxes and branch
profit taxes) as are imposed on or measured by such Lender's or Agent's,
as the case may be, income by the United States of America or any
Governmental Authority of the jurisdiction under the laws of which such
Lender or Agent, as the case may be, is organized or maintains a Lending
Installation (all such non-excluded taxes, levies, imposts, deductions,
charges, withholdings, and liabilities which the Agent or a Lender
determines to be applicable to this Agreement, the other Loan Documents,
the Revolving Loan Commitments, the Loans or the Letters of Credit being
hereinafter referred to as "Taxes"). If Borrower shall be required by
law to deduct any Taxes from or in respect of any sum payable hereunder
or under the other Loan Documents to any Lender or the Agent, (i) the
sum payable shall be increased as may be necessary so that after making
all required deductions (including deductions applicable to additional
sums payable under this Section 2.15(E)) such Lender or Agent (as the
case may be) receives an amount equal to the sum it would have received
had no such deductions been made, (ii) Borrower shall make such
deductions, and (iii) Borrower shall pay the full amount deducted to the
relevant taxation authority or other authority in accordance with
applicable law. If a withholding tax of the United States of America or
any other Governmental Authority shall be or become applicable (y) after
the date of this Agreement, to such payments by Borrower made to the
Lending Installation or any other office that a Lender may claim as its
Lending Installation, or (z) after such Lender's selection and
designation of any other Lending Installation, to such payments made to
such other Lending Installation, such Lender shall use reasonable
efforts to make, fund and maintain its Loans through another Lending
Installation of such Lender in another jurisdiction so as to reduce
Borrower's liability hereunder, if the making, funding or maintenance of
such Loans through such other Lending Installation of such Lender does
not, in the judgment of such Lender, otherwise adversely affect such
Loans, or obligations under the Revolving Loan Commitments or such
Lender.
(ii) In addition, Borrower agrees to pay any present or future
stamp or documentary taxes or any other excise or property taxes,
charges, or similar levies which arise from any payment made hereunder,
from the issuance of Letters of Credit hereunder, or from the execution,
delivery or registration of, or otherwise with respect to, this
Agreement, the other Loan Documents, the Revolving Loan Commitments, the
Loans or the Letters of Credit (hereinafter referred to as "Other
Taxes").
(iii) Borrower indemnifies each Lender and the Agent for the full
amount of Taxes and Other Taxes (including, without limitation, any
Taxes or Other Taxes imposed by any Governmental Authority on amounts
payable under this Section 2.15(E)) paid by such Lender or the Agent (as
the case may be) and any liability (including penalties, interest, and
expenses) arising therefrom or with respect thereto, whether or not such
Taxes or Other Taxes were correctly or legally asserted. This
indemnification shall be made within thirty (30) days after the date
such Lender or the Agent (as the case may be) makes written demand
therefor. A certificate as to any additional amount payable to any
Lender or the Agent under this Section 2.15(E) submitted to Borrower and
the Agent (if a Lender is so submitting) by such Lender or the Agent
shall show in reasonable detail the amount payable and the calculations
used to determine such amount and shall, absent manifest error, be
final, conclusive and binding upon all parties hereto. With respect to
such deduction or withholding for or on account of any Taxes and to
confirm that all such Taxes have been paid to the appropriate
Governmental Authorities, Borrower shall promptly (and in any event not
later than thirty (30) days after receipt) furnish to each Lender and
the Agent such certificates, receipts and other documents as may be
required (in the judgment of such Lender or the Agent) to establish any
tax credit to which such Lender or the Agent may be entitled.
(iv) Within thirty (30) days after the date of any payment of
Taxes or Other Taxes by Borrower, Borrower shall furnish to the Agent
the original or a certified copy of a receipt evidencing payment
thereof.
(v) Without prejudice to the survival of any other agreement of
Borrower hereunder, the agreements and obligations of Borrower contained
in this Section 2.15(E) shall survive the payment in full of principal
and interest hereunder, the termination of the Letters of Credit and the
termination of this Agreement.
(vi) Without limiting the obligations of Borrower under this
Section 2.15(E), each Lender that is not created or organized under the
laws of the United States of America or a political subdivision thereof
shall deliver to Borrower and the Agent on or before the Closing Date,
or, if later, the date on which such Lender becomes a Lender pursuant to
Section 12.3 hereof, a true and accurate certificate executed in
duplicate by a duly authorized officer of such Lender, in a form
satisfactory to Borrower and the Agent, to the effect that such Lender
is capable under the provisions of an applicable tax treaty concluded by
the United States of America (in which case the certificate shall be
accompanied by two executed copies of Form 1001 of the IRS) or under
Section 1442 of the Code (in which case the certificate shall be
accompanied by two copies of Form 4224 of the IRS) of receiving payments
of interest hereunder without deduction or withholding of United States
federal income tax. Each such Lender further agrees to deliver to
Borrower and the Agent from time to time a true and accurate certificate
executed in duplicate by a duly authorized officer of such Lender
substantially in a form satisfactory to Borrower and the Agent, before
or promptly upon the occurrence of any event requiring a change in the
most recent certificate previously delivered by it to Borrower and the
Agent pursuant to this Section 2.15(E)(vi). Further, each Lender which
delivers a certificate accompanied by Form 1001 of the IRS covenants and
agrees to deliver to Borrower and the Agent within fifteen (15) days
prior to January 1, 1996, and every third (3rd) anniversary of such date
thereafter, on which this Agreement is still in effect, another such
certificate and two accurate and complete original signed copies of
Form 1001 (or any successor form or forms required under the Code or the
applicable regulations promulgated thereunder), and each Lender that
delivers a certificate accompanied by Form 4224 of the IRS covenants and
agrees to deliver to Borrower and the Agent within fifteen (15) days
prior to the beginning of each subsequent taxable year of such Lender
during which this Agreement is still in effect, another such certificate
and two accurate and complete original signed copies of IRS Form 4224
(or any successor form or forms required under the Code or the
applicable regulations promulgated thereunder). Each such certificate
shall certify as to one of the following:
(a) that such Lender is capable of receiving payments of
interest hereunder without deduction or withholding of United
States of America federal income tax;
(b) that such Lender is not capable of receiving
payments of interest hereunder without deduction or
withholding of United States of America federal income tax as
specified therein but is capable of recovering the full amount
of any such deduction or withholding from a source other than
Borrower and will not seek any such recovery from Borrower; or
(c) that, as a result of the adoption of or any change
in any law, treaty, rule, regulation, guideline or
determination of a Governmental Authority or any change in the
interpretation or application thereof by a Governmental
Authority after the date such Lender became a party hereto,
such Lender is not capable of receiving payments of interest
hereunder without deduction or withholding of United States of
America federal income tax as specified therein and that it is
not capable of recovering the full amount of the same from a
source other than Borrower.
Each Lender shall promptly furnish to Borrower and the Agent such
additional documents as may be reasonably required by Borrower or the
Agent to establish any exemption from or reduction of any Taxes or Other
Taxes required to be deducted or withheld and which may be obtained
without undue expense to such Lender.
(F) Loan Account. Each Lender shall maintain in accordance with its
usual practice an account or accounts (a "Loan Account") evidencing the
Obligations of Borrower to such Lender owing to such Lender from time to
time, including the amount of principal and interest payable and paid to
such Lender from time to time hereunder and under the Notes.
(G) Control Account. The Register maintained by the Agent pursuant to
Section 12.3(C) shall include a control account, and a subsidiary account
for each Lender, in which accounts (taken together) shall be recorded
(i) the date and amount of each Advance made hereunder, the type of Loan
comprising such Advance and any Interest Period applicable thereto,
(ii) the effective date and amount of each assignment and acceptance
delivered to and accepted by it and the parties thereto pursuant to
Section 12.3, (iii) the amount of any principal or interest due and
payable or to become due and payable from Borrower to each Lender
hereunder or under the Notes, (iv) the amount of any sum received by the
Agent from Borrower hereunder and each Lender's share thereof, and (v) all
other appropriate debits and credits as provided in this Agreement,
including, without limitation, all fees, charges, expenses and interest.
(H) Entries Binding. The entries made in the Register and each Loan
Account shall be conclusive and binding for all purposes, absent manifest
error, unless Borrower objects to information contained in the Register
and each Loan Account within thirty (30) days of Borrower's receipt of
such information.
2.16 Notification of Advances, Interest Rates, Prepayments and
Aggregate Revolving Loan Commitment Reductions. Promptly after receipt
thereof, the Agent will notify each Lender of the contents of each
Aggregate Revolving Loan Commitment reduction notice, Borrowing Notice,
Continuation/Conversion Notice, and repayment notice received by it
hereunder. The Agent will notify each Lender of the interest rate
applicable to each Eurodollar Rate Loan promptly upon determination of
such interest rate and will give each Lender prompt notice of each change
in the Alternate Base Rate.
2.17 Lending Installations. Each Lender may book its Loans at any
Lending Installation selected by such Lender and may change its Lending
Installation from time to time. All terms of this Agreement shall apply
to any such Lending Installation and the Notes shall be deemed held by
each Lender for the benefit of such Lending Installation. Each Lender
may, by written or facsimile notice to the Agent and Borrower, designate a
Lending Installation through which Loans will be made by it and for whose
account Loan payments are to be made.
2.18 Non-Receipt of Funds by the Agent. Unless Borrower or a Lender,
as the case may be, notifies the Agent prior to the date on which it is
scheduled to make payment to the Agent of (i) in the case of a Lender, the
proceeds of a Loan or (ii) in the case of Borrower, a payment of
principal, interest or fees to the Agent for the account of the Lenders,
that it does not intend to make such payment, the Agent may assume that
such payment has been made. The Agent may, but shall not be obligated to,
make the amount of such payment available to the intended recipient in
reliance upon such assumption. If such Lender or Borrower, as the case
may be, has not in fact made such payment to the Agent, the recipient of
such payment shall, on demand by the Agent, repay to the Agent the amount
so made available together with interest thereon in respect of each day
during the period commencing on the date such amount was so made available
by the Agent until the date the Agent recovers such amount at a rate per
annum equal to (i) in the case of payment by a Lender, the Federal Funds
Effective Rate for such day or (ii) in the case of payment by Borrower,
the interest rate applicable to the relevant Loan.
2.19 Termination Date. This Agreement shall be effective until the
Termination Date. Notwithstanding the termination of this Agreement on
the Termination Date, until all of the Obligations (other than contingent
indemnity obligations) shall have been fully and indefeasibly paid and
satisfied, all financing arrangements among Borrower and the Lenders shall
have been terminated (other than under Interest Rate Agreements or other
agreements with respect to Rate Hedging Obligations) and all of the
Letters of Credit shall have expired, been cancelled or terminated, all of
the rights and remedies under this Agreement and the other Loan Documents
shall survive and the Agent shall be entitled to retain its security
interest in and to all existing and future Collateral for the benefit of
itself and the Holders of Secured Obligations.
2.20 Replacement of Certain Lenders. In the event a Lender ("Affected
Lender") shall have: (i) failed to fund its Pro Rata Share of any Advance
requested by Borrower which such Lender is obligated to fund under the
terms of this Agreement and which failure has not been cured, (ii)
requested compensation from Borrower under Sections 2.15(E), 3.1 or 3.2 to
recover Taxes, Other Taxes or other additional costs incurred by such
Lender which are not being incurred generally by the other Lenders, (iii)
delivered a notice pursuant to Section 3.3 claiming that such Lender is
unable to extend Eurodollar Rate Loans to Borrower for reasons not
generally applicable to the other Lenders or (iv) has invoked Section 9.2,
then, in any such case, Borrower or the Agent may make written demand on
such Affected Lender (with a copy to the Agent in the case of a demand by
Borrower and a copy to Borrower in the case of a demand by the Agent) for
the Affected Lender to assign, and such Affected Lender shall use
reasonable efforts to assign pursuant to one or more duly executed
assignment and acceptance agreements in substantially the form of Exhibit
E five (5) Business Days after the date of such demand, to one or more
financial institutions that comply with the provisions of Section 12.3(A)
(and, if selected by Borrower is reasonably acceptable to the Agent) which
Borrower or the Agent, as the case may be, shall have engaged for such
purpose ("Replacement Lender"), all of such Affected Lender's rights and
obligations under this Agreement and the other Loan Documents (including,
without limitation, its Revolving Loan Commitment, all Loans owing to it,
all of its participation interests in existing Letters of Credit, and its
obligation to participate in additional Letters of Credit hereunder) in
accordance with Section 12.3. If the Affected Lender is also an Issuing
Lender, then prior to or simultaneously with the assignment to the
Replacement Lender, all Letters of Credit issued by the Affected Lender
shall be replaced by Letters of Credit issued by the Agent, the
Replacement Lender or another Issuing Lender. The Agent agrees, upon the
occurrence of such events with respect to an Affected Lender and upon the
written request of Borrower, to use its reasonable efforts to obtain the
commitments from one or more financial institutions to act as a
Replacement Lender. The Agent is authorized to execute one or more of
such assignment agreements as attorney-in-fact for any Affected Lender
failing to execute and deliver the same within five (5) Business Days
after the date of such demand. Further, with respect to such assignment
the Affected Lender shall have concurrently received, in cash, all amounts
due and owing to the Affected Lender hereunder or under any other Loan
Document, including, without limitation, the aggregate outstanding
principal amount of the Loans owed to such Lender, together with accrued
interest thereon through the date of such assignment, amounts payable
under Sections 2.15(E), 3.1, and 3.2 with respect to such Affected Lender
and compensation payable under Section 2.15(C) in the event of any
replacement of any Affected Lender under clause (ii) or clause (iii) of
this Section 2.20; provided that upon such Affected Lender's replacement,
such Affected Lender shall cease to be a party hereto but shall continue
to be entitled to the benefits of Sections 2.15(E), 3.1, 3.2, 3.4, and
9.7, as well as to any fees accrued for its account hereunder and not yet
paid, and shall continue to be obligated under Section 10.8. Upon the
replacement of any Affected Lender pursuant to this Section 2.20, the
provisions of Section 8.2 shall continue to apply with respect to Loans
which are then outstanding with respect to which the Affected Lender
failed to fund its Pro Rata Share and which failure has not been cured.
2.21 Letter of Credit Facility. Upon receipt of duly executed
applications therefor, and such other documents, instructions and
agreements as such Issuing Lender may require, and subject to the
provisions of Article IV, the Agent shall or any other Lender, in its sole
discretion, may, issue letters of credit for the account of Borrower (the
Agent and each such other Lender in such capacity being referred to as an
"Issuing Lender"), on terms as are satisfactory to such Issuing Lender;
provided, however, that no Letter of Credit will be issued for the account
of Borrower by an Issuing Lender if on the date of issuance, before or
after taking such Letter of Credit into account, (i) the Revolving Credit
Obligations at such time would exceed the lesser of the Aggregate
Revolving Loan Commitments and the Borrowing Base at such time or (ii) the
aggregate outstanding amount of the L/C Obligations exceeds $1,000,000;
and provided, further, that no Letter of Credit shall be issued which has
an expiration date later than the date which is five (5) Business Days
immediately preceding the Termination Date. If Borrower applies for a
Letter of Credit from any Lender other than the Agent, Borrower shall
simultaneously notify the Agent of the proposed amount and expiration date
of such Letter of Credit. The Agent shall promptly notify Borrower and
the Lender to which such application has been made whether the issuance of
such Letter of Credit would comply with the terms of this Section 2.21.
2.22 Letter of Credit Reimbursement Obligations. Borrower agrees
unconditionally, irrevocably and absolutely to pay immediately to the
Agent, for the account of the applicable Issuing Lender or the account of
Lenders, as the case may be, the amount of each advance which may be drawn
under or pursuant to a Letter of Credit issued for its account or an L/C
Draft related thereto (such obligation of Borrower to reimburse the
Issuing Lender or the Agent for an advance made under a Letter of Credit
or L/C Draft, except to the extent funded or deemed funded by a Revolving
Loan, being hereinafter referred to as a "Reimbursement Obligation" with
respect to such Letter of Credit or L/C Draft), each such payment to be
made by Borrower no later than the Business Day on which the applicable
Issuing Lender makes payment of each such L/C Draft or, in the case of any
other draw on a Letter of Credit, the date specified in a demand of the
Agent. Any Issuing Lender may direct the Agent to make such a demand with
respect to Letters of Credit issued by such Issuing Lender. If Borrower
at any time fails to repay a Reimbursement Obligation pursuant to this
Section 2.22, Borrower shall be deemed to have elected to borrow a
Revolving Loan from the Lenders, as of the date of the advance giving rise
to the Reimbursement Obligation equal in amount to the amount of the
unpaid Reimbursement Obligation. Such Revolving Loan shall be made as of
the date of the payment giving rise to such Reimbursement Obligation,
automatically, without notice and without any requirement to satisfy the
conditions precedent otherwise applicable to an Advance of Revolving
Loans. Such Revolving Loans shall constitute a Floating Rate Advance, the
proceeds of which Advance shall be used to repay such Reimbursement
Obligation. If, for any reason, Borrower fails to repay a Reimbursement
Obligation on the day such Reimbursement Obligation arises and, for any
reason, the Lenders are unable to make or have no obligation to make a
Revolving Loan, then such Reimbursement Obligation shall bear interest
from and after such day, until paid in full, at the interest rate
applicable to a Floating Rate Advance.
2.23 Letter of Credit Participation. Immediately upon the issuance of
each Letter of Credit hereunder, each Lender shall be deemed to have
automatically, irrevocably and unconditionally purchased and received from
the applicable Issuing Lender an undivided interest and participation in
and to such Letter of Credit, the obligations of Borrower in respect
thereof, and the liability of the applicable Issuing Lender thereunder
(collectively, an "L/C Interest") in an amount equal to the amount
available for drawing under such Letter of Credit multiplied by such
participating Lender's Pro Rata Share. The Agent will notify each Lender
(or in the case of an Issuing Lender other than the Agent, such Issuing
Lender shall notify the Agent who in turn will notify each Lender)
promptly if Borrower fails to pay the Agent for the account of the
applicable Issuing Lender amounts required to be paid by it under Section
2.22 with respect to any L/C Draft or upon any other draw under a Letter
of Credit and each Lender shall promptly and unconditionally pay to the
Agent for the account of the applicable Issuing Lender, in immediately
available funds an amount equal to such Lender's Pro Rata Share of the
amount of such payment or draw. Upon the Agent's receipt of funds as a
result of an Issuing Lender's payment on an L/C Draft or any other draw on
a Letter of Credit issued by such Issuing Lender, the Agent shall promptly
pay such funds to the Issuing Lender. If Borrower fails to repay the
amount of any L/C Draft or any other draw on a Letter of Credit in
accordance with Section 2.22, then, upon direction from the Issuing
Lender, the Agent shall notify each Lender of such failure, and each
Lender shall promptly make payment to the Agent, in immediately available
funds in an amount equal to such Lender's Pro Rata Share of the amount of
such payment or draw. The obligation of each Lender to pay the Agent for
the account of the applicable Issuing Lender under this Section 2.23 shall
be unconditional, continuing, irrevocable and absolute. In the event that
any Lender fails to make payment to the Agent of any amount due under this
Section 2.23, the Agent shall be entitled to receive and apply against
such obligation the principal and interest otherwise payable to such
Lender hereunder until the Agent on behalf of the applicable Issuing
Lender receives such payment from such Lender or such obligation is
otherwise fully satisfied; provided, however, that nothing contained in
this sentence shall relieve such Lender of its obligation to reimburse the
Agent for the account of the applicable Issuing Lender such amount in
accordance with this Section 2.23.
2.24 Cash Collateral. Notwithstanding anything to the contrary herein
or in any application for a Letter of Credit, after the occurrence and
during the continuance of Default, Borrower shall, upon the Agent's
demand, deliver to the Agent for the benefit of the Lenders, cash, or
other collateral of a type satisfactory to the Required Lenders, having a
value, as determined by such Lenders, equal to the aggregate outstanding
L/C Obligations. In addition, if the Maximum Revolving Credit Amount is
at any time less than the amount of contingent L/C Obligations outstanding
at any time, Borrower shall deposit cash collateral with the Agent in an
amount equal to the amount by which such L/C Obligations exceed such
Maximum Revolving Credit Amount. Any such collateral shall be held by the
Agent in a separate account appropriately designated as a cash collateral
account in relation to this Agreement and the Letters of Credit and
retained by the Agent for the benefit of the Lenders as collateral
security for Borrower's obligations in respect of this Agreement and each
of the Letters of Credit and L/C Drafts. Such amounts shall be applied to
reimburse the Agent or each Issuing Lender, as applicable, for drawings or
payments under or pursuant to Letters of Credit or L/C Drafts, or if no
such reimbursement is required, to payment of such of the other
Obligations as the Agent shall determine. If no Default shall be
continuing, amounts remaining in any cash collateral account established
pursuant to this Section 2.24 which are not to be applied to reimburse the
Agent for amounts actually paid or to be paid by the Agent in respect of a
Letter of Credit or L/C Draft, shall be returned to Borrower (after
deduction of the Agent's expenses incurred in connection with such cash
collateral account).
2.25 Letter of Credit Fees. Borrower agrees to pay (i) monthly, in
arrears, to the Agent for the ratable benefit of the Lenders, except as
set forth in Section 8.2, a letter of credit fee of two and three-quarters
percent (2.75%) per annum on the aggregate amount available for drawing
under all of the standby Letters of Credit, (ii) monthly, in arrears, to
the Agent for the ratable benefit of the Lenders, except as set forth in
Section 8.2, a commercial letter of credit fee of two percent (2.00%) per
annum on the average daily outstanding face amount available for drawing
under all of the commercial Letters of Credit issued for the account of
Borrower and (iii) to the Issuing Lender directly for its benefit, all
customary fees (including fronting fees) and other issuance, amendment,
document examination, negotiation and presentment expenses and related
charges in connection with the issuance, amendment, presentation of L/C
Drafts, and the like customarily charged by such Issuing Lender with
respect to standby and commercial Letters of Credit issued by it,
including, without limitation standard commissions with respect to
commercial Letters of Credit, payable at the time of invoice of such
amounts.
2.26 Indemnification; Exoneration. (a) In addition to amounts payable
as elsewhere provided in this Agreement, Borrower agrees to protect,
indemnify, pay and save harmless the Agent, each Issuing Lender and each
Lender from and against any and all liabilities and costs which the Agent,
any Issuing Lender or any Lender may incur or be subject to as a
consequence, direct or indirect, of (i) the issuance of any Letter of
Credit other than, in the case of the Issuing Lender, as a result of its
Gross Negligence or willful misconduct, as determined by the final
judgment of a court of competent jurisdiction, or (ii) the failure of the
Issuing Lender of a Letter of Credit to honor a drawing under such Letter
of Credit as a result of any act or omission, whether rightful or
wrongful, of any present or future de jure or de facto Governmental
Authority (all such acts or omissions herein called "Governmental Acts").
(b) As among Borrower, the Lenders, the Issuing Lenders and the Agent,
Borrower assumes all risks of the acts and omissions of, or misuse of such
Letter of Credit by, the beneficiary of any Letter of Credit. In
furtherance and not in limitation of the foregoing, subject to the
provisions of the Letter of Credit applications and Letter of Credit
reimbursement agreements executed by Borrower at the time of request for
any Letter of Credit, the Issuing Lender of a Letter of Credit, the Agent
and the Lenders shall not be responsible (in the absence of Gross
Negligence or willful misconduct in connection therewith, as determined by
the final judgment of a court of competent jurisdiction): (i) for the
form, validity, sufficiency, accuracy, genuineness or legal effect of any
document submitted by any party in connection with the application for and
issuance of the Letters of Credit, even if it should in fact prove to be
in any or all respects invalid, insufficient, inaccurate, fraudulent or
forged; (ii) for the validity or sufficiency of any instrument
transferring or assigning or purporting to transfer or assign a Letter of
Credit or the rights or benefits thereunder or proceeds thereof, in whole
or in part, which may prove to be invalid or ineffective for any reason;
(iii) for failure of the beneficiary of a Letter of Credit to comply duly
with conditions required in order to draw upon such Letter of Credit; (iv)
for errors, omissions, interruptions or delays in transmission or delivery
of any messages, by mail, cable, telegraph, telex, or other similar form
of teletransmission or otherwise; (v) for errors in interpretation of
technical trade terms; (vi) for any loss or delay in the transmission or
otherwise of any document required in order to make a drawing under any
Letter of Credit or of the proceeds thereof; (vii) for the misapplication
by the beneficiary of a Letter of Credit of the proceeds of any drawing
under such Letter of Credit; and (viii) for any consequences arising from
causes beyond the control of the Agent, the Issuing Lender and the Lenders
including, without limitation, any Governmental Acts. None of the above
shall affect, impair, or prevent the vesting of any of the Issuing
Lender's rights or powers under this Section 2.26.
(c) In furtherance and extension and not in limitation of the specific
provisions hereinabove set forth, any action taken or omitted by Issuing
Lender under or in connection with Letters of Credit issued on behalf of
Borrower or any related certificates shall not, in the absence of Gross
Negligence or willful misconduct, as determined by the final judgment of a
court of competent jurisdiction, put the Issuing Lender, the Agent or any
Lender under any resulting liability to Borrower or relieve Borrower of
any of its obligations hereunder to any such Person.
(d) Without prejudice to the survival of any other agreement of
Borrower hereunder, the agreements and obligations of Borrower contained
in this Section 2.26 shall survive the payment in full of principal and
interest hereunder, the termination of the Letters of Credit and the
termination of this Agreement.
(e) Notwithstanding anything therein to the contrary, in the event any
of the provisions of any application submitted in connection with any
Letter of Credit conflict with the provisions of this Agreement, the terms
of this Agreement shall govern.
ARTICLE III: CHANGE IN CIRCUMSTANCES
3.1 Yield Protection. If any law or any governmental or quasi-
governmental rule, regulation, policy, guideline or directive (whether or
not having the force of law) adopted after the date of this Agreement and
having general applicability to all banks within the jurisdiction in which
such Lender operates (excluding, for the avoidance of doubt, the effect of
and phasing in of capital requirements or other regulations or guidelines
passed prior to the date of this Agreement), or any interpretation or
application thereof by any Governmental Authority charged with the
interpretation or application thereof, or the compliance of any Lender
therewith,
(i) subjects any Lender (each reference in this Section 3.1 to a
Lender being in its capacity either as a Lender or an Issuing Lender, or
both) or any applicable Lending Installation to any tax, duty, charge or
withholding on or from payments due from Borrower (excluding federal
taxation of the overall net income of any Lender or applicable Lending
Installation), or changes the basis of taxation of payments to any
Lender in respect of its Loans, its L/C Interests, the Letters of Credit
or other amounts due it hereunder, or
(ii) imposes or increases or deems applicable any reserve,
assessment, insurance charge, special deposit or similar requirement
against assets of, deposits with or for the account of, or credit
extended by, any Lender or any applicable Lending Installation (other
than reserves and assessments taken into account in determining the
interest rate applicable to Eurodollar Rate Loans) with respect to its
Loans, L/C Interests or the Letters of Credit, or
(iii) imposes any other condition the result of which is to
increase the cost to any Lender or any applicable Lending Installation
of making, funding or maintaining the Loans, the L/C Interests or the
Letters of Credit or reduces any amount received by any Lender or any
applicable Lending Installation in connection with Loans or Letters of
Credit, or requires any Lender or any applicable Lending Installation to
make any payment calculated by reference to the amount of Loans or L/C
Interests held or interest received by it or by reference to the Letters
of Credit, by an amount deemed material by such Lender;
and the result of any of the foregoing is to increase the cost to that
Lender of making, renewing or maintaining its Loans, L/C Interests or
Letters of Credit or to reduce any amount received under this Agreement,
then, within 15 days after receipt by Borrower of written demand by such
Lender pursuant to Section 3.5, Borrower shall pay such Lender that
portion of such increased expense incurred or reduction in an amount
received which such Lender determines is attributable to making, funding
and maintaining its Loans, L/C Interests, Letters of Credit and its
Revolving Loan Commitment.
3.2 Changes in Capital Adequacy Regulations. If a Lender (each
reference in this Section 3.2 to a Lender being in its capacity either as
a Lender or an Issuing Lender, or both) determines (i) the amount of
capital required or expected to be maintained by such Lender, any Lending
Installation of such Lender or any corporation controlling such Lender is
increased as a result of a "Change" (as defined below), and (ii) such
increase in capital will result in an increase in the cost to such Lender
of maintaining its Loans, L/C Interests, the Letters of Credit or its
obligation to make Loans hereunder, then, within 15 days after receipt by
Borrower of written demand by such Lender pursuant to Section 3.5,
Borrower shall pay such Lender the amount necessary to compensate for any
shortfall in the rate of return on the portion of such increased capital
which such Lender determines is attributable to this Agreement, its Loans,
its L/C Interests, the Letters of Credit or its obligation to make Loans
hereunder (after taking into account such Lender's policies as to capital
adequacy). "Change" means (i) any change after the date of this Agreement
in the "Risk-Based Capital Guidelines" (as defined below) excluding, for
the avoidance of doubt, the effect of any phasing in of such Risk-Based
Capital Guidelines or any other capital requirements passed prior to the
date hereof, or (ii) any adoption of or change in any other law,
governmental or quasi-governmental rule, regulation, policy, guideline,
interpretation, or directive (whether or not having the force of law)
after the date of this Agreement and having general applicability to all
banks and financial institutions within the jurisdiction in which such
Lender operates which affects the amount of capital required or expected
to be maintained by any Lender or any Lending Installation or any
corporation controlling any Lender. "Risk-Based Capital Guidelines" means
(i) the risk-based capital guidelines in effect in the United States on
the date of this Agreement, including transition rules, and (ii) the
corresponding capital regulations promulgated by regulatory authorities
outside the United States implementing the July 1988 report of the Basle
Committee on Banking Regulation and Supervisory Practices Entitled
"International Convergence of Capital Measurements and Capital Standards,"
including transition rules, and any amendments to such regulations adopted
prior to the date of this Agreement.
3.3 Availability of Types of Advances. If (i) any Lender determines
that maintenance of its Eurodollar Rate Loans at a suitable Lending
Installation would violate any applicable law, rule, regulation or
directive, whether or not having the force of law, or (ii) the Required
Lenders determine that (x) deposits of a type and maturity appropriate to
match fund Eurodollar Rate Advances are not available or (y) the interest
rate applicable to a Type of Advance does not accurately reflect the cost
of making or maintaining such an Advance, then the Agent shall suspend the
availability of the affected Type of Advance and, in the case of any
occurrence set forth in clause (i) require any Advances of the affected
Type to be repaid.
3.4 Funding Indemnification. If any payment of a Eurodollar Rate
Advance occurs on a date which is not the last day of the applicable
Interest Period, whether because of acceleration, prepayment, or
otherwise, or a Eurodollar Rate Advance is not made on the date specified
by Borrower for any reason other than default by the Lenders, Borrower
indemnifies each Lender for any loss or cost incurred by it resulting
therefrom, including, without limitation, any loss or cost in liquidating
or employing deposits acquired to fund or maintain the Eurodollar Rate
Advance. In connection with any assignment by First Chicago of any
portion of the Loans made pursuant to Section 12.3 and made on or prior to
the earlier of (i) March 22, 1995 and (ii) execution of assignment and
acceptance agreements delivered to the Agent pursuant to Section 12.3 with
respect to not less than $35,000,000 of the loan facilities hereunder, and
if, notwithstanding the provisions of Section 2.4, Borrower has requested
and the Agent has consented to the use of the Eurodollar Rate, Borrower
shall be deemed to have repaid all outstanding Eurodollar Rate Advances as
of such date and reborrowed such amount as a Floating Rate Advance and/or
Eurodollar Rate Advance (chosen in accordance with the provisions od
Section 2.4) and the indemnification provisions under this Section 3.4
shall apply.
3.5 Lender Statements; Survival of Indemnity. If reasonably possible,
each Lender shall designate an alternate Lending Installation with respect
to its Eurodollar Rate Loans to reduce any liability of Borrower to such
Lender under Sections 3.1 and 3.2 or to avoid the unavailability of a Type
of Advance under Section 3.3, so long as such designation is not
disadvantageous to such Lender. Each Lender requiring compensation
pursuant to Section 2.15(E) or to this Article III shall use its
reasonable efforts to notify Borrower and the Agent in writing of any
Change, law, policy, rule, guideline or directive giving rise to such
demand for compensation not later than ninety (90) days following the date
upon which the responsible account officer of such Lender knows or should
have known of such Change, law, policy, rule, guideline or directive. Any
demand for compensation pursuant to this Article III shall be in writing
and shall state the amount due, if any, under Section 3.1, 3.2 or 3.4 and
shall set forth in reasonable detail the calculations upon which such
Lender determined such amount. Such written demand shall be rebuttably
presumed correct for all purposes. Notwithstanding anything in this
Agreement to the contrary, Borrower shall not be obligated to pay any
amount or amounts under Section 2.15(E) or this Article III to the extent
such amount or amounts result from a Change, law, policy, rule, guideline
or directive which took effect more than 120 days prior to the date of
delivery of the notice described above. Determination of amounts payable
under such Sections in connection with a Eurodollar Rate Loan shall be
calculated as though each Lender funded its Eurodollar Rate Loan through
the purchase of a deposit of the type and maturity corresponding to the
deposit used as a reference in determining the Eurodollar Rate applicable
to such Loan, whether in fact that is the case or not. The obligations of
Borrower under Sections 3.1, 3.2 and 3.4 shall survive payment of the
Obligations and termination of this Agreement.
ARTICLE IV: CONDITIONS PRECEDENT
4.1 Initial Advances and Letters of Credit. The Lenders shall not be
required to make the initial Loans or issue any Letters of Credit or
purchase any participations therein unless (i) such loans are made not
later than January 19, 1995; (ii) (w) the timing of the offer to
purchase, the expiration period, tender period, proration period and
withdrawal rights in connection with the Stock Repurchase shall not have
been extended beyond the applicable dates set forth in the Issuer Tender
Offer Statement, (x) no other material terms of the offer to purchase
shall have been modified without the prior written consent of the Agent
and the Required Lenders, (y) Holdings shall have delivered its notice to
the depositary in connection with the Stock Repurchase of Holdings'
acceptance of shares for payment pursuant to the offer to purchase (a copy
of which shall have been provided to the Agent) and (z) all conditions
(other than payment for shares accepted) to consummation of the Stock
Repurchase shall have been satisfied; (iii) all of the conditions
precedent set forth in that certain commitment letter dated November 8,
1994 between First Chicago and Holdings shall have been met to the
satisfaction of the Agent and each of the Lenders; and (iv) Borrower has
furnished to the Agent each of the following, with sufficient copies for
the Lenders:
(1) Copies of the Certificate of Incorporation of Borrower,
together with all amendments and a certificate of good standing, both
certified by the appropriate governmental officer in its jurisdiction of
incorporation;
(2) Copies, certified by the Secretary or Assistant Secretary of
Borrower, of its By-Laws and of its Board of Directors' resolutions (and
resolutions of other bodies, if any are deemed necessary by counsel for
any Lender) authorizing the execution of the Loan Documents;
(3) An incumbency certificate, executed by the Secretary or
Assistant Secretary of Borrower, which shall identify by name and title
and bear the signature of the officers of Borrower authorized to sign
the Loan Documents and of each of the Authorized Officers authorized to
make borrowings and make application for Letters of Credit hereunder,
upon which certificate the Lenders shall be entitled to rely until
informed of any change in writing by Borrower;
(4) A certificate, in form and substance satisfactory to the
Agent, signed by the chief financial officer of Borrower, stating that
on Closing Date no Default or Unmatured Default has occurred and is
continuing;
(5) A written opinion of Borrower's counsel, addressed to the
Agent and the Lenders in form, scope and substance acceptable to the
Agent and the Lenders;
(6) Notes payable to the order of each of the Lenders;
(7) Written money transfer instructions in substantially the form
of Exhibit J hereto, addressed to the Agent and signed by an Authorized
Officer, together with such other related money transfer authorizations
as the Agent may have reasonably requested; and
(8) Such other documents as the Agent or any Lender or its counsel
may have reasonably requested, including, without limitation all of the
documents reflected on the List of Closing Documents attached as Exhibit
F to this Agreement.
4.2 Each Advance and Letter of Credit. The Lenders shall not be
required to make any Advance, issue any Letter of Credit or purchase any
participation therein, unless on the applicable Borrowing Date, or in the
case of a Letter of Credit, the date on which the Letter of Credit is to
be issued:
(i) There exists no Default or Unmatured Default; and
(ii) The representations and warranties contained in Article V are
true and correct as of such Borrowing Date except for changes in the
Schedules to this Agreement reflecting transactions permitted by this
Agreement.
Each Borrowing Notice with respect to each such Advance and the letter
of credit application with respect to a Letter of Credit shall constitute
a representation and warranty by Borrower that the conditions contained in
Sections 4.2(i) and (ii) have been satisfied. Any Lender may require a
duly completed officer's certificate in substantially the form of Exhibit
G hereto and/or a duly completed compliance certificate in substantially
the form of Exhibit H hereto as a condition to making an Advance.
ARTICLE V: REPRESENTATIONS AND WARRANTIES
In order to induce the Agent and the Lenders to enter into this
Agreement and to make the Loans and the other financial accommodations to
Borrower and to issue the Letters of Credit described herein, Borrower
represents and warrants as follows to each Lender and the Agent as of the
Closing Date and thereafter on each date as required by Section 4.2:
5.1 Organization; Corporate Powers. Borrower and each of its
Subsidiaries (i) is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization,
(ii) is duly qualified to do business as a foreign corporation and is in
good standing under the laws of each jurisdiction in which failure to be
so qualified and in good standing will have a Material Adverse Effect and
(iii) has all requisite corporate power and authority to own, operate and
encumber its property and to conduct its business as presently conducted
and as proposed to be conducted in connection with and following the
consummation of the transactions contemplated by this Agreement.
5.2 Authority.
(A) Holdings, Borrower and each of its Subsidiaries has the requisite
corporate power and authority (i) to execute, deliver and perform each of
the Transaction Documents which are to be executed by it as required by
this Agreement on or prior to Closing Date and (ii) to file the
Transaction Documents which must be filed by it in connection with the
Stock Repurchase or which have been filed by it as required by this
Agreement on or prior to the Closing Date with any Governmental Authority.
(B) The execution, delivery, performance and filing, as the case may be,
of each of the Transaction Documents which must be executed or filed by
Holdings, Borrower or any of its Subsidiaries in connection with the Stock
Repurchase or which have been executed or filed as required by this
Agreement on or prior to the Closing Date and to which Holdings, Borrower
or any of its Subsidiaries is party, and the consummation of the
transactions contemplated thereby, have been duly approved by the
respective boards of directors and, if necessary, the shareholders of
Holdings, Borrower and its Subsidiaries, and such approvals have not been
rescinded. No other corporate action or proceedings on the part of
Holdings, Borrower or its Subsidiaries are necessary to consummate such
transactions.
(C) Each of the Transaction Documents to which Borrower or any of its
Subsidiaries is a party has been duly executed, delivered or filed, as the
case may be, by it and constitutes its legal, valid and binding
obligation, enforceable against it in accordance with its terms (except as
enforceability may be limited by bankruptcy, insolvency, or similar laws
affecting the enforcement of creditor's rights generally), is in full
force and effect and no material term or condition thereof has been
amended, modified or waived from the terms and conditions contained in the
Transaction Documents delivered to the Agent pursuant to Section 4.1
without the prior written consent of the Required Lenders, and Borrower
and its Subsidiaries have, and, to the best of Borrower's and its
Subsidiaries' knowledge, all other parties thereto have, performed and
complied with all the terms, provisions, agreements and conditions set
forth therein and required to be performed or complied with by such
parties on or before the Closing Date, and no unmatured default, default
or breach of any covenant by any such party exists thereunder.
5.3 No Conflict; Governmental Consents. The execution, delivery and
performance of each of the Loan Documents and other Transaction Documents
to which Borrower or any of its Subsidiaries is a party do not and will
not (i) conflict with the certificate or articles of incorporation or by-
laws of Borrower or any such Subsidiary, (ii) constitute a tortious
interference with any Contractual Obligation of any Person or conflict
with, result in a breach of or constitute (with or without notice or lapse
of time or both) a default under any Requirement of Law (including,
without limitation, any Environmental Property Transfer Act) or
Contractual Obligation of Borrower or any such Subsidiary, or require
termination of any Contractual Obligation, except such interference,
breach, default or termination which individually or in the aggregate
would not reasonably be expected to have a Material Adverse Effect,
(iii) with respect to the Loan Documents and, to the best of Borrower's
and its Subsidiaries' knowledge with respect to the other Transaction
Documents, result in or require the creation or imposition of any Lien
whatsoever upon any of the property or assets of Borrower or any such
Subsidiary, other than Liens permitted by the Loan Documents, or
(iv) require any approval of Borrower's or any such Subsidiary's
shareholders except such as have been obtained. Except as set forth on
Schedule 5.3 to this Agreement, the execution, delivery and performance of
each of the Transaction Documents to which Borrower or any of its
Subsidiaries is a party do not and will not require any registration with,
consent or approval of, or notice to, or other action to, with or by any
Governmental Authority, including under any Environmental Property
Transfer Act, except (i) registrations, approvals, filings, consents or
notices which have been made, obtained or given, or which, if not made,
obtained or given, individually or in the aggregate would not reasonably
be expected to have a Material Adverse Effect, and (ii) filings necessary
to create or perfect security interests in the Collateral.
5.4 Financial Statements.
(A) The pro forma financial statements of Borrower and its
Subsidiaries, copies of which are attached hereto as Exhibit I, present on
a pro forma basis the financial condition of Borrower and such
Subsidiaries as of such date, and reflect on a pro forma basis those
liabilities reflected in the notes thereto and resulting from consummation
of the Stock Repurchase and the Stock Repurchase Dividend and the
transactions contemplated by this Agreement, and the payment or accrual of
all Transaction Costs payable on the Closing Date with respect to any of
the foregoing. The projections and assumptions expressed in the pro forma
financials referenced in this Section 5.4(A) were prepared in good faith
and represent management's opinion based on the information available to
Borrower at the time so furnished.
(B) Complete and accurate copies of the following financial statements
and the following related information have been delivered to the Agent:
(1) the consolidated balance sheet Holdings and its Subsidiaries as at the
fiscal year ended December 31, 1993 and the related consolidated
statements of income, stockholders' equity and cash flow of Holdings and
its Subsidiaries for such fiscal year, and in comparative form the
corresponding figures for the previous fiscal year along with
consolidating schedules and the audit report related thereto; and (2) the
unaudited consolidated and consolidating balance sheets of Holdings and
its Subsidiaries as at the end of the month ended September 30, 1994 and
the related consolidated and consolidating statements of income and
statement of cash flow of Holdings and its Subsidiaries for such calendar
month.
5.5 No Material Adverse Change. (a) Since December 31, 1993 (tested by
reference to the audited financial statements of Holdings as at such date)
up to the Closing Date, there has occurred no change in the business,
properties, condition (financial or otherwise) or results of operations of
Borrower or Borrower and its Subsidiaries taken as a whole or any other
event which has had or is reasonably likely to have a Material Adverse
Effect.
(b) Since the Closing Date, there has occurred no change in the
business, properties, condition (financial or otherwise) or results of
operations of Borrower or Borrower and its Subsidiaries taken as a whole
or any other event which has had or is reasonably likely to have a
Material Adverse Effect.
5.6 Taxes.
(A) Tax Examinations. All deficiencies which have been asserted
against Borrower or any of Borrower's Subsidiaries as a result of any
federal, state, local or foreign tax examination for each taxable year in
respect of which an examination has been conducted have been fully paid or
finally settled or are being contested in good faith, and as of the
Closing Date no issue has been raised by any taxing authority in any such
examination which, by application of similar principles, reasonably can be
expected to result in assertion by such taxing authority of a material
deficiency for any other year not so examined which has not been reserved
for in Borrower's consolidated financial statements to the extent, if any,
required by Agreement Accounting Principles. Except as permitted pursuant
to Section 6.2(D), neither Borrower nor any of Borrower's Subsidiaries
anticipates any material tax liability with respect to the years which
have not been closed pursuant to applicable law.
(B) Payment of Taxes. All tax returns and reports of each of,
Holdings, Borrower and Borrower's Subsidiaries required to be filed have
been timely filed, and all taxes, assessments, fees and other governmental
charges thereupon and upon their respective property, assets, income and
franchises which are shown in such returns or reports to be due and
payable have been paid except those items which are being contested in
good faith and have been reserved for in accordance with Agreement
Accounting Principles. Borrower has no knowledge of any proposed tax
assessment against Holdings, Borrower or any of Borrower's Subsidiaries
that will have or is reasonably likely to have a Material Adverse Effect.
5.7 Litigation; Loss Contingencies and Violations. Except as set forth
in Schedules 5.7 and 5.18 to this Agreement, there is no action, suit,
proceeding, investigation of which Borrower has knowledge or arbitration
before or by any Governmental Authority or private arbitrator pending or,
to the knowledge of Borrower or any of its Subsidiaries, threatened
against Borrower or any of its Subsidiaries or any property of any of them
(i) challenging the validity or the enforceability of any material
provision of the Transaction Documents or (ii) which will have or is
reasonably likely to have a Material Adverse Effect. There is no material
loss contingency within the meaning of Agreement Accounting Principles
which has not been reflected in the consolidated financial statements of
Borrower prepared and delivered pursuant to Section 6.1(A) for the fiscal
period during which such material loss contingency was incurred. Neither
Borrower nor any of its Subsidiaries is (A) in violation of any applicable
Requirements of Law which violation will have or is reasonably likely to
have a Material Adverse Effect, or (B) subject to or in default with
respect to any final judgment, writ, injunction, restraining order or
order of any nature, decree, rule or regulation of any court or
Governmental Authority which will have or is reasonably likely to have a
Material Adverse Effect.
5.8 Subsidiaries. Schedule 5.8 to this Agreement (i) contains a
description of the corporate structure of Holdings, Borrower, its
Subsidiaries and any other Person in which Holdings, Borrower or any of
its Subsidiaries holds an equity interest (both narratively and in flow
chart form); and (ii) accurately sets forth (A) the correct legal name,
the jurisdiction of incorporation and the jurisdictions in which each of
Borrower and the direct and indirect Subsidiaries of Borrower is qualified
to transact business as a foreign corporation, (B) the authorized, issued
and outstanding shares of each class of Capital Stock of Holdings,
Borrower and each of its Subsidiaries and the owners of such shares (both
as of the Closing Date and on a fully-diluted basis), and (C) a summary of
the direct and indirect partnership, joint venture, or other equity
interests, if any, of Holdings, Borrower and each Subsidiary of Borrower
in any Person that is not a corporation. None of the issued and
outstanding Capital Stock of Borrower or any of its Subsidiaries is
subject to any vesting, redemption, or repurchase agreement, and there are
no warrants or options outstanding with respect to such Capital Stock.
The outstanding Capital Stock of Borrower and each of its Subsidiaries is
duly authorized, validly issued, fully paid and nonassessable and is not
Margin Stock. Borrower has no Subsidiaries. Holdings has no Subsidiaries
other than Borrower.
5.9 ERISA. Neither Holdings, Borrower nor any of Borrower's
Subsidiaries which is a member of the Controlled Group maintains or
contributes to any Benefit Plan, Multiemployer Plan or Foreign Employee
Benefit Plan. No Benefit Plan has incurred any accumulated funding
deficiency (as defined in Sections 302(a)(2) of ERISA and 412(a) of the
Code) whether or not waived. Neither Holdings, Borrower nor any member of
the Controlled Group has incurred any liability to the PBGC which remains
outstanding other than the payment of premiums, and there are no premium
payments which have become due which are unpaid. Schedule B to the most
recent annual report filed with the IRS with respect to each Benefit Plan
and, if requested by the Agent furnished to the Lenders, is complete and
accurate in all material respects. Since the date of each such
Schedule B, there has been no material adverse change in the funding
status or financial condition of the Benefit Plan relating to such
Schedule B. Neither Holdings, Borrower nor any other member of the
Controlled Group has (i) failed to make a required contribution or payment
to a Multiemployer Plan or (ii) made a complete or partial withdrawal
under Sections 4203 or 4205 of ERISA from a Multiemployer Plan. Neither
Holdings, Borrower nor any other member of the Controlled Group has failed
to make a required installment or any other required payment under
Section 412 of the Code on or before the due date for such installment or
other payment. Neither Holdings, Borrower nor any other member of the
Controlled Group is required to provide security to a Benefit Plan under
Section 401(a)(29) of the Code due to a Plan amendment that results in an
increase in current liability for the plan year. Neither Borrower nor any
of its Subsidiaries maintains or contributes to any employee welfare
benefit plan within the meaning of Section 3(1) of ERISA which provides
benefits to employees after termination of employment other than as
required by Part 6 of Subtitle B of Title I of ERISA or applicable state
continuation coverage. Each Plan which is intended to be qualified under
Section 401(a) of the Code as currently in effect is so qualified, and
each trust related to any such Plan is exempt from federal income tax
under Section 501(a) of the Code as currently in effect. Holdings,
Borrower and their respective Subsidiaries are in compliance in all
material respects with the responsibilities, obligations and duties
imposed on them by ERISA and the Code with respect to all Plans. Neither
Holdings, Borrower nor any of their respective Subsidiaries nor any
fiduciary of any Plan has engaged in a nonexempt prohibited transaction
described in Sections 406 of ERISA or 4975 of the Code which could
reasonably be expected to subject Borrower to liability in excess of
$500,000. Neither Borrower nor any member of the Controlled Group has
taken or failed to take any action which would constitute or result in a
Termination Event, which action or inaction could reasonably be expected
to subject Borrower to liability in excess of $500,000. Neither Borrower
nor any of its Subsidiaries is subject to any liability under Sections
4063, 4064, 4069, 4204 or 4212(c) of ERISA which could reasonably be
expected to subject Borrower to liability in excess of $500,000. No other
member of the Controlled Group is subject to any liability under
Sections 4063, 4064, 4069, 4204 or 4212(c) of ERISA which could reasonably
be expected to subject Borrower to liability in excess of $500,000.
Neither Borrower nor any of its Subsidiaries has, by reason of the
transactions contemplated hereby, any obligation to make any payment to
any employee pursuant to any Plan or existing contract or arrangement.
5.10 Accuracy of Information. The information, exhibits and reports
(including, without limitation the "Salomon Brothers Inc. Offering
Memorandum") furnished by or on behalf of Borrower and any of its
Subsidiaries to the Agent or to any Lender in connection with the
negotiation of, or compliance with, the Loan Documents, the
representations and warranties of Borrower and its Subsidiaries contained
in the Loan Documents, and all certificates and documents delivered to the
Agent and the Lenders pursuant to the terms thereof do not contain as of
the date furnished any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements contained
herein or therein, in light of the circumstances under which they were
made, not misleading.
5.11 Securities Activities. Neither Borrower nor any of its
Subsidiaries is engaged in the business of extending credit for the
purpose of purchasing or carrying Margin Stock.
5.12 Material Agreements. Neither Borrower nor any Subsidiary is a
party to any agreement or instrument or subject to any charter or other
corporate restriction which will have or is reasonably likely to have a
Material Adverse Effect. Neither Borrower nor any of its Subsidiaries has
received notice or has knowledge that (i) it is in default in the
performance, observance or fulfillment of any of the obligations,
covenants or conditions contained in any Contractual Obligation applicable
to it, or (ii) any condition exists which, with the giving of notice or
the lapse of time or both, would constitute a default with respect to any
such Contractual Obligation, in each case, except where such default or
defaults, if any, will not have or are not reasonably likely to have a
Material Adverse Effect.
5.13 Compliance with Laws. Borrower and its Subsidiaries are in
compliance with all Requirements of Law applicable to them and their
respective businesses, in each case where the failure to so comply
individually or in the aggregate will have or is reasonably likely to have
a Material Adverse Effect.
5.14 Assets and Properties. Borrower and each of its Subsidiaries has
good and marketable title to all of its assets and properties (tangible
and intangible, real or personal) owned by it or a valid leasehold
interest in all of its leased assets (except insofar as marketability may
be limited by any laws or regulations of any Governmental Authority
affecting such assets), and all such assets and property are free and
clear of all Liens, except Liens securing the Obligations and Liens
permitted under Section 6.3(C). Substantially all of the assets and
properties owned by, leased to or used by Borrower and/or each such
Subsidiary of Borrower are in good condition, repair and working order,
ordinary wear and tear excepted. Except for Liens granted to the Agent
for the benefit of the Agent and the Holders of Secured Obligations,
neither this Agreement nor any other Transaction Document, nor any
transaction contemplated under any such agreement, will affect any right,
title or interest of Borrower or such Subsidiary in and to any of such
assets in a manner that would have or is reasonably likely to have a
Material Adverse Effect.
5.15 Statutory Indebtedness Restrictions. Neither Borrower, nor any of
its Subsidiaries is subject to regulation under the Public Utility Holding
Company Act of 1935, the Federal Power Act, the Interstate Commerce Act,
or the Investment Company Act of 1940, or any other federal or state
statute or regulation which limits its ability to incur indebtedness or
its ability to consummate the transactions contemplated hereby or in
connection with Stock Repurchase.
5.16 Post-Retirement Benefits. As of the Closing Date, Borrower and
its Subsidiaries have no expected cost of post-retirement medical and
insurance benefits payable by Borrower and its Subsidiaries to their
employees and former employees, as estimated by Borrower in accordance
with Financial Accounting Standards Board Statement No. 106 (other than
post-retirement benefits required by Part 6 of Subtitle B of Title I of
ERISA or applicable state continuation law).
5.17 Insurance. Schedule 5.17 to this Agreement accurately sets forth
as of the Closing Date all insurance policies and programs currently in
effect with respect to the respective properties and assets and business
of Borrower and its Subsidiaries, specifying for each such policy and
program, (i) the amount thereof, (ii) the risks insured against thereby,
(iii) the name of the insurer and each insured party thereunder, (iv) the
policy or other identification number thereof, (v) the expiration date
thereof, (vi) the annual premium with respect thereto and (vii) describes
any reserves, relating to any self-insurance program that is in effect.
Such insurance policies and programs reflect coverage that is reasonably
consistent with prudent industry practice.
5.18 Contingent Obligations. Except as set forth on Schedule 5.18 to
this Agreement, neither Holdings, Borrower nor any of its Subsidiaries has
any Contingent Obligation, contingent liability, long-term lease or
commitment, not reflected in its audited financial statements delivered to
the Agent on or prior to the Closing Date or otherwise disclosed to the
Agent and the Lenders in the other Schedules to this Agreement, which
could reasonably be expected to subject Borrower to liability in excess of
$500,000.
5.19 Restricted Junior Payments. Neither Borrower nor any of its
Subsidiaries has directly or indirectly declared, ordered, paid or made or
set apart any sum or properties for any Restricted Junior Payment or
agreed to do so, except as permitted pursuant to Section 6.3(F) of this
Agreement.
5.20 Labor Matters.
(A) Except as listed on Schedule 5.20 to this Agreement, there are on
the Closing Date no collective bargaining agreements, other labor
agreements or Multiemployer Plans covering any of the employees of
Borrower or any of its Subsidiaries. As of the Closing Date, no attempt
to organize the employees of Borrower, and no labor disputes, strikes or
walkouts affecting the operations of Borrower or any of its Subsidiaries,
is pending, or, to Borrower's knowledge, threatened, planned or
contemplated.
(B) Set forth in Schedule 5.20 to this Agreement is a list, as of the
Closing Date, of all material consulting agreements, executive
compensation plans, deferred compensation agreements, employee pension
plans or retirement plans, employee profit sharing plans, employee stock
purchase and stock option plans, severance plans, group life insurance,
hospitalization insurance or other plans or arrangements of Holdings,
Borrower and its Subsidiaries providing for benefits for employees of
Holdings, Borrower and its Subsidiaries.
5.21 Environmental Matters. (a) Except as disclosed on Schedule 5.21 to
this Agreement
(i) the operations of Borrower and its Subsidiaries comply in all
material respects with Environmental, Health or Safety Requirements of
Law;
(ii) Borrower and its Subsidiaries have all material permits,
licenses or other authorizations required under Environmental, Health or
Safety Requirements of Law and are in material compliance with such
permits;
(iii) neither Borrower, any of its Subsidiaries nor any of their
respective present property or operations, or, to the best of,
Borrower's or any of its Subsidiaries' knowledge, any of their
respective past property or operations, are subject to or the subject
of, any investigation known to Borrower or any of its Subsidiaries, any
judicial or administrative proceeding, order, judgment, decree,
settlement or other agreement respecting: (A) any material violation of
Environmental, Health or Safety Requirements of Law; (B) any remedial
action; or (C) any material claims or liabilities arising from the
Release or threatened Release of a Contaminant into the environment;
(iv) there is not now, nor to the best of Borrower's or any of its
Subsidiaries' knowledge has there ever been on or in the property of
Borrower or any of its Subsidiaries any landfill, waste pile,
underground storage tanks, aboveground storage tanks, surface
impoundment or hazardous waste storage facility of any kind, any
polychlorinated biphenyls (PCBs) used in hydraulic oils, electric
transformers or other equipment, or any asbestos containing material;
and
(v) neither Borrower nor any of its Subsidiaries has any material
Contingent Obligation in connection with any Release or threatened
Release of a Contaminant into the environment.
(b) For purposes of this Section 5.21 "material" means any
noncompliance or basis for liability which could reasonably be likely to
subject Borrower to liability in excess of $500,000.
ARTICLE VI: COVENANTS
Borrower covenants and agrees that so long as any Commitments are
outstanding and thereafter until payment in full of all of the Obligations
(other than contingent indemnity obligations), unless the Required Lenders
shall otherwise give prior written consent:
6.1 Reporting. Borrower shall:
(A) Financial Reporting. Furnish to the Lenders:
(i) Monthly Reports. As soon as practicable, and in any event
within twenty (20) days after the end of each calendar month, the
consolidated and consolidating balance sheets of Borrower and its
Subsidiaries as at the end of such period and the related consolidated
and consolidating statements of income and statement of cash flow of
Borrower and its Subsidiaries for such calendar month, certified by the
chief financial officer of Borrower on behalf of Borrower as fairly
presenting the consolidated and consolidating financial position of
Borrower and its Subsidiaries as at the dates indicated and the results
of their operations and cash flow for the calendar months indicated in
accordance with Agreement Accounting Principles, subject to normal year
end adjustments.
(ii) Quarterly Reports. (a) As soon as practicable, and in any
event within forty-five (45) days after the end of each fiscal quarter
in each fiscal year, the consolidated and consolidating balance sheets
of Borrower and its Subsidiaries as at the end of such period and the
related consolidated and consolidating statements of income, and cash
flow of Borrower and its Subsidiaries for such fiscal quarter and for
the period from the beginning of the then current fiscal year to the end
of such fiscal quarter, and a forecasted consolidated and consolidating
balance sheet and a consolidated statement of earnings and cash flow of
Borrower for and as of the end of the next succeeding fiscal quarter and
a comparison of the statement of earnings and cash flow to the budget,
certified by the chief financial officer of Borrower on behalf of
Borrower as fairly presenting the consolidated and consolidating
financial position of Borrower and its Subsidiaries as at the dates
indicated and the results of their operations and cash flow for the
periods indicated in accordance with Agreement Accounting Principles,
subject to normal year end adjustments.
(b) As soon as practicable, and in any event within forty-five (45)
days after the end of the last fiscal quarter in each fiscal year, the
preliminary annual unaudited consolidated and consolidating balance
sheets of Borrower and its Subsidiaries as at the end of such fiscal
year and the related consolidated and consolidating statements of
income, stockholders' equity and cash flow of Borrower and its
Subsidiaries for such fiscal year, setting forth in each case in
comparative form the corresponding actual and forecasted figures for the
previous fiscal year, subject to revisions based on the annual reports
delivered pursuant to clause (iii) below, along with consolidating
schedules in form and substance sufficient to calculate the financial
covenants set forth in Section 6.4.
(iii) Annual Reports. As soon as practicable, and in any event
within ninety (90) days after the end of each fiscal year, (a) the
consolidated balance sheets of Borrower and its Subsidiaries as at the
end of such fiscal year and the related consolidated statements of
income, stockholders' equity and cash flow of Borrower and its
Subsidiaries for such fiscal year, and in comparative form the
corresponding figures for the previous fiscal year along with
consolidating schedules in form and substance sufficient to calculate
the financial covenants set forth in Section 6.4, (b) a schedule from
Borrower setting forth for each item in clause (a) hereof, the
corresponding figures from the consolidated financial budget for the
current fiscal year delivered pursuant to Section 6.1(A)(v), and (c) an
audit report on the items listed in clause (a) hereof of independent
certified public accountants of recognized national standing, which
audit report shall be unqualified and shall state that such financial
statements fairly present the consolidated and consolidating financial
position of Borrower and its Subsidiaries as at the dates indicated and
the results of their operations and cash flow for the periods indicated
in conformity with Agreement Accounting Principles and that the
examination by such accountants in connection with such consolidated and
consolidating financial statements has been made in accordance with
generally accepted auditing standards. The deliveries made pursuant to
this clause (iii) shall be accompanied by (y) any management letter
prepared by the above-referenced accountants and (z) a certificate of
such accountants that, in the course of their examination necessary for
their certification of the foregoing, they have obtained no knowledge of
any Default or Unmatured Default, or if, in the opinion of such
accountants, any Default or Unmatured Default shall exist, stating the
nature and status thereof.
(iv) Officer's Certificate. Together with each delivery of any
financial statement (a) pursuant to clauses (i), (ii) and (iii) of this
Section 6.1(A), an Officer's Certificate of Borrower, substantially in
the form of Exhibit G attached hereto and made a part hereof, stating
that no Default or Unmatured Default exists, or if any Default or
Unmatured Default exists, stating the nature and status thereof and (b)
pursuant to clauses (ii) and (iii) of this Section 6.1(A), a Compliance
Certificate, substantially in the form of Exhibit H attached hereto and
made a part hereof, signed by Borrower's chief financial officer or
treasurer, setting forth calculations for the period then ended for
Section 2.5(B), if applicable, and which demonstrate compliance, when
applicable, with the provisions of Section 6.4.
(v) Budgets; Business Plans; Financial Projections. As soon as
practicable and in any event not later than thirty (30) days prior to
the beginning of each fiscal year, a copy of the plan and forecast
(including a projected balance sheet, income statement and funds flow
statement) of Borrower for the upcoming fiscal year prepared in such
detail as shall be reasonably satisfactory to the Agent. As soon as
practicable, any revisions of such plan and forecast which represent a
material amendment thereof.
(B) Notice of Default. Promptly upon any of the chief executive
officer, chief operating officer, chief financial officer, treasurer or
controller of Borrower obtaining knowledge (i) of any condition or event
which constitutes a Default or Unmatured Default, or becoming aware that
any Lender or Agent has given any written notice with respect to a claimed
Default or Unmatured Default under this Agreement, or (ii) that any Person
has given any written notice to Borrower or any Subsidiary of Borrower or
taken any other action with respect to a claimed default or event or
condition of the type referred to in Section 7.1(d) or (e), deliver to the
Agent and the Lenders an Officer's Certificate specifying (a) the nature
and period of existence of any such claimed default, Default, Unmatured
Default, condition or event, (b) the notice given or action taken by such
Person in connection therewith, and (c) what action Borrower has taken, is
taking and proposes to take with respect thereto.
(C) Lawsuits. (i) Promptly upon Borrower obtaining knowledge of the
institution of, or written threat of, any action, suit, proceeding,
governmental investigation or arbitration against or affecting Borrower or
any of its Subsidiaries or any property of Borrower or any of its
Subsidiaries not previously disclosed pursuant to Section 5.7, which
action, suit, proceeding, governmental investigation or arbitration
exposes, or in the case of multiple actions, suits, proceedings,
governmental investigations or arbitrations arising out of the same
general allegations or circumstances which expose, in Borrower's
reasonable judgment, Borrower or any of its Subsidiaries to liability in
an amount aggregating $500,000 or more (exclusive of claims covered by
insurance policies of Borrower or any of its Subsidiaries unless the
insurers of such claims have disclaimed coverage or reserved the right to
disclaim coverage on such claims and exclusive of claims covered by the
indemnity of a financially responsible indemnitor in favor of Borrower or
any of its Subsidiaries (unless the indemnitor has disclaimed or reserved
the right to disclaim coverage thereof), give written notice thereof to
the Agent and the Lenders and provide such other information as may be
reasonably available to enable each Lender and the Agent and its counsel
to evaluate such matters; and (ii) in addition to the requirements set
forth in clause (i) of this Section 6.1(C), upon request of the Agent or
the Required Lenders, promptly give written notice of the status of any
action, suit, proceeding, governmental investigation or arbitration
covered by a report delivered pursuant to clause (i) above and provide
such other information as may be reasonably available to it that would not
violate any attorney-client privilege by disclosure to the Lenders to
enable each Lender and the Agent and its counsel to evaluate such matters.
(D) Insurance. As soon as practicable and in any event within ninety
(90) days of the end of each fiscal year commencing with fiscal year
ending December 31, 1994, deliver to the Agent and the Lenders (i) a
report in form and substance reasonably satisfactory to the Agent and the
Lenders outlining all material insurance coverage maintained as of the
date of such report by Borrower and its Subsidiaries and the duration of
such coverage and (ii) an insurance broker's statement that all premiums
with respect to such coverage have been paid when due.
(E) ERISA Notices. Deliver or cause to be delivered to the Agent and
the Lenders, at Borrower's expense, the following information and notices
as soon as reasonably possible, and in any event:
(i) (a) within ten (10) Business Days after Borrower knows or has
reason to know that a Termination Event has occurred, a written
statement of the senior financial officer of Borrower describing such
Termination Event and the action, if any, which Borrower has taken, is
taking or proposes to take with respect thereto, and when known, any
action taken or threatened by the IRS, DOL or PBGC with respect thereto
and (b) within ten (10) Business Days after Holdings or any of
Borrower's Subsidiaries which is a member of the Controlled Group knows
or has reason to know that a Termination Event has occurred which could
reasonably be expected to subject Borrower to liability in excess of
$500,000, a written statement of the senior financial officer of
Borrower describing such Termination Event and the action, if any, which
the member of the Controlled Group has taken, is taking or proposes to
take with respect thereto, and when known, any action taken or
threatened by the IRS, DOL or PBGC with respect thereto;
(ii) within ten (10) Business Days after Holdings, Borrower, or
any of their Subsidiaries which is a member of the Controlled Group
knows or has reason to know that a prohibited transaction (defined in
Sections 406 of ERISA and Section 4975 of the Code) with respect to a
Plan has occurred, a statement of the senior financial officer of
Borrower describing such transaction and the action which Holdings,
Borrower or such Subsidiary has taken, is taking or proposes to take
with respect thereto;
(iii) within ten (10) Business Days after a material increase in
the benefits of any existing Benefit Plan due to an amendment of such
Benefit Plan or the establishment of any new Benefit Plan or the
commencement of, or obligation to commence, contributions to any Benefit
Plan or Multiemployer Plan to which Holdings, Borrower or any of their
Subsidiaries which is a member of the Controlled Group was not
previously contributing, notification of such increase, establishment,
commencement or obligation to commence and the amount of such
contributions;
(iv) within ten (10) Business Days after Holdings, Borrower or any
of their Subsidiaries which is a member of the Controlled Group receives
notice of any unfavorable determination letter from the IRS regarding
the qualification of a Plan under Section 401(a) of the Code, copies of
each such letter;
(v) within ten (10) Business Days after the establishment of any
Foreign Employee Benefit Plan or the commencement of, or obligation to
commence, contributions to any Foreign Employee Benefit Plan to which
Holdings, Borrower or any of their Subsidiaries which is a member of the
Controlled Group was not previously contributing, notification of such
establishment, commencement or obligation to commence and the amount of
such contributions;
(vi) within ten (10) Business Days after receipt by Borrower of a
written request by the Agent, copies of each annual report (form 5500
series), including Schedule B thereto, filed with respect to each
Benefit Plan;
(vii) within ten (10) Business Days after receipt by Borrower of a
written request by the Agent, copies of each actuarial report for any
Benefit Plan or Multiemployer Plan and each annual report for any
Multiemployer Plan;
(viii) within ten (10) Business Days after the filing thereof with
the IRS, a copy of each funding waiver request filed with respect to any
Benefit Plan and all written communications received by either Holdings,
Borrower or any of their respective Subsidiaries which is a member of
the Controlled Group with respect to such request;
(ix) (a) within ten (10) Business Days after receipt by Borrower
of the PBGC's intention to terminate a Benefit Plan or to have a trustee
appointed to administer a Benefit Plan and (b) within ten (10) Business
Days after receipt by Holdings, any of Borrowers' Subsidiaries which is
a member of the Controlled Group of the PBGC's intention to terminate a
Benefit Plan or have a trustee appointed to administer a Benefit Plan
which could reasonably be expected to subject Borrower to liability in
excess of $500,000, copies of each such notice;
(x) (a) within ten (10) Business Days after receipt by Borrower of
a notice from a Multiemployer Plan regarding the imposition of
withdrawal liability and (b) within ten (10) Business Days after receipt
by Holdings or any of Borrower's Subsidiaries which is a member of the
Controlled Group of a notice from a Multiemployer Plan regarding the
imposition of a withdrawal liability which could reasonably be expected
to subject Borrower to liability in excess of $500,000, copies of each
such notice;
(xi) within ten (10) Business Days after either Holdings, Borrower
or any of their respective Subsidiaries which is a member of the
Controlled Group fails with respect to a Benefit Plan to make a required
installment or any other required payment under Section 412 of the
Internal Revenue Code on or before the due date for such installment or
payment, a notification of such failure; and
(xii) within ten (10) Business Days after Holdings, Borrower or
any of their respective Subsidiaries which is a member of the Controlled
Group knows or has reason to know that (a) a Multiemployer Plan has been
terminated, (b) the administrator or plan sponsor of a Multiemployer
Plan intends to terminate a Multiemployer Plan, or (c) the PBGC has
instituted or will institute proceedings under Section 4042 of ERISA to
terminate a Multiemployer Plan.
For purposes of this Section 6.1(E), Holdings, Borrower, any of their
Subsidiaries which is a member of the Controlled Group shall be deemed to
know all facts known by the Administrator of any Plan of which Holdings,
Borrower or any member of the Controlled Group or such Subsidiary is the
plan sponsor.
(F) Labor Matters. Notify the Agent and the Lenders in writing,
promptly upon Borrower's learning thereof, of (i) any material labor
dispute to which Borrower or any of its Subsidiaries may become a party,
including, without limitation, any strikes, lockouts or other disputes
relating to such Persons' plants and other facilities and (ii) any Worker
Adjustment and Retraining Notification Act liability incurred with respect
to the closing of any plant or other facility of Borrower or any of its
Subsidiaries.
(G) Other Indebtedness. Deliver to the Agent (i) a copy of each
regular report, notice or communication regarding potential or actual
defaults (including any accompanying officers' certificate) delivered by
or on behalf of Borrower to the holders of funded Indebtedness pursuant to
the terms of the agreements governing such Indebtedness, such delivery to
be made at the same time and by the same means as such notice or other
communication is delivered to such holders, and (ii) a copy of each notice
or other communication received by Borrower from the from the holders of
funded Indebtedness pursuant to the terms of such Indebtedness, such
delivery to be made promptly after such notice or other communication is
received by Borrower.
(H) Other Reports. Deliver or cause to be delivered to the Agent and
the Lenders copies of all financial statements, reports and notices, if
any, sent or made available generally by Borrower to its securities
holders or filed with the Commission by Borrower, all press releases made
available generally by Borrower or any of Borrower's Subsidiaries to the
public concerning material developments in the business of Borrower or any
such Subsidiary and all notifications received from the Commission by
Borrower or its Subsidiaries pursuant to the Securities Exchange Act and
the rules promulgated thereunder.
(I) Environmental Notices. As soon as possible and in any event within
ten (10) days after receipt by Borrower, provide Agent and the Lenders a
copy of (i) any notice or claim to the effect that Borrower or any of its
Subsidiaries is or may be liable to any Person as a result of the Release
by Borrower, any of its Subsidiaries, or any other Person of any
Contaminant into the environment, and (ii) any notice alleging any
violation of any Environmental, Health or Safety Requirements of Law by
Borrower or any of its Subsidiaries if, in either case, such notice or
claim relates to an event which could reasonably be expected to subject
Borrower to liability in excess of $500,000.
(J) Borrowing Base Certificate. As soon as practicable, and in any
event within twenty (20) days after the close of each calendar month (and
more often if requested by the Agent or the Required Lenders), Borrower
shall provide the Agent and the Lenders with a Borrowing Base Certificate,
together with such supporting documents as the Agent deems desirable, all
certified as being true and correct by the chief financial officer or
treasurer of Borrower. Borrower may update the Borrowing Base Certificate
and supporting documents more frequently than monthly and the most
recently delivered Borrowing Base Certificate shall be the applicable
Borrowing Base Certificate for purposes of determining the Borrowing Base
at any time.
(K) Other Information. Promptly upon receiving a request therefor from
the Agent, prepare and deliver to the Agent and the Lenders such other
information with respect to Holdings, Borrower, any of its Subsidiaries,
or the Collateral, including, without limitation, schedules identifying
and describing the Collateral and any dispositions thereof or any Asset
Sale (and the use of the Net Cash Proceeds thereof), as from time to time
may be reasonably requested by the Agent.
6.2 Affirmative Covenants.
(A) Corporate Existence, Etc. Borrower shall, and shall cause each of
its Subsidiaries to, at all times maintain its corporate existence and
preserve and keep, or cause to be preserved and kept, in full force and
effect its rights and franchises material to its businesses.
(B) Corporate Powers; Conduct of Business. Borrower shall, and shall
cause each of its Subsidiaries to qualify and remain qualified to do
business in each jurisdiction in which the nature of its business requires
it to be so qualified and where the failure to be so qualified will have
or is reasonably likely to have a Material Adverse Effect. Borrower will,
and will cause each Subsidiary to, carry on and conduct its business in
substantially the same manner and in substantially the same fields of
enterprise as it is presently conducted.
(C) Compliance with Laws, Etc. Borrower shall, and shall cause its
Subsidiaries to, (a) comply with all Requirements of Law and all
restrictive covenants affecting such Person or the business, properties,
assets or operations of such Person, and (b) obtain as needed all Permits
necessary for its operations and maintain such Permits in good standing
unless failure to comply or obtain could not reasonably be anticipated to
have a Material Adverse Effect.
(D) Payment of Taxes and Claims; Tax Consolidation. Borrower shall
pay, and cause each of its Subsidiaries and Holdings to pay, (i) all
taxes, assessments and other governmental charges imposed upon it or on
any of its properties or assets or in respect of any of its franchises,
business, income or property before any penalty or interest accrues
thereon, and (ii) all claims (including, without limitation, claims for
labor, services, materials and supplies) for sums which have become due
and payable and which by law have or may become a Lien (other than a Lien
permitted by Section 6.3(C) upon any of Borrower's or such Subsidiary's
property or assets, prior to the time when any penalty or fine shall be
incurred with respect thereto; provided, however, that no such taxes,
assessments and governmental charges referred to in clause (i) above or
claims referred to in clause (ii) above (and interest, penalties or fines
relating thereto) need be paid if being contested in good faith by
appropriate proceedings diligently instituted and conducted and if such
reserve or other appropriate provision, if any, as shall be required in
conformity with Agreement Accounting Principles shall have been made
therefor. Borrower will not, nor will it permit any of its Subsidiaries
to, file or consent to the filing of any consolidated income tax return
with any Person other than Holdings.
(E) Insurance. Borrower shall maintain for itself and its
Subsidiaries, or shall cause each of its Subsidiaries to maintain in full
force and effect the insurance policies and programs listed on Schedule
5.17 to this Agreement or substantially similar policies and programs or
other policies and programs as reflect coverage that is reasonably
consistent with prudent industry practice. Borrowers shall deliver to the
Agent endorsements (y) to all "All Risk" physical damage insurance
policies on all of Borrowers' tangible real and personal property and
assets and business interruption insurance policies naming the Agent loss
payee, and (z) to all general liability and other liability policies
naming the Agent an additional insured. In the event Borrower or any of
its Subsidiaries, at any time or times hereafter shall fail to obtain or
maintain any of the policies or insurance required herein or to pay any
premium in whole or in part relating thereto, then the Agent, without
waiving or releasing any obligations or resulting Default hereunder, may
at any time or times thereafter (but shall be under no obligation to do
so) obtain and maintain such policies of insurance and pay such premiums
and take any other action with respect thereto which the Agent deems
advisable. All sums so disbursed by the Agent shall constitute part of
the Obligations, payable as provided in this Agreement.
(F) Inspection of Property; Books and Records; Discussions. Borrower
shall permit, and cause Holdings and each of Borrower's Subsidiaries to
permit, any authorized representative(s) designated by either the Agent or
any Lender to visit and inspect any of the properties of Holdings,
Borrower or any of its Subsidiaries, to examine, audit, check and make
copies of their respective financial and accounting records, books,
journals, orders, receipts and any correspondence and other data relating
to their respective businesses or the transactions contemplated hereby and
by the Stock Repurchase (including, without limitation, in connection with
environmental compliance, hazard or liability), and to discuss their
affairs, finances and accounts with their officers and independent
certified public accountants, all upon reasonable notice and at such
reasonable times during normal business hours, as often as may be
reasonably requested. Borrower shall keep and maintain, and cause
Holdings and each of Borrower's Subsidiaries to keep and maintain, in all
material respects, proper books of record and account in which entries in
conformity with Agreement Accounting Principles shall be made of all
dealings and transactions in relation to their respective businesses and
activities, including, without limitation, transactions and other dealings
with respect to the Collateral. If a Default has occurred and is
continuing, Borrower, upon the Agent's request, shall turn over any such
records to the Agent or its representatives.
(G) Insurance and Condemnation Proceeds. Borrower directs (and, if
applicable, shall cause its Subsidiaries to direct) all insurers under
policies of property damage, boiler and machinery and business
interruption insurance and payors of any condemnation claim or award
relating to the property to pay all proceeds payable under such policies
or with respect to such claim or award for any loss with respect to the
Collateral directly to the Agent, for the benefit of the Agent and the
Holders of the Secured Obligations; provided, however, in the event that
such proceeds or award are less than $100,000 ("Excluded Proceeds"),
unless a Default shall have occurred and be continuing, the Agent shall
remit such Excluded Proceeds to Borrower. Each such policy shall contain
a long-form loss-payable endorsement naming the Agent as loss payee, which
endorsement shall be in form and substance acceptable to the Agent. The
Agent shall, upon receipt of such proceeds (other than Excluded Proceeds)
and at Borrower's direction, either apply the same to the principal amount
of the Loans outstanding at the time of such receipt and create a
corresponding reserve against Revolving Credit Availability in an amount
equal to such application (the "Decision Reserve") or hold them as cash
collateral for the Obligations. For up to 150 days from the date of any
loss (the "Decision Period"), Borrower may notify the Agent that it
intends to restore, rebuild or replace the property subject to any
insurance payment or condemnation award and shall, as soon as practicable
thereafter, provide the Agent detailed information, including a
construction schedule and cost estimates. Should a Default occur at any
time during the Decision Period, should Borrower notify the Agent that it
has decided not to rebuild or replace such property during the Decision
Period, or should Borrower fail to notify the Agent of Borrower's decision
during the Decision Period, then the amounts held as cash collateral
pursuant to this Section 6.2(G) or as the Decision Reserve shall upon the
Required Lenders' direction be applied as a mandatory prepayment of the
Term Loans pursuant to Section 2.5(B). Proceeds held as cash collateral
pursuant to this Section 6.2(G) or constituting the Decision Reserve shall
be disbursed as payments for restoration, rebuilding or replacement of
such property become due; provided, however, should a Default occur after
Borrower has notified the Agent that it intends to rebuild or replace the
property, the Decision Reserve or amounts held as cash collateral may, or
shall, upon the Required Lenders' direction, be applied as a mandatory
prepayment of the Term Loans pursuant to Section 2.5(B). Upon completion
of the restoration, rebuilding or replacement of such property, the unused
proceeds shall constitute Net Cash Proceeds of an Asset Sale and shall be
applied as a mandatory prepayment of the Term Loans pursuant to Section
2.5(B).
(H) ERISA Compliance. Borrower shall, and shall cause Holdings and
each of Borrower's Subsidiaries to, establish, maintain and operate all
Plans to comply in all material respects with the provisions of ERISA, the
Code, all other applicable laws, and the regulations thereunder and the
respective requirements of the governing documents for such Plans.
(I) Maintenance of Property. Borrower shall cause all property used or
useful in the conduct of its business or the business of any Subsidiary to
be maintained and kept in good condition, repair and working order and
supplied with all necessary equipment and shall cause to be made all
necessary repairs, renewals, replacements, betterments and improvements
thereof, all as in the judgment of Borrower may be necessary so that the
business carried on in connection therewith may be properly and
advantageously conducted at all times; provided, however, that nothing in
this Section 6.2(I) shall prevent Borrower from discontinuing the
operation or maintenance of any of such property if such discontinuance
is, in the judgment of Borrower, desirable in the conduct of its business
or the business of any Subsidiary and not disadvantageous in any material
respect to the Agent or the Lenders.
(J) Environmental Compliance. Borrower and its Subsidiaries shall
comply with all Environmental, Health or Safety Requirements of Law,
except where noncompliance will not have or is not reasonably likely to
subject Borrower to liability in excess of $500,000.
(K) Use of Proceeds. Borrower shall use the proceeds of the Revolving
Loans to (i) to pay Transaction Costs (not to exceed $2,500,000) in
connection with the Stock Repurchase, (ii) to repay a portion of the
outstanding Indebtedness and Contingent Obligations of Borrower and its
Affiliates to Firstar Bank Milwaukee, N.A. and (iii) to provide funds for
the working capital needs and other general corporate purposes of Borrower
and to repay outstanding Loans. Borrower shall use the proceeds of the
Term Loans (i) to repay the remaining balance of the outstanding
Indebtedness and Contingent Obligations of Borrower and its Affiliates to
Firstar Bank Milwaukee, N.A. and (ii) for the purpose of facilitating the
Stock Repurchase through the declaration and payment of the Stock
Repurchase Dividend and paying Transaction Costs (not to exceed
$2,500,000). Other than in connection with the Stock Repurchase, Borrower
will not, nor will it permit any Subsidiary to, use any of the proceeds of
the Loans to purchase or carry any "Margin Stock" or to make any
Acquisition, other than any Permitted Acquisition pursuant to Section
6.3(G); provided in no event will Borrower use or permit any Subsidiary to
use any of the proceeds of the Loans or Letters of Credit to make any
Acquisition unless such Acquisition is approved by the board of directors
or other governing body of the target company and by any shareholder vote
of the target company required by law or corporate charter.
(L) Interest Rate Agreements. Within sixty (60) days after the Closing
Date, Borrower shall enter into, and shall thereafter maintain, Interest
Rate Agreements on terms and with counterparties determined by Borrower
and reasonably acceptable to the Agent by which Borrower is protected
against increases in interest rates from and after the date of such
contracts as to $25,000,000 in notional amount. In the event a Lender
elects to enter into any Interest Rate Agreement with Borrower, the
obligations of Borrower with respect to such Interest Rate Agreement shall
be Secured Obligations secured by the Collateral.
6.3 Negative Covenants.
(A) Indebtedness. Neither Holdings, Borrower nor any of its
Subsidiaries shall directly or indirectly create, incur, assume, guarantee
or otherwise become or remain directly or indirectly liable with respect
to any Indebtedness, except:
(i) with respect to Holdings:
(a) Indebtedness in respect of taxes, assessments, and
governmental charges, to the extent that payment thereof is not required
pursuant to Section 6.2(D);
(b) Indebtedness incurred for ordinary administrative expenses,
franchise taxes, accounting expenses, legal expenses and other similar
types of expenses of Holdings which Indebtedness shall not exceed an
aggregate of $25,000 in any fiscal year; and
(c) Indebtedness under the Guaranty; and
(ii) with respect to Borrower and its Subsidiaries:
(a) the Obligations;
(b) the Transaction Costs in an amount not to exceed $2,500,000 in
the aggregate for all amounts paid and Indebtedness for such amounts
incurred in connection with the Stock Repurchase and this Agreement;
(c) Permitted Existing Indebtedness, and any extension, renewal,
refunding or refinancing thereof, provided that any such extension,
renewal, refunding or refinancing is in an aggregate principal amount
not greater than the principal amount of and interest, fees and expenses
accrued on, such Permitted Existing Indebtedness outstanding at the time
thereof and is on terms (including, without limitation, maturity,
amortization, interest rate, premiums, fees, covenants, events of
default, and remedies) not materially less favorable to Borrower or
materially adverse to the Lenders than the terms of such Permitted
Existing Indebtedness;
(d) Subordinated Indebtedness the terms (including, without
limitation, maturity, amortization, interest rate, premiums, fees,
covenants, events of default, and remedies) of which are acceptable to
the Required Lenders when issued, but in each case not any increase in
the principal amount thereof and not any refinancing, modification,
refunding or extension of maturity thereof, in whole or in part, unless
such refinancing, modification, refunding or extension is not materially
less favorable to Borrower, including, without limitation, with respect
to amount, maturity, amortization, interest rate, premiums, fees,
covenants, subordination terms, events of default and remedies;
(e) Indebtedness in respect of taxes, assessments, governmental
charges and claims for labor, materials or supplies, to the extent that
payment thereof is not required pursuant to Section 6.2(D);
(f) Indebtedness constituting Contingent Obligations permitted by
Section 6.3(E);
(g) Indebtedness arising from intercompany loans from any
Subsidiary to Borrower or any other such Subsidiary;
(h) Indebtedness in respect of profit sharing plans to the extent
permitted under Section 6.3(D)(ii);
(i) Indebtedness in respect of Interest Rate Agreements permitted
under Section 6.3(R);
(j) Indebtedness with respect to warranties and indemnities made
under any agreements for Asset Sales permitted under Section 6.3(B);
(k) secured or unsecured purchase money Indebtedness (including
Capitalized Leases) incurred by Borrower or any of its Subsidiaries
after the Closing Date to finance the acquisition of fixed assets, if
(1) at the time of such incurrence, no Default or Unmatured Default has
occurred and is continuing or would result from such incurrence,
(2) such Indebtedness has a scheduled maturity and is not due on demand,
(3) such Indebtedness does not exceed $1,000,000 in the aggregate
outstanding at any time, and (4) any Lien securing such Indebtedness is
permitted under Section 6.3(C) (such Indebtedness being referred to
herein as "Permitted Purchase Money Indebtedness");
(l) Indebtedness with respect to surety, appeal and performance
bonds obtained by Borrower or any of its Subsidiaries in the ordinary
course of business; and
(m) Indebtedness incurred for ordinary administrative expenses,
franchise taxes, accounting expenses, legal expenses, employee expenses,
lease and office expenses, consultant expenses, investment banker
expenses incurred by Holdings on behalf of Borrower;
(n) unsecured Indebtedness and other liabilities incurred in the
ordinary course of business and consistent with past practice, but not
incurred through the borrowing of money or the obtaining of credit
(other than customary trade terms).
(B) Sales of Assets. Neither Borrower nor any of its Subsidiaries
shall sell, assign, transfer, lease, convey or otherwise dispose of any
property, whether now owned or hereafter acquired, or any income or
profits therefrom, or enter into any agreement to do so, except:
(i) sales of Inventory in the ordinary course of business;
(ii) the disposition of obsolete Equipment in the ordinary course
of business; and
(iii) sales, assignments, transfers, leases, conveyances or other
dispositions of other assets if such transaction (a) is for all cash
consideration with respect to any Collateral which is sold, (b) for not
less than fair market value, (c) which, when combined with all such
other sales, assignments, transfers, conveyances or other dispositions
in the immediately preceding twelve-month period represents the
disposition of not greater than ten percent (10%) of Borrower's
consolidated (y) assets or (z) revenues and (d) if, after giving effect
to such sale, property having an aggregate fair market value in excess
of $500,000 has been sold by Borrower or any of its Subsidiaries
pursuant to this Section 6.2(B)(iii) since the date of this Agreement,
Borrower, prior to such sale, provides the Agent with reasonable
projections or other evidence reasonably satisfactory to the Agent that
such sale will not or is not reasonably likely to have a Material
Adverse Effect.
(C) Liens. Neither Borrower nor any of its Subsidiaries shall directly
or indirectly create, incur, assume or permit to exist any Lien on or with
respect to any of their respective property or assets except:
(i) Liens created by the Loan Documents;
(ii) Permitted Existing Liens;
(iii) Customary Permitted Liens; and
(iv) purchase money Liens (including the interest of a lessor
under a Capitalized Lease and Liens to which any property is subject at
the time of Borrower's acquisition thereof) securing Permitted Purchase
Money Indebtedness; provided that such Liens shall not apply to any
property of Borrower or its Subsidiaries other than that purchased or
subject to such Capitalized Lease.
In addition, neither Borrower nor any or its Subsidiaries shall become a
party to any agreement, note, indenture or other instrument, or take any
other action, which would prohibit the creation of a Lien on any of its
properties or other assets in favor of the Agent for the benefit of itself
and the Holders of Secured Obligations, as additional collateral for the
Obligations; provided that any agreement, note, indenture or other
instrument in connection with Permitted Purchase Money Indebtedness
(including Leases) may prohibit the creation of a Lien in favor of the
Agent for the benefit of itself and the Holders of the Secured Obligations
on the items of property obtained with the proceeds of such Permitted
Purchase Money Indebtedness.
(D) Investments. Except to the extent permitted pursuant to paragraph
(G) below, neither Borrower nor any of its Subsidiaries shall directly or
indirectly make or own any Investment except:
(i) Investments in Cash Equivalents;
(ii) Permitted Existing Investments in an amount not greater than
the amount thereof on the Closing Date;
(iii) Investments received in connection with the bankruptcy or
reorganization of suppliers and customers and in settlement of
delinquent obligations of, and other disputes with, customers and
suppliers arising in the ordinary course of business;
(iv) Investments consisting of one or more deposit accounts not
subject to Collection Account Agreements with deposits not in excess of
$5,000 at any time; and
(v) Investments with any other Persons which do not exceed
$100,000 in the aggregate at any time.
(E) Contingent Obligations. Neither Holdings, Borrower nor any of its
Subsidiaries shall directly or indirectly create or become or be liable
with respect to any Contingent Obligation, except: (i) recourse
obligations resulting from endorsement of negotiable instruments for
collection in the ordinary course of business; (ii) Permitted Existing
Contingent Obligations and any extensions, renewals or replacements
thereof, provided that any such extension, renewal or replacement is not
greater than the Indebtedness under, and shall be on terms no less
favorable to Borrower or such Subsidiary than the terms of, the Permitted
Existing Contingent Obligation being extended, renewed or replaced; (iii)
obligations, warranties, and indemnities, not relating to Indebtedness of
any Person, which have been or are undertaken or made in the ordinary
course of business and not for the benefit of or in favor of an Affiliate
of Borrower or such Subsidiary; (iv) Contingent Obligations arising under
the Transaction Documents; (v) additional Contingent Obligations which do
not exceed $100,000 in the aggregate at any time; and (vi) Contingent
Obligations with respect to surety, appeal and performance bonds obtained
by borrower or any subsidiary in the ordinary course of business.
(F) Restricted Junior Payments. Neither Borrower nor any of its
Subsidiaries shall declare or make any Restricted Junior Payment, except:
(i) payment of the Stock Repurchase Dividend from funds legally
available for such purpose;
(ii) Borrower may make distributions to Holdings in any fiscal
year, from funds legally available for such purpose, in an amount not to
exceed the amount calculated pursuant to Schedule 6.3(F)(ii);
(iii) mandatory payments of interest, principal or premium, if any,
due on the Subordinated Indebtedness as permitted under Section
6.3(A)(ii)(d) unless such payments are prohibited by the terms of such
Indebtedness or the subordination agreements related thereto; and
(iv) cash dividends or distributions on the Capital Stock of
Borrower to fund actual out-of-pocket ordinary administrative expenses,
franchise taxes, accounting expenses, legal expenses and other similar
types of expenses of Holdings which dividends shall not exceed $25,000
in any fiscal year;
provided, however, that the Restricted Junior Payments described in
clauses (i) through (iv) above shall not be permitted if either a Default
or an Unmatured Default shall have occurred and be continuing at the date
of declaration or payment thereof or would result therefrom.
(G) Conduct of Business; Subsidiaries; Acquisitions. Neither Borrower
nor any of its Subsidiaries shall engage in any business other than the
businesses engaged in by Borrower on the date hereof and any business or
activities which are substantially similar, related or incidental thereto.
Holdings shall not engage, either directly or indirectly (except through
Borrower) in any operating business enterprise but shall solely own the
Capital Stock of Borrower. Holdings shall not create, capitalize or
acquire any Subsidiary (other than Borrower) after the date hereof.
Borrower shall not create, capitalize or acquire any Subsidiary after the
date hereof. Borrower shall not enter into any transaction or series of
transactions in which it acquires all or any significant portion of the
assets of another Person unless such purchase meets the following
requirements (each such purchase constituting a "Permitted Acquisition"):
(1) no Default or Unmatured Default shall have occurred and be
continuing or would result from such transaction or transactions or the
incurrence of any Indebtedness in connection therewith; and
(2) prior to each such purchase, Borrower shall deliver to the
Agent and the Lenders a certificate from one of Borrower's Authorized
Officers demonstrating to the satisfaction of the Agent and the Required
Lenders that after giving effect to such transaction or transactions and
the incurrence of any Indebtedness permitted by Section 6.3(A) in
connection therewith on a pro forma basis as if such acquisition and
such incurrence of Indebtedness had occurred on the first day of the
twelve-month period ending on the last day of Borrower's most recently
completed fiscal quarter, Borrower would have been in compliance with
all provisions of Section 6.4 at all times during such twelve-month
period.
(H) Transactions with Shareholders and Affiliates. Neither Borrower
nor any of its Subsidiaries shall directly or indirectly (i) except as
permitted in Section 6.3(F), pay any management fees or other similar fees
or compensation to CHS or any other holder or holders of Borrower's or
Holdings' equity securities, other than wages, salaries and bonuses of
employees who are also stockholders of Borrower in the ordinary course and
consistent with past practices or (ii) enter into or permit to exist any
transaction (including, without limitation, the purchase, sale, lease or
exchange of any property or the rendering of any service) with any holder
or holders of any of its Capital Stock of Borrower or Holdings, or with
any Affiliate of Borrower which is not its Subsidiary, on terms that are
less favorable to Borrower or any of its Subsidiaries, as applicable, than
those that might be obtained in an arm's length transaction at the time
from Persons who are not such a holder or Affiliate.
(I) Restriction on Fundamental Changes. Neither Borrower nor any of
its Subsidiaries shall enter into any merger or consolidation, or
liquidate, wind-up or dissolve (or suffer any liquidation or dissolution),
or convey, lease, sell, transfer or otherwise dispose of, in one
transaction or series of transactions, all or substantially all of
Borrower's or any such Subsidiary's business or property, whether now or
hereafter acquired, except transactions permitted under Sections 6.3(B) or
6.3(G).
(J) Sales and Leasebacks. Neither Borrower nor any of its Subsidiaries
shall become liable, directly, by assumption or by Contingent Obligation,
with respect to any lease, whether an Operating Lease or a Capitalized
Lease, of any property (whether real or personal or mixed) (i) which it or
one of its Subsidiaries sold or transferred or is to sell or transfer to
any other Person, or (ii) which it or one of its Subsidiaries intends to
use for substantially the same purposes as any other property which has
been or is to be sold or transferred by it or one of its Subsidiaries to
any other Person in connection with such lease, unless in either case the
sale involved is not prohibited under Section 6.3(B) and the lease
involved is not prohibited under Section 6.3(A).
(K) Margin Regulations. Neither Borrower nor any of its Subsidiaries,
shall use all or any portion of the proceeds of any credit extended under
this Agreement to purchase or carry Margin Stock and promptly after
consummation of the Stock Repurchase, Borrower shall cause Holdings to
cancel each share of Capital Stock purchased by it pursuant to the Issuer
Tender Offer Statement.
(L) ERISA. Borrower shall not:
(i) engage, or permit Holdings or any of Borrower's Subsidiaries
which is a member of the Controlled Group to engage, in any prohibited
transaction described in Sections 406 of ERISA or 4975 of the Code for
which a statutory or class exemption is not available or an individual
exemption has not been previously obtained from the DOL;
(ii) permit to exist any accumulated funding deficiency (as
defined in Sections 302 of ERISA and 412 of the Internal Revenue Code),
with respect to any Benefit Plan, whether or not waived;
(iii) fail, or permit Holdings or any of Borrower's Subsidiaries
which is a member of the Controlled Group to fail, to pay timely
required contributions or annual installments due with respect to any
waived funding deficiency to any Benefit Plan;
(iv) terminate, or permit Holdings or any of Borrower's
Subsidiaries which is a member of the Controlled Group to terminate, any
Benefit Plan which would result in any liability of Borrower under
Title IV of ERISA ;
(v) fail to make any contribution or payment to any Multiemployer
Plan which Holdings, Borrower or any of its Subsidiaries which is a
member of the Controlled Group may be required to make under any
agreement relating to such Multiemployer Plan, or any law pertaining
thereto;
(vi) fail, or permit Holdings or any of Borrower's Subsidiaries
which is a member of the Controlled Group to fail, to pay any required
installment or any other payment required under Section 412 of the
Internal Revenue Code on or before the due date for such installment or
other payment; or
(vii) amend, or permit Holdings, Borrower or any of Borrower's
Subsidiaries which is a member of the Controlled Group to amend, a Plan
resulting in an increase in current liability for the plan year such
that Holdings, Borrower or any Controlled Group member is required to
provide security to such Plan under Section 401(a)(29) of the Code,
if such event, either singly or in the aggregate after taking into account
all other such events which previously occurred, could reasonably be
expected to subject Borrower to liability in excess of $500,000.
(M) Issuance of Capital Stock. Neither Borrower nor any of its
Subsidiaries shall issue any Capital Stock.
(N) Corporate Documents. Neither Borrower nor any of its Subsidiaries
shall amend, modify or otherwise change any of the terms or provisions in
any of their respective corporate documents (other than the by-laws and,
in the case of by-laws, any of the material terms or provisions thereof)
as in effect on the date hereof in any manner adverse to the interests of
the Lenders without the prior written consent of the Required Lenders
(which consent shall not be unreasonably withheld).
(O) Other Indebtedness. Except as permitted in Section 6.3(S),
Borrower shall not amend, supplement or otherwise modify the terms of any
Indebtedness (other than the Obligations) permitted under Section 6.3(A)
in any way that would be materially less advantageous to Borrower or
materially adverse to the Lenders, including, without limitation, with
respect to amount, maturity, amortization, interest rate, premiums, fees,
covenants, events of default and remedies. Except for payments made in
the ordinary course with respect to Borrower's trade indebtedness and
except as permitted in Section 6.3(F)(iii), neither Borrower nor any of
its Subsidiaries shall purchase, redeem, prepay or repay any principal of,
premium, if any, interest or other amount payable in respect of any
Indebtedness (other than the Obligations) permitted under Section 6.3(A).
(P) Fiscal Year. Neither Borrower nor any of its consolidated
Subsidiaries shall change its fiscal year for accounting or tax purposes
from a period consisting of the 12-month period ending on December 31 of
each calendar year.
(Q) Subsidiary Covenants. Borrower will not, and will not permit any
Subsidiary to, create or otherwise become effective any consensual
encumbrance or restriction of any kind on the ability of any Subsidiary to
pay dividends or make any other distribution on its stock, or make any
other Restricted Junior Payment, pay any Indebtedness or other Obligation
owed to Borrower or any other Subsidiary, make loans or advances or other
Investments in Borrower or any other Subsidiary, or sell, transfer or
otherwise convey any of its property to Borrower or any other Subsidiary.
(R) Rate Hedging Obligations. Borrower shall not and shall not permit
any of its Subsidiaries to enter into any interest rate, commodity or
foreign currency exchange, swap, collar, cap or similar agreements other
than interest rate, foreign currency or commodity exchange, swap, collar,
cap or similar agreements entered into by Borrower pursuant to Section
6.2(L) hereof or pursuant to which Borrower has hedged its actual interest
rate, foreign currency or commodity exposure (such hedging agreements are
sometimes referred to herein as "Interest Rate Agreements").
(S) Subordinated Indebtedness. Borrower shall not amend, supplement or
modify the terms of any Permitted Subordinated Indebtedness, or make any
payment required as a result of an amendment or change thereto other than
amendments, supplements or modifications which (i) decrease the rate of
interest payable on the Permitted Subordinated Indebtedness, (ii) provide
for the payment in kind in lieu of cash of any portion of the interest on
the Permitted Subordinated Indebtedness, (iii) provide for the extension
of the maturity date with respect to any principal or interest payment to
be made under the instruments evidencing Permitted Subordinated
Indebtedness, (iv) provide more flexibility to Borrower in connection with
any financial covenants, (v) waives any defaults existing in connection
with the Permitted Subordinated Indebtedness, and (vi) do not adversely
affect in any respect the interests of the Agent or the Holders of the
Secured Obligations.
(T) Change of Deposit Accounts. Borrower shall not, and shall not
permit any Subsidiary to, establish or maintain any deposit account with
any bank or other financial institution other than those which have
entered into a Collection Account Agreement in form and substance
acceptable to the Agent.
6.4 Financial Covenants. Borrower shall comply with the following:
(A) Defined Terms for Financial Covenants. The following terms used in
this Agreement shall have the following meanings (such meanings to be
applicable, except to the extent otherwise indicated in a definition of a
particular term, both to the singular and the plural forms of the terms
defined):
"Capital Expenditures" means, for any period, the aggregate of all
expenditures (whether paid in cash or accrued as liabilities and including
Capitalized Leases and Permitted Purchase Money Indebtedness) by Borrower
and its Subsidiaries during that period that, in conformity with Agreement
Accounting Principles, are required to be included in or reflected by the
property, plant, equipment or similar fixed asset accounts reflected in
the consolidated balance sheet of Borrower and its Subsidiaries other than
with respect to the acquisition of inventory and equipment in the ordinary
course of business or with respect to Acquisitions and shall also include,
without duplication, the aggregate of all Environmental Expenditures.
"EBITA" means, for any period, on a consolidated basis for Borrower and
its consolidated Subsidiaries, the sum of the amounts for such period of
(i) Net Income, plus (ii) charges against income for foreign, federal,
state and local taxes, plus (iii) Interest Expense, plus (iv) Fees, plus
(v) amortization expense, including, without limitation, amortization of
goodwill and other intangible assets, plus (vi) other non-cash charges
classified as long-term deferrals in accordance with Agreement Accounting
Principles, minus (vii) interest income, minus (viii) extraordinary gains
(and any unusual gains arising in or outside of the ordinary course of
business not included in extraordinary gains determined in accordance with
Agreement Accounting Principles which have been included in the
determination of Net Income).
"Environmental Expenditures" means, for any period, the aggregate of all
expenditures (whether paid in cash or accrued as liabilities, and
including penalties and fines) by Borrower and its consolidated
Subsidiaries during the applicable period, that are required to correct
and maintain the operations of Borrower and its consolidated Subsidiaries
in compliance with Environmental, Safety and Health Requirements of Law,
including amendments or newly promulgated requirements thereof, or are
required for investigatory and remedial action related to the release or
threatened release of a Contaminant into the environment.
"Fees" means fees (including, without limitation, agency and unused
commitment fees) and discounts with respect to (i) Letters of Credit and
(ii) Indebtedness evidenced by this Agreement.
"Interest Expense" means, for any period, the total interest expense of
Borrower and its consolidated Subsidiaries, whether paid or accrued
(including the interest component of Capitalized Leases), but excluding
interest expense not payable in cash (including amortization of discount),
all as determined in conformity with Agreement Accounting Principles.
"Net Income" means, for any period, the net earnings (or loss) after
taxes of Borrower and its Subsidiaries on a consolidated basis for such
period taken as a single accounting period determined in conformity with
Agreement Accounting Principles.
"Rentals" of a Person means the aggregate fixed amounts payable by such
Person under any lease of real or personal property but does not include
any amounts payable under Capitalized Leases of such Person.
(B) Interest Coverage Ratio. Borrower shall maintain a ratio (the
"Interest Coverage Ratio") of (i) EBITA to (ii) Interest Expense for the
applicable period of at least:
(1) 3.50 to 1.00 for the fiscal quarter ending March 31, 1995;
(2) 4.85 to 1.00 for the fiscal quarter ending June 30, 1995;
(3) 3.50 to 1.00 for the fiscal quarter ending September 30, 1995;
(4) 2.85 to 1.00 for each fiscal quarter for the period commencing
with the fiscal quarter ending December 31, 1995 through the fiscal
quarter ending September 30, 1996;
(5) 3.40 to 1.00 for each fiscal quarter for the period commencing
with the fiscal quarter ending December 31, 1996 through the fiscal
quarter ending September 30, 1997; and
(6) 3.50 to 1.00 for the fiscal quarter ending December 31, 1997
and for each fiscal quarter thereafter until the Termination Date.
In each case the Interest Coverage Ratio shall be determined as of the
last day of each fiscal quarter for the four-quarter period ending on such
day (provided, however, for the first three of such calculations made
after the date of this Agreement, such calculation shall be done based
upon the period commencing with January 1, 1995 and ending with the
quarterly period then ended).
(C) Fixed Charge Coverage Ratio. Borrower shall maintain a ratio
("Fixed Charge Coverage Ratio") of: (i) the sum of the amounts of (a)
EBITA, plus (b) depreciation expense, plus (c) Rentals, minus (d) Capital
Expenditures to (ii) the sum of the amounts of (a) Interest Expense, plus
(b) Fees, plus (c) Rentals, plus (d) Restricted Junior Payments consisting
of tax related payments paid pursuant to Section 6.3(F)(ii), plus (e)
scheduled amortization of the principal portion of the Term Loans and
scheduled amortization of the principal portion of all other Indebtedness
of Borrower and its Subsidiaries during such period of at least:
(1) 1.40 to 1.00 for the fiscal quarter ending June 30, 1995;
(2) 1.40 to 1.00 for the fiscal quarter ending September 30, 1995;
and
(3) 1.10 to 1.00 for the fiscal quarter ending December 31, 1995
and for each fiscal quarter thereafter until the Termination Date.
In each case the Fixed Charge Coverage Ratio shall be determined as of the
last day of each fiscal quarter for the four-quarter period ending on such
day (provided, however, for the first two of such calculations made after
the date of this Agreement, such calculation shall be done based upon the
period commencing with January 1, 1995 and ending with the quarterly
period then ended).
(D) Maximum Leverage Ratio. Borrower shall not permit the ratio
("Leverage Ratio") of (i) Indebtedness of Borrower and its consolidated
subsidiaries for borrowed money to (ii) the sum of (a) EBITA plus (b)
depreciation expenses minus (c) Capital Expenditures, of not greater than
the ratio set forth below at the end of each fiscal quarter ending during
the period set forth below:
(1) 3.40 to 1.00 for each fiscal quarter for the period commencing
with the fiscal quarter ending December 31, 1995 through the fiscal
quarter ending September 30, 1996;
(2) 2.50 to 1.00 for each fiscal quarter for the period commencing
with the fiscal quarter ending December 31, 1996 through the fiscal
quarter ending September 30, 1997; and
(3) 2.00 to 1.00 for the fiscal quarter ending December 31, 1997
and for each fiscal quarter thereafter until the Termination Date.
The Leverage Ratio shall be calculated, in each case, determined as of the
last day of each fiscal quarter based upon (A) for Indebtedness,
Indebtedness as of the last day of each such fiscal quarter; and (B) for
EBITA, depreciation and Capital Expenditures, the actual amount for the
four-quarter period ending on such day.
(E) Capital Expenditures. Borrower will not, nor will it permit any
Subsidiary to, expend, or be committed to expend, for Capital Expenditures
in the acquisition of fixed assets (or in the case Environmental
Expenditures otherwise in compliance with Environmental, Safety and Health
Requirements of Law) during any one fiscal year on a non-cumulative basis
in the aggregate for Borrower and its Subsidiaries in excess of:
(1) $1,600,000 for the period from January 1, 1995 through December
31, 1995; and
(2) $1,300,000 for the period from January 1 through December 31
for each year thereafter.
(F) Rentals. Borrower will not, nor will it permit any Subsidiary to,
create, incur or suffer to exist obligations for Rentals in excess of
$250,000 during any one fiscal year on a non-cumulative basis in the
aggregate for Borrower and its Subsidiaries.
ARTICLE VII: DEFAULTS
7.1 Defaults. Each of the following occurrences shall constitute a
Default under this Agreement:
(a) Failure to Make Payments When Due. Borrower shall (i) fail to pay
when due any of the Obligations consisting of principal with respect to
the Loans or (ii) shall fail to pay within three (3) Business Days of the
date when due any of the other Obligations under this Agreement or the
other Loan Documents.
(b) Breach of Certain Covenants. Borrower shall fail duly and
punctually to perform or observe any agreement, covenant or obligation
binding on Borrower under:
(i) Sections 6.1(C), 6.1(D), 6.1(E), 6.1(F), 6.1(G), 6.1(H),
6.1(I), 6.1(K), 6.2(B) or 6.2(F) and such failure shall continue
unremedied for fifteen (15) days;
(ii) Section 6.1(A), 6.1(B) or 6.1(J) and such failure shall
continue unremedied for five (5) Business Days; or
(iii) Section 6.3 or 6.4(B), 6.4(C), 6.4(D), 6.4(E), 6.4(F) or
6.4(G).
(c) Breach of Representation or Warranty. Any representation or
warranty made or deemed made by Borrower to the Agent or any Lender herein
or by Holdings, Borrower or any of its Subsidiaries in any of the other
Loan Documents or in any statement or certificate at any time given by any
such Person pursuant to any of the Loan Documents shall be false or
misleading in any material respect on the date as of which made (or deemed
made).
(d) Other Defaults. Borrower shall default in the performance of or
compliance with any term contained in this Agreement (other than as
covered by paragraphs (a), (b) or (c) of this Section 7.1), or Holdings,
Borrower or any of its Subsidiaries shall default in the performance of or
compliance with any term contained in any of the other Loan Documents, and
such default shall continue for thirty (30) days after the occurrence
thereof.
(e) Default as to Other Indebtedness; Operating Leases. Borrower or
any of its Subsidiaries shall fail to make any payment when due (whether
by scheduled maturity, required prepayment, acceleration, demand or
otherwise) with respect to any Indebtedness (other than the Obligations)
the outstanding principal amount of which Indebtedness is in excess of
$500,000; or any breach, default or event of default shall occur, or any
other condition shall exist under any instrument, agreement or indenture
pertaining to any such Indebtedness, if the effect thereof is to cause an
acceleration, mandatory redemption, a requirement that Borrower offer to
purchase such Indebtedness or other required repurchase of such
Indebtedness, or permit the holder(s) of such Indebtedness to accelerate
the maturity of any such Indebtedness or require a redemption or other
repurchase of such Indebtedness; or any such Indebtedness shall be
otherwise declared to be due and payable (by acceleration or otherwise) or
required to be prepaid, redeemed or otherwise repurchased by Borrower or
any of its Subsidiaries (other than by a regularly scheduled required
prepayment) prior to the stated maturity thereof.
(f) Involuntary Bankruptcy; Appointment of Receiver, Etc.
(i) An involuntary case shall be commenced against Holdings,
Borrower or any of Borrower's Subsidiaries and the petition shall not be
dismissed, stayed, bonded or discharged within sixty (60) days after
commencement of the case; or a court having jurisdiction in the premises
shall enter a decree or order for relief in respect of Holdings,
Borrower or any of Borrower's Subsidiaries in an involuntary case, under
any applicable bankruptcy, insolvency or other similar law now or
hereinafter in effect; or any other similar relief shall be granted
under any applicable federal, state, local or foreign law.
(ii) A decree or order of a court having jurisdiction in the
premises for the appointment of a receiver, liquidator, sequestrator,
trustee, custodian or other officer having similar powers over Holdings,
Borrower or any of Borrower's Subsidiaries or over all or a substantial
part of the property of Holdings, Borrower or any of Borrower's
Subsidiaries shall be entered; or an interim receiver, trustee or other
custodian of Holdings, Borrower or any of Borrower's Subsidiaries or of
all or a substantial part of the property of Holdings, Borrower or any
of Borrower's Subsidiaries shall be appointed or a warrant of
attachment, execution or similar process against any substantial part of
the property of Holdings, Borrower or any of Borrower's Subsidiaries
shall be issued and any such event shall not be stayed, dismissed,
bonded or discharged within sixty (60) days after entry, appointment or
issuance.
(g) Voluntary Bankruptcy; Appointment of Receiver, Etc. Holdings,
Borrower or any of Borrower's Subsidiaries shall (i) commence a voluntary
case under any applicable bankruptcy, insolvency or other similar law now
or hereafter in effect, (ii) consent to the entry of an order for relief
in an involuntary case, or to the conversion of an involuntary case to a
voluntary case, under any such law, (iii) consent to the appointment of or
taking possession by a receiver, trustee or other custodian for all or a
substantial part of its property, (iv) make any assignment for the benefit
of creditors or (v) take any corporate action to authorize any of the
foregoing.
(h) Judgments and Attachments. Any money judgment(s) (other than a
money judgment covered by insurance as to which the insurance company has
not disclaimed or reserved the right to disclaim coverage), writ or
warrant of attachment, or similar process against Borrower or any of its
Subsidiaries or any of their respective assets involving in any single
case or in the aggregate an amount in excess of $500,000 is (are) entered
and shall remain undischarged, unvacated, unbonded or unstayed for a
period of sixty (60) days or in any event later than fifteen (15) days
prior to the date of any proposed sale thereunder.
(i) Dissolution. Any order, judgment or decree shall be entered
against Borrower decreeing its involuntary dissolution or split up and
such order shall remain undischarged and unstayed for a period in excess
of sixty (60) days; or Borrower shall otherwise dissolve or cease to exist
except as specifically permitted by this Agreement.
(j) Loan Documents; Failure of Security. At any time, for any reason,
(i) any Loan Document as a whole that materially affects the ability of
the Agent, or any of the Lenders to enforce the Obligations or enforce
their rights against the Collateral ceases to be in full force and effect
or Borrower or any of Borrower's Subsidiaries party thereto seeks to
repudiate its obligations thereunder and the Liens intended to be created
thereby are, or Borrower or any such Subsidiary seeks to render such
Liens, invalid and unperfected, or (ii) Liens on Collateral with a fair
market value in excess of $500,000 in favor of the Agent contemplated by
the Loan Documents shall, at any time, for any reason, be invalidated or
otherwise cease to be in full force and effect, or such Liens shall not
have the priority contemplated by this Agreement or the Loan Documents.
(k) Termination Event. Any Termination Event occurs which the Required
Lenders believe is reasonably likely to subject Borrower to liability in
excess of $500,000.
(l) Waiver of Minimum Funding Standard. If the plan administrator of
any Plan applies under Section 412(d) of the Code for a waiver of the
minimum funding standards of Section 412(a) of the Code and any Lender
believes the substantial business hardship upon which the application for
the waiver is based could reasonably be expected to subject either
Borrower or any Controlled Group member to liability in excess of
$500,000.
(m) Interest Rate Agreements. Nonpayment by Borrower of any obligation
under the any Interest Rate Agreements entered into with any Lender or the
breach by Borrower of any term, provision or condition contained in any
such Interest Rate Agreements.
(n) Environmental Matters. Borrower or any of its Subsidiaries shall
be the subject of any proceeding or investigation pertaining to (i) the
Release by Borrower or any of its Subsidiaries of any Contaminant into the
environment, (ii) the liability of Borrower or any of its Subsidiaries
arising from the Release by any other Person of any Contaminant into the
environment, or (iii) any violation of any Environmental, Health or Safety
Requirements of Law which by Borrower or any of its Subsidiaries, which,
in any case, has or is reasonably likely to subject Borrower to liability
in excess of $500,000.
(o) Guarantor Revocation. Any guarantor of the Obligations shall
terminate or revoke any of its obligations under the applicable guarantee
agreement or breach any of the terms of such guarantee agreement.
(p) Failure of Subordination. The subordination provisions of the
documents and instruments evidencing any Permitted Subordinated
Indebtedness shall, at any time, be invalidated or otherwise cease to be
in full force and effect.
(q) Audit Qualification. The auditor's report or reports on the
audited financial statements delivered pursuant to Section 6.1(A) shall
include any material qualification (including with respect to the scope of
audit) or exception.
A Default shall be deemed "continuing" until cured or until waived in
writing in accordance with Section 8.3.
ARTICLE VIII: ACCELERATION, DEFAULTING LENDERS; WAIVERS, AMENDMENTS AND
REMEDIES
8.1 Termination of Commitments; Acceleration. If any Default described
in Section 7.1(f) or 7.1(g) occurs with respect to Borrower, the
obligations of the Lenders to make Loans hereunder and the obligation of
the Agent or any other Issuing Lender to issue Letters of Credit hereunder
shall automatically terminate and the Obligations shall immediately become
due and payable without any election or action on the part of the Agent,
any Lender or any Issuing Lender. If any other Default occurs, the
Required Lenders may terminate or suspend the obligations of the Lenders
to make Loans hereunder and the obligation of the Agent and the Issuing
Lenders to issue Letters of Credit hereunder, or declare the Obligations
to be due and payable, or both, whereupon the Obligations shall become
immediately due and payable, without presentment, demand, protest or
notice of any kind, all of which Borrower expressly waives.
8.2 Defaulting Lender. In the event that any Lender fails to fund its
Pro Rata Share of any Advance requested or deemed requested by Borrower
which such Lender is obligated to fund under the terms of this Agreement
(the funded portion of such Advance being hereinafter referred to as a
"Non Pro Rata Loan"), until the earlier of such Lender's cure of such
failure and the termination of the Revolving Loan Commitments, the
proceeds of all amounts thereafter repaid to the Agent by Borrower and
otherwise required to be applied to such Lender's share of all other
Obligations pursuant to the terms of this Agreement shall be advanced to
Borrower by the Agent on behalf of such Lender to cure, in full or in
part, such failure by such Lender, but shall nevertheless be deemed to
have been paid to such Lender in satisfaction of such other Obligations.
Notwithstanding anything in this Agreement to the contrary:
(i) the foregoing provisions of this Section 8.2 shall apply
only with respect to the proceeds of payments of Obligations and shall
not affect the conversion or continuation of Loans pursuant to Section
2.10;
(ii) any such Lender shall be deemed to have cured its failure
to fund its Pro Rata Share of any Advance at such time as an amount
equal to such Lender's original Pro Rata Share of the requested
principal portion of such Advance is fully funded to Borrower, whether
made by such Lender itself or by operation of the terms of this
Section 8.2, and whether or not the Non Pro Rata Loan with respect
thereto has been repaid, converted or continued;
(iii) amounts advanced to Borrower to cure, in full or in part,
any such Lender's failure to fund its Pro Rata Share of any Advance
("Cure Loans") shall bear interest at the rate applicable to Floating
Rate Loans in effect from time to time, and for all other purposes of
this Agreement shall be treated as if they were Floating Rate Loans;
(iv) regardless of whether or not a Default has occurred or is
continuing, and notwithstanding the instructions of Borrower as to its
desired application, all repayments of principal which, in accordance
with the other terms of this Agreement, would be applied to the
outstanding Floating Rate Loans shall be applied first, ratably to all
Floating Rate Loans constituting Non Pro Rata Loans, second, ratably
to Floating Rate Loans other than those constituting Non Pro Rata
Loans or Cure Loans and, third, ratably to Floating Rate Loans
constituting Cure Loans;
(v) for so long as and until the earlier of any such Lender's
cure of the failure to fund its Pro Rata Share of any Advance and the
termination of the Revolving Loan Commitments, the term "Required
Lenders" for purposes of this Agreement shall mean Lenders (excluding
all Lenders whose failure to fund their respective Pro Rata Shares of
such Advance have not been so cured) whose Pro Rata Shares represent
equal to or greater than sixty-six and two thirds percent (66-2/3%) of
the aggregate Pro Rata Shares of such Lenders; and
(vi) for so long as and until any such Lender's failure to fund
its Pro Rata Share of any Advance is cured in accordance with Section
8.2(ii), (A) such Lender shall not be entitled to any commitment fees
with respect to its Revolving Loan Commitment and (B) such Lender
shall not be entitled to any letter of credit fees, which commitment
fees and letter of credit fees shall accrue in favor of the Lenders
which have funded their respective Pro Rata Share of such requested
Advance, shall be allocated among such performing Lenders ratably
based upon their relative Revolving Loan Commitments, and shall be
calculated based upon the average amount by which the aggregate
Revolving Loan Commitments of such performing Lenders exceeds the sum
of (I) the outstanding principal amount of the Loans owing to such
performing Lenders, plus (II) the outstanding Reimbursement
Obligations owing to such performing Lenders, plus (III) the aggregate
participation interests of such performing Lenders arising pursuant to
Section 2.21 with respect to undrawn and outstanding Letters of
Credit.
8.3 Amendments. Subject to the provisions of this Article VIII, the
Required Lenders (or the Agent with the consent in writing of the Required
Lenders) and Borrower may enter into agreements supplemental hereto for
the purpose of adding or modifying any provisions to the Loan Documents or
changing in any manner the rights of the Lenders or Borrower hereunder or
waiving any Default hereunder; provided, however, that no such
supplemental agreement shall, without the consent of each Lender affected
thereby:
(i) Postpone or extend the Revolving Loan Termination Date, the
Term Loan Termination Date or any other date fixed for any payment of
principal of, or interest on, the Loans, the Reimbursement Obligations
or any fees or other amounts payable to such Lender (except with respect
to (a) any modifications of the provisions relating to prepayments of
Loans and other Obligations and (b) a waiver of the application of the
default rate of interest pursuant to Section 2.11 hereof).
(ii) Reduce the principal amount of any Loans or L/C Obligations,
or reduce the rate or extend the time of payment of interest or fees
thereon.
(iii) Reduce the percentage specified in the definition of
Required Lenders or any other percentage of Lenders specified to be the
applicable percentage in this Agreement to act on specified matters.
(iv) Increase the amount of the Revolving Loan Commitment of any
Lender hereunder (except with respect to an increase in the amount, or
other modification to the terms or components, of the Borrowing Base).
(v) Permit Borrower to assign its rights under this Agreement.
(vi) Amend this Section 8.3.
(vii) Release any guarantor of the Obligations or all or
substantially all of the Collateral.
No amendment of any provision of this Agreement relating to the Agent
shall be effective without the written consent of the Agent. No amendment
of any provision of this Agreement relating to Issuing Lenders shall be
effective without the written consent of the Agent and each Issuing
Lender. The Agent may waive payment of the fee required under Section
12.3(B) without obtaining the consent of any of the Lenders.
8.4 Preservation of Rights. No delay or omission of the Lenders, the
Issuing Lenders or the Agent to exercise any right under the Loan
Documents shall impair such right or be construed to be a waiver of any
Default or an acquiescence therein, and the making of a Loan or the
issuance of a Letter of Credit notwithstanding the existence of a Default
or the inability of Borrower to satisfy the conditions precedent to such
Loan or issuance of such Letter of Credit shall not constitute any waiver
or acquiescence. Any single or partial exercise of any such right shall
not preclude other or further exercise thereof or the exercise of any
other right, and no waiver, amendment or other variation of the terms,
conditions or provisions of the Loan Documents whatsoever shall be valid
unless in writing signed by the Lenders required pursuant to Section 8.3,
and then only to the extent in such writing specifically set forth. All
remedies contained in the Loan Documents or by law afforded shall be
cumulative and all shall be available to the Agent, the Lenders and the
Issuing Lenders until the Obligations have been paid in full.
ARTICLE IX: GENERAL PROVISIONS
9.1 Survival of Representations. All representations and warranties of
Borrower contained in this Agreement shall survive delivery of the Notes
and the making of the Loans and other financial accommodations herein
contemplated.
9.2 Governmental Regulation. Anything contained in this Agreement to
the contrary notwithstanding, no Lender shall be obligated to extend
credit to Borrower and neither the Agent nor any Issuing Lender shall be
obligated to issue any Letter of Credit for the account of Borrower in
violation of any limitation or prohibition provided by any applicable
statute or regulation.
9.3 Performance of Obligations. Borrower agrees that the Agent may,
but shall have no obligation to (i) at any time, pay or discharge taxes,
liens, security interests or other encumbrances levied or placed on or
threatened against any Collateral and (ii) after the occurrence and during
the continuance of a Default make any other payment or perform any act
required of Borrower under any Loan Document or take any other action
which the Agent in its discretion deems necessary or desirable to protect
or preserve the Collateral, including, without limitation, any action to
(y) effect any repairs or obtain any insurance called for by the terms of
any of the Loan Documents and to pay all or any part of the premiums
therefor and the costs thereof and (z) pay any rents payable by Borrower
which are more than 30 days past due, or as to which the landlord has
given notice of termination, under any lease. The Agent shall use
reasonable efforts to give Borrower notice of any action taken under this
Section 9.3 prior to the taking of such action or promptly thereafter
provided the failure to give such notice shall not affect Borrower's
obligations in respect thereof. Borrower agrees to pay the Agent, upon
demand, the principal amount of all funds advanced by the Agent under this
Section 9.3, together with interest thereon at the rate from time to time
applicable to Floating Rate Loans from the date of such advance until the
outstanding principal balance thereof is paid in full. If Borrower fails
to make payment in respect of any such advance under this Section 9.3
within one (1) Business Day after the date Borrower receives written
demand therefor from the Agent, the Agent shall promptly notify each
Lender and each Lender agrees that it shall thereupon make available to
the Agent, in Dollars in immediately available funds, the amount equal to
such Lender's Pro Rata Share of such advance. If such funds are not made
available to the Agent by such Lender within one (1) Business Day after
the Agent's demand therefor, the Agent will be entitled to recover any
such amount from such Lender together with interest thereon at the
Effective Federal Funds Rate for each day during the period commencing on
the date of such demand and ending on the date such amount is received.
The failure of any Lender to make available to the Agent its Pro Rata
Share of any such unreimbursed advance under this Section 9.3 shall
neither relieve any other Lender of its obligation hereunder to make
available to the Agent such other Lender's Pro Rata Share of such advance
on the date such payment is to be made nor increase the obligation of any
other Lender to make such payment to the Agent. All outstanding principal
of, and interest on, advances made under this Section 9.3 shall constitute
Obligations secured by the Collateral until paid in full by Borrower.
9.4 Headings. Section headings in the Loan Documents are for
convenience of reference only, and shall not govern the interpretation of
any of the provisions of the Loan Documents.
9.5 Entire Agreement. The Loan Documents embody the entire agreement
and understanding among Borrower, the Agent and the Lenders and , except
for the letter agreement regarding fees referenced in Section 2.14(C)(ii),
supersede all prior agreements and understandings among Borrower, the
Agent and the Lenders relating to the subject matter thereof.
9.6 Several Obligations; Benefits of this Agreement. The respective
obligations of the Lenders hereunder are several and not joint and no
Lender shall be the partner or agent of any other (except to the extent to
which the Agent is authorized to act as such). The failure of any Lender
to perform any of its obligations hereunder shall not relieve any other
Lender from any of its obligations hereunder. This Agreement shall not be
construed so as to confer any right or benefit upon any Person other than
the parties to this Agreement and their respective successors and assigns.
9.7 Expenses; Indemnification.
(A) Expenses. Borrower shall reimburse the Agent for any reasonable
costs, internal charges and out-of-pocket expenses (including attorneys'
and paralegals' fees and time charges of attorneys and paralegals for the
Agent, which attorneys and paralegals may be employees of the Agent) paid
or incurred by the Agent in connection with the preparation, negotiation,
execution, delivery, syndication, review, amendment, modification, and
administration of the Loan Documents. Borrower also agrees to reimburse
the Agent, the Lenders and the Issuing Lenders for any costs, internal
charges and out-of-pocket expenses (including attorneys' and paralegals'
fees and time charges of attorneys and paralegals for the Agent, the
Lenders and the Issuing Lenders, which attorneys and paralegals may be
employees of the Agent, the Lenders or the Issuing Lenders) paid or
incurred by the Agent, any Issuing Lender or any Lender in connection with
the collection of the Obligations and enforcement of the Loan Documents.
In addition to expenses set forth above, Borrower agrees to reimburse the
Agent, promptly after the Agent's request therefor, for each audit,
collateral analysis or other business analysis performed by or for the
benefit of the Lenders in connection with this Agreement or the other Loan
Documents in an amount equal to the Agent's then customary charges for
each person employed to perform such audit or analysis, plus all costs and
expenses (including without limitation, travel expenses) incurred by the
Agent in the performance of such audit or analysis. Agent shall provide
Borrower with a detailed statement of all reimbursements requested under
this Section 9.7(A).
(B) Indemnity. Borrower further agrees to defend, protect, indemnify,
and hold harmless the Agent, each and all of the Lenders, each and all of
the Issuing Lenders and each of their respective Affiliates, and each of
such Agent's, Lender's, Issuing Lender's or Affiliate's respective
officers, directors, employees, attorneys and agents (including, without
limitation, those retained in connection with the satisfaction or
attempted satisfaction of any of the conditions set forth in Article IV)
(collectively, the "Indemnitees") from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, claims, costs, expenses of any kind or nature whatsoever
(including, without limitation, the fees and disbursements of counsel for
such Indemnitees in connection with any investigative, administrative or
judicial proceeding, whether or not such Indemnitees shall be designated a
party thereto), imposed on, incurred by, or asserted against such
Indemnitees in any manner relating to or arising out of:
(i) this Agreement, the other Loan Documents or any of the
Transaction Documents, or any act, event or transaction related or
attendant thereto or to the Stock Repurchase, the making of the Loans,
and the issuance of and participation in Letters of Credit hereunder,
the management of such Loans or Letters of Credit, the use or intended
use of the proceeds of the Loans or Letters of Credit hereunder, or any
of the other transactions contemplated by the Transaction Documents; or
(ii) any liabilities, obligations, responsibilities, losses,
damages, personal injury, death, punitive damages, economic damages,
consequential damages, treble damages, intentional, willful or wanton
injury, damage or threat to the environment, natural resources or public
health or welfare, costs and expenses (including, without limitation,
attorney, expert and consulting fees and costs of investigation,
feasibility or remedial action studies), fines, penalties and monetary
sanctions, interest, direct or indirect, known or unknown, absolute or
contingent, past, present or future relating to violation of any
Environmental, Health or Safety Requirements of Law arising from or in
connection with the past, present or future operations of Holdings,
Borrower, its Subsidiaries or any of their respective predecessors in
interest, or, the past, present or future environmental, health or
safety condition of any respective property of Borrower or its
Subsidiaries, the presence of asbestos-containing materials at any
respective property of Borrower or its Subsidiaries or the Release or
threatened Release of any Contaminant into the environment
(collectively, the "Indemnified Matters");
provided, however, Borrower shall have no obligation to an Indemnitee
hereunder with respect to Indemnified Matters caused solely by or
resulting solely from (y) a dispute among the Lenders or a dispute between
any Lender and the Agent, or (z) the willful misconduct or Gross
Negligence of such Indemnitee or breach of contract by such Indemnitee
with respect to the Loan Documents, in each case, as determined by the
final non-appealed judgment of a court of competent jurisdiction. If the
undertaking to indemnify, pay and hold harmless set forth in the preceding
sentence may be unenforceable because it is violative of any law or public
policy, Borrower shall contribute the maximum portion which it is
permitted to pay and satisfy under applicable law, to the payment and
satisfaction of all Indemnified Matters incurred by the Indemnitees.
(C) Waiver of Certain Claims; Settlement of Claims. Borrower further
agrees to assert no claim against any of the Indemnitees on any theory of
liability for consequential, special, indirect, exemplary or punitive
damages. No settlement shall be entered into by Holdings, Borrower or any
if its Subsidiaries with respect to any claim, litigation, arbitration or
other proceeding relating to or arising out of the transaction evidenced
by this Agreement, the other Loan Documents or in connection with the
Stock Repurchase (whether or not the Agent, any Lender, any Issuing Lender
or any Indemnitee is a party thereto) unless such settlement releases all
Indemnitees from any and all liability with respect thereto.
(D) Survival of Agreements. The obligations and agreements of Borrower
under this Section 9.7 shall survive the termination of this Agreement.
9.8 Numbers of Documents. All statements, notices, closing documents,
and requests hereunder shall be furnished to the Agent with sufficient
counterparts so that the Agent may furnish one to each of the Lenders.
9.9 Accounting. Except as provided to the contrary herein, all
accounting terms used herein shall be interpreted and all accounting
determinations hereunder shall be made in accordance with Agreement
Accounting Principles.
9.10 Severability of Provisions. Any provision in any Loan Document
that is held to be inoperative, unenforceable, or invalid in any
jurisdiction shall, as to that jurisdiction, be inoperative,
unenforceable, or invalid without affecting the remaining provisions in
that jurisdiction or the operation, enforceability, or validity of that
provision in any other jurisdiction, and to this end the provisions of all
Loan Documents are declared to be severable.
9.11 Nonliability of Lenders. The relationship between Borrower and
the Lenders, Issuing Lenders and the Agent shall be solely that of
borrower and lender. Neither the Agent nor any Lender nor any Issuing
Lender shall have any fiduciary responsibilities to Borrower. Neither the
Agent nor any Lender nor any Issuing Lender undertakes any responsibility
to Borrower to review or inform Borrower of any matter in connection with
any phase of Borrower's business or operations.
9.12 GOVERNING LAW. THE AGENT ACCEPTS THIS AGREEMENT, ON BEHALF OF
ITSELF AND THE LENDERS AND ISSUING LENDERS, AT CHICAGO, ILLINOIS BY
ACKNOWLEDGING AND AGREEING TO IT THERE. ANY DISPUTE BETWEEN BORROWER AND
THE AGENT, ANY LENDER, ANY ISSUING LENDER OR ANY OTHER HOLDER OF SECURED
OBLIGATIONS ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO
THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH, THIS
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, AND WHETHER ARISING IN
CONTRACT, TORT, EQUITY, OR OTHERWISE, SHALL BE RESOLVED IN ACCORDANCE WITH
THE INTERNAL LAWS (WITHOUT REGARD TO THE CONFLICTS OF LAWS PROVISIONS) OF
THE STATE OF ILLINOIS.
9.13 CONSENT TO JURISDICTION; SERVICE OF PROCESS; JURY TRIAL.
(A) EXCLUSIVE JURISDICTION. EXCEPT AS PROVIDED IN SUBSECTION (B), EACH
OF THE PARTIES HERETO AGREES THAT ALL DISPUTES AMONG THEM ARISING OUT OF,
CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED
AMONG THEM IN CONNECTION WITH, THIS AGREEMENT OR ANY OF THE OTHER LOAN
DOCUMENTS WHETHER ARISING IN CONTRACT, TORT, EQUITY, OR OTHERWISE, SHALL
BE RESOLVED EXCLUSIVELY BY STATE OR FEDERAL COURTS LOCATED IN CHICAGO,
ILLINOIS, BUT THE PARTIES HERETO ACKNOWLEDGE THAT ANY APPEALS FROM THOSE
COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF CHICAGO,
ILLINOIS. EACH OF THE PARTIES HERETO WAIVES IN ALL DISPUTES BROUGHT
PURSUANT TO THIS SUBSECTION (A) ANY OBJECTION THAT IT MAY HAVE TO THE
LOCATION OF THE COURT CONSIDERING THE DISPUTE.
(B) OTHER JURISDICTIONS. BORROWER AGREES THAT THE AGENT, ANY LENDER,
ANY ISSUING LENDER OR ANY HOLDER OF SECURED OBLIGATIONS SHALL HAVE THE
RIGHT TO PROCEED AGAINST BORROWER OR ITS PROPERTY IN A COURT IN ANY
LOCATION TO ENABLE SUCH PERSON TO (1) OBTAIN PERSONAL JURISDICTION OVER
BORROWER OR (2) REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE
OBLIGATIONS OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR
OF SUCH PERSON. BORROWER AGREES THAT IT WILL NOT ASSERT ANY PERMISSIVE
COUNTERCLAIMS IN ANY PROCEEDING BROUGHT BY SUCH PERSON TO REALIZE ON THE
COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS OR TO ENFORCE A
JUDGMENT OR OTHER COURT ORDER IN FAVOR OF SUCH PERSON. BORROWER WAIVES
ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT IN WHICH SUCH
PERSON HAS COMMENCED A PROCEEDING DESCRIBED IN THIS SUBSECTION (B).
(C) SERVICE OF PROCESS. BORROWER WAIVES PERSONAL SERVICE OF ANY
PROCESS UPON IT AND, AS ADDITIONAL SECURITY FOR THE OBLIGATIONS,
IRREVOCABLY APPOINTS THE PRENTICE HALL CORPORATION SYSTEM, INC.,
BORROWER'S REGISTERED AGENT, WHOSE ADDRESS IS 33 NORTH LASALLE STREET,
SUITE 1925, CHICAGO, ILLINOIS 60602, AS BORROWER'S AGENT FOR THE PURPOSE
OF ACCEPTING SERVICE OF PROCESS ISSUED BY ANY COURT. BORROWER IRREVOCABLY
WAIVES ANY OBJECTION (INCLUDING, WITHOUT LIMITATION, ANY OBJECTION OF THE
LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS) WHICH IT
MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING
WITH RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR
AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH IN ANY JURISDICTION
SET FORTH ABOVE.
(D) WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO IRREVOCABLY
WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE,
WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, ARISING OUT OF,
CONNECTED WITH, RELATED TO OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED
AMONG THEM IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER INSTRUMENT,
DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH. EACH
OF THE PARTIES HERETO AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND,
ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY
AND THAT ANY PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF
THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE
PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
(E) WAIVER OF BOND. BORROWER WAIVES THE POSTING OF ANY BOND OTHERWISE
REQUIRED OF ANY PARTY HERETO IN CONNECTION WITH ANY JUDICIAL PROCESS OR
PROCEEDING TO REALIZE ON THE COLLATERAL (INCLUDING, WITHOUT LIMITATION,
THE REAL PROPERTY COLLATERAL) OR ANY OTHER SECURITY FOR THE OBLIGATIONS OR
TO ENFORCE ANY JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF SUCH
PARTY, OR TO ENFORCE BY SPECIFIC PERFORMANCE, TEMPORARY RESTRAINING ORDER,
PRELIMINARY OR PERMANENT INJUNCTION, THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT.
(F) ADVICE OF COUNSEL. EACH OF THE PARTIES REPRESENTS TO EACH OTHER
PARTY HERETO THAT IT HAS DISCUSSED THIS AGREEMENT AND, SPECIFICALLY, THE
PROVISIONS OF THIS SECTION 9.13, WITH ITS COUNSEL.
9.14 No Strict Construction. The parties hereto have participated
jointly in the negotiation and drafting of this Agreement. In the event
an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the parties hereto
and no presumption or burden of proof shall arise favoring or disfavoring
any party by virtue of the authorship of any provisions of this Agreement.
ARTICLE X: THE AGENT
10.1 Appointment; Nature of Relationship. The First National Bank of
Chicago is appointed by the Lenders (each reference in this Article X to a
Lender being in its capacity either as a Lender or an Issuing Lender, or
both) as the Agent hereunder and under each other Loan Document, and each
of the Lenders irrevocably authorizes the Agent to act as the contractual
representative of such Lender with the rights and duties expressly set
forth herein and in the other Loan Documents. The Agent agrees to act as
such contractual representative upon the express conditions contained in
this Article X. Notwithstanding the use of the defined term "Agent," it
is expressly understood and agreed that the Agent shall not have any
fiduciary responsibilities to any Lender by reason of this Agreement and
that the Agent is merely acting as the representative of the Lenders with
only those duties as are expressly set forth in this Agreement and the
other Loan Documents. In its capacity as the Lenders' contractual
representative, the Agent (i) does not assume any fiduciary duties to any
of the Lenders, (ii) is a "representative" of the Lenders within the
meaning of Section 9-105 of the Uniform Commercial Code and (iii) is
acting as an independent contractor, the rights and duties of which are
limited to those expressly set forth in this Agreement and the other Loan
Documents. Each of the Lenders agrees to assert no claim against the
Agent on any agency theory or any other theory of liability for breach of
fiduciary duty, all of which claims each Lender waives.
10.2 Powers. The Agent shall have and may exercise such powers under
the Loan Documents as are specifically delegated to the Agent by the terms
of each thereof, together with such powers as are reasonably incidental
thereto. The Agent shall have no implied duties or fiduciary duties to
the Lenders, or any obligation to the Lenders to take any action hereunder
or under any of the other Loan Documents except any action specifically
provided by the Loan Documents required to be taken by the Agent.
10.3 General Immunity. Neither the Agent nor any of its directors,
officers, agents or employees shall be liable to Borrower, the Lenders or
any Lender for any action taken or omitted to be taken by it or them
hereunder or under any other Loan Document or in connection herewith or
therewith except to the extent such action or inaction is found in a final
judgment by a court of competent jurisdiction to have arisen solely from
(i) the Gross Negligence or willful misconduct of such Person or (ii)
breach of contract by such Person with respect to the Loan Documents.
10.4 No Responsibility for Loans, Creditworthiness, Collateral,
Recitals, Etc. Neither the Agent nor any of its directors, officers,
agents or employees shall be responsible for or have any duty to
ascertain, inquire into, or verify (i) any statement, warranty or
representation made in connection with any Loan Document or any borrowing
hereunder; (ii) the performance or observance of any of the covenants or
agreements of any obligor under any Loan Document; (iii) the satisfaction
of any condition specified in Article IV, except receipt of items required
to be delivered solely to the Agent; (iv) the existence or possible
existence of any Default or (v) the validity, effectiveness or genuineness
of any Loan Document or any other instrument or writing furnished in
connection therewith. The Agent shall not be responsible to any Lender
for any recitals, statements, representations or warranties herein or in
any of the other Loan Documents, for the perfection or priority of any of
the Liens on any of the Collateral, or for the execution, effectiveness,
genuineness, validity, legality, enforceability, collectibility, or
sufficiency of this Agreement or any of the other Loan Documents or the
transactions contemplated thereby, or for the financial condition of any
guarantor of any or all of the Obligations, Holdings, Borrower or any of
their respective Subsidiaries.
10.5 Action on Instructions of Lenders. The Agent shall in all cases
be fully protected in acting, or in refraining from acting, hereunder and
under any other Loan Document in accordance with written instructions
signed by the Required Lenders, and such instructions and any action taken
or failure to act pursuant thereto shall be binding on all of the Lenders
and on all holders of Notes. The Agent shall be fully justified in
failing or refusing to take any action hereunder and under any other Loan
Document unless it shall first be indemnified to its satisfaction by the
Lenders pro rata against any and all liability, cost and expense that it
may incur by reason of taking or continuing to take any such action.
10.6 Employment of Agents and Counsel. The Agent may execute any of
its duties as the Agent hereunder and under any other Loan Document by or
through employees, agents, and attorney-in-fact and shall not be
answerable to the Lenders, except as to money or securities received by it
or its authorized agents, for the default or misconduct of any such agents
or attorneys-in-fact selected by it with reasonable care. The Agent shall
be entitled to advice of counsel concerning the contractual arrangement
between the Agent and the Lenders and all matters pertaining to the
Agent's duties hereunder and under any other Loan Document.
10.7 Reliance on Documents; Counsel. The Agent shall be entitled to
rely upon any Note, notice, consent, certificate, affidavit, letter,
telegram, statement, paper or document believed by it to be genuine and
correct and to have been signed or sent by the proper person or persons,
and, in respect to legal matters, upon the opinion of counsel selected by
the Agent, which counsel may be employees of the Agent.
10.8 The Agent's Reimbursement and Indemnification. The Lenders agree
to reimburse and indemnify the Agent ratably in proportion to their
respective Revolving Loan Commitment (i) for any amounts not reimbursed by
Borrower for which the Agent is entitled to reimbursement by Borrower
under the Loan Documents, (ii) for any other expenses incurred by the
Agent on behalf of the Lenders, in connection with the preparation,
execution, delivery, administration and enforcement of the Loan Documents
and (iii) for any liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind
and nature whatsoever which may be imposed on, incurred by or asserted
against the Agent in any way relating to or arising out of the Loan
Documents or any other document delivered in connection therewith or the
transactions contemplated thereby, or the enforcement of any of the terms
thereof or of any such other documents, provided that no Lender shall be
liable for any of the foregoing to the extent any of the foregoing is
found in a final non-appealable judgment by a court of competent
jurisdiction to have arisen solely from the Gross Negligence or willful
misconduct of the Agent.
10.9 Rights as a Lender. With respect to its Revolving Loan
Commitment, its Term Loan Commitment, Loans made by it, the Notes issued
to it and Letters of Credit issued by it as an Issuing Lender, the Agent
shall have the same rights and powers hereunder and under any other Loan
Document as any Lender and may exercise the same as through it were not
the Agent, and the term "Lender" or "Lenders" or "Issuing Lender" or
"Issuing Lenders", as applicable, shall, unless the context otherwise
indicates, include the Agent in its individual capacity. The Agent may
accept deposits from, lend money to, and generally engage in any kind of
trust, debt, equity or other transaction, in addition to those
contemplated by this Agreement or any other Loan Document, with Borrower
or any of its Subsidiaries in which such Person is not prohibited hereby
from engaging with any other Person.
10.10 Lender Credit Decision. Each Lender acknowledges that it has,
independently and without reliance upon the Agent or any other Lender and
based on the financial statements prepared by Holdings and Borrower and
such other documents and information as it has deemed appropriate, made
its own credit analysis and decision to enter into this Agreement and the
other Loan Documents. Each Lender also acknowledges that it will,
independently and without reliance upon the Agent or any other Lender and
based on such documents and information as it shall deem appropriate at
the time, continue to make its own credit decisions in taking or not
taking action under this Agreement and the other Loan Documents.
10.11 Successor Agent. The Agent may resign at any time by giving
written notice thereof to the Lenders and Borrower, and the Agent may be
removed at any time with or without cause by written notice received by
the Agent from the Required Lenders. Upon any such resignation or
removal, the Required Lenders shall have the right to appoint, on behalf
of Borrower and the Lenders, a successor Agent. If no successor Agent
shall have been so appointed by the Required Lenders and shall have
accepted such appointment within thirty days after the retiring Agent's
giving notice of resignation, then the retiring Agent may appoint, on
behalf of Borrower and the Lenders, a successor Agent. Notwithstanding
anything herein to the contrary, so long as no Default has occurred and is
continuing, each such successor Agent shall be subject to approval by
Borrower, which approval shall not be unreasonably withheld. Such
successor Agent shall be a commercial bank having capital and retained
earnings of at least $50,000,000. Upon the acceptance of any appointment
as the Agent hereunder by a successor Agent, such successor Agent shall
thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Agent, and the retiring Agent shall
be discharged from its duties and obligations hereunder and under the
other Loan Documents. After any retiring Agent's resignation hereunder as
Agent, the provisions of this Article X shall continue in effect for its
benefit in respect of any actions taken or omitted to be taken by it while
it was acting as the Agent hereunder and under the other Loan Documents.
10.12 Collateral Documents. Each Lender authorizes the Agent to enter
into each of the Collateral Documents to which it is a party and to take
all action contemplated by such documents. Each Lender agrees that no
Lender shall have the right individually to seek to realize upon the
security granted by any Collateral Document, it being understood and
agreed that such rights and remedies may be exercised solely by the Agent
for the benefit of the Holders of Secured Obligations upon the terms of
the Collateral Documents.
ARTICLE XI: SETOFF; RATABLE PAYMENTS
11.1 Setoff. In addition to, and without limitation of, any rights of
the Lenders or Issuing Lenders under applicable law, if any Default occurs
and is continuing, any indebtedness from any Lender or Issuing Lender to
Borrower (including all account balances, whether provisional or final and
whether or not collected or available) may be offset and applied toward
the payment of the Obligations owing to such Lender, such Issuing Lender
and the other Obligations, whether or not the Obligations, or any part
hereof, shall then be due.
11.2 Ratable Payments. If any Lender, whether by setoff or otherwise,
has payment made to it upon its Loans (other than payments received
pursuant to Sections 3.1, 3.2 or 3.4) in a greater proportion than that
received by any other Lender, such Lender agrees, promptly upon demand, to
purchase a portion of the Loans held by the other Lenders so that after
such purchase each Lender will hold its ratable proportion of Loans. If
any Lender, whether in connection with setoff or amounts which might be
subject to setoff or otherwise, receives collateral or other protection
for its Obligation or such amounts which may be subject to setoff, such
Lender agrees, promptly upon demand, to take such action necessary such
that all Lenders share in the benefits of such collateral ratably in
proportion to the obligations owing to them. In case any such payment is
disturbed by legal process, or otherwise, appropriate further adjustments
shall be made.
11.3 Application of Payments. Subject to the provisions of Section
8.2, the Agent shall, unless otherwise specified at the direction of the
Required Lenders which direction shall be consistent with the last
sentence of this Section 11.3, apply all payments and prepayments in
respect of any Obligations and all proceeds of Collateral in the following
order:
(A) first, to pay interest on and then principal of any portion of
the Loans which the Agent may have advanced on behalf of any Lender for
which the Agent has not then been reimbursed by such Lender or Borrower;
(B) second, to pay interest on and then principal of any advance
made under Section 9.3 for which the Agent has not then been paid by
Borrower or reimbursed by the Lenders;
(C) third, to pay Obligations in respect of any fees, expense
reimbursements or indemnities then due to the Agent;
(D) fourth, to pay Obligations in respect of any fees, expenses,
reimbursements or indemnities then due to the Lenders and Issuing
Lenders;
(E) fifth, to pay interest due in respect of Loans and L/C
Obligations;
(F) sixth, to the ratable payment or prepayment of principal
outstanding on Loans, Reimbursement Obligations and Rate Hedging
Obligations in such order as the Agent may determine in its sole
discretion;
(G) seventh, to provide required cash collateral if any pursuant
to Section 2.24; and
(H) eighth, to the ratable payment of all other Obligations.
Unless otherwise designated (which designation shall only be applicable
prior to the occurrence of a Default) by Borrower or unless otherwise
mandated by the terms of this Agreement, all principal payments in respect
of Loans shall be applied first, to the outstanding Revolving Loans and,
second, to the outstanding Term Loans, in each case, first, to repay
outstanding Floating Rate Loans, and then to repay outstanding Eurodollar
Rate Loans with those Eurodollar Rate Loans which have earlier expiring
Interest Periods being repaid prior to those which have later expiring
Interest Periods. The order of priority set forth in this Section 11.3
and the related provisions of this Agreement are set forth solely to
determine the rights and priorities of the Agent, the Lenders, the Issuing
Lenders and other Holders of Secured Obligations as among themselves. The
order of priority set forth in clauses (D) through (H) of this Section
11.3 may at any time and from time to time be changed by the Required
Lenders without necessity of notice to or consent of or approval by
Borrower, or any other Person. The order of priority set forth in clauses
(A) through (C) of this Section 11.3 may be changed only with the prior
written consent of the Agent.
11.4 Relations Among Lenders.
(a) Except with respect to the exercise of set-off rights of any Lender
in accordance with Section 11.1, the proceeds of which are applied in
accordance with this Agreement, and except as set forth in the following
sentence, each Lender agrees that it will not take any action, nor
institute any actions or proceedings, against Borrower or any other
obligor hereunder or with respect to any Collateral or Loan Document,
without the prior written consent of the Required Lenders or, as may be
provided in this Agreement or the other Loan Documents, at the direction
of the Agent.
(b) The Lenders are not partners or co-venturers, and no Lender shall
be liable for the acts or omissions of, or (except as otherwise set forth
herein in case of the Agent) authorized to act for, any other Lender.
Notwithstanding the foregoing, and subject to Section 11.2, any Lender
shall have the right to enforce on an unsecured basis the payment of the
principal of and interest on any Loan made by it after the date such
principal or interest has become due and payable pursuant to the terms of
this Agreement.
ARTICLE XII: BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS
12.1 Successors and Assigns. The terms and provisions of the Loan
Documents shall be binding upon and inure to the benefit of Borrower and
the Lenders and their respective successors and assigns, except that (i)
Borrower shall not have the right to assign its rights or obligations
under the Loan Documents and (ii) any assignment by any Lender must be
made in compliance with Section 12.3 hereof. Notwithstanding clause (ii)
of this Section 12.1, any Lender may at any time, without the consent of
Borrower or the Agent, assign all or any portion of its rights under this
Agreement and its Notes to a Federal Reserve Bank; provided, however, that
no such assignment shall release the transferor Lender from its
obligations hereunder. The Agent may treat the payee of any Note as the
owner thereof for all purposes hereof unless and until such payee complies
with Section 12.3 hereof in the case of an assignment thereof or, in the
case of any other transfer, a written notice of the transfer is filed with
the Agent. Any assignee or transferee of a Note agrees by acceptance
thereof to be bound by all the terms and provisions of the Loan Documents.
Any request, authority or consent of any Person, who at the time of making
such request or giving such authority or consent is the holder of any
Note, shall be conclusive and binding on any subsequent holder, transferee
or assignee of such Note or of any Note or Notes issued in exchange
therefor.
12.2 Participations.
(A) Permitted Participants; Effect. Subject to the terms set forth in
this Section 12.2, any Lender may, in the ordinary course of its business
and in accordance with applicable law, at any time sell to one or more
banks or other entities ("Participants") participating interests in any
Loan owing to such Lender, any Note held by such Lender, any Revolving
Loan Commitment of such Lender, any Letter of Credit issued by such
Lender, any L/C Interest of such Lender or any other interest of such
Lender under the Loan Documents on a pro-rata or non pro-rata basis;
provided that without the prior consent of the Agent the amount of such
participation shall not be for less than $5,000,000. Notice of such
participation to Borrower and the Agent shall be required prior to any
participation becoming effective with respect to a Participant which is
not a Lender or an Affiliate thereof. In the event of any such sale by a
Lender of participating interests to a Participant, such Lender's
obligations under the Loan Documents shall remain unchanged, such Lender
shall remain solely responsible to the other parties hereto for the
performance of such obligations, such Lender shall remain the holder of
any such Note for all purposes under the Loan Documents, all amounts
payable by Borrower under this Agreement shall be determined as if such
Lender had not sold such participating interests, and Borrower and the
Agent shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under the Loan
Documents except that, for purposes of Article III hereof, the
Participants shall be entitled to the same rights as if they were Lenders.
(B) Voting Rights. Each Lender shall retain the sole right to approve,
without the consent of any Participant, any amendment, modification or
waiver of any provision of the Loan Documents other than any amendment,
modification or waiver with respect to any Loan or Revolving Loan
Commitment in which such Participant has an interest which forgives
principal, interest or fees or reduces the interest rate or fees payable
pursuant to the terms of this Agreement with respect to any such Loan or
Revolving Loan Commitment, postpones any date fixed for any regularly-
scheduled payment of principal of, or interest or fees on, any such Loan
or Revolving Loan Commitment, or releases all or substantially all of the
Collateral, if any, securing any such Loan.
(C) Benefit of Setoff. Borrower agrees that each Participant shall be
deemed to have the right of setoff provided in Section 11.1 hereof in
respect to its participating interest in amounts owing under the Loan
Documents to the same extent as if the amount of its participating
interest were owing directly to it as a Lender under the Loan Documents,
provided that each Lender shall retain the right of setoff provided in
Section 11.1 hereof with respect to the amount of participating interests
sold to each Participant except to the extent such Participant exercises
its right of set off. The Lenders agree to share with each Participant,
and each Participant, by exercising the right of setoff provided in
Section 11.1 hereof, agrees to share with each Lender, any amount received
pursuant to the exercise of its right of setoff, such amounts to be shared
in accordance with Section 11.2 as if each Participant were a Lender.
12.3 Assignments.
(A) Permitted Assignments. Any Lender may, in the ordinary course of
its business and in accordance with applicable law, at any time assign to
one or more banks or other entities ("Purchasers") all or a portion of its
rights and obligations under this Agreement (including, without
limitation, its Revolving Loan Commitment, all Loans owing to it, all of
its interests as an Issuing Lender with respect to Letters of Credit, all
of its participation interests in existing Letters of Credit, and its
obligation to participate in additional Letters of Credit hereunder) in
accordance with the provisions of this Section 12.3; provided, however
that prior to any amendment to this Agreement which increases the
Aggregate Revolving Loan Commitment or the amount of the Term Loan, no
such assignment shall be permitted without Borrower's prior written
consent (which consent shall not be unreasonably withheld) unless a
Default shall have occurred and be continuing at the time thereof. Each
assignment shall be of a constant, and not a varying, ratable percentage
of all of the assigning Lender's rights and obligations under this
Agreement. Such assignment shall be substantially in the form of Exhibit
E hereto and shall not be permitted hereunder unless such assignment is
either for all of such Lender's rights and obligations under the Loan
Documents or, without the prior written consent of the Agent, involves
loans and commitments in an aggregate amount of at least $5,000,000.
Notice to the Agent and consent of the Agent (which consent shall not be
unreasonably withheld) shall be required prior to an assignment becoming
effective with respect to a Purchaser which is not a Lender or an
Affiliate thereof.
(B) Effect; Effective Date. Upon (i) delivery to the Agent of a notice
of assignment, substantially in the form attached as Appendix I to Exhibit
E hereto (a "Notice of Assignment"), together with any consent required by
Section 12.3.(A) hereof, and (ii) payment of a $3,000 fee to the Agent for
processing such assignment, such assignment shall become effective on the
effective date specified in such Notice of Assignment. The Notice of
Assignment shall contain a representation by the Purchaser to the effect
that none of the consideration used to make the purchase of the
Commitment, Loans, Letters of Credit and L/C Obligations under the
applicable assignment agreement are "plan assets" as defined under ERISA
and that the rights and interests of the Purchaser in and under the Loan
Documents will not be "plan assets" under ERISA. On and after the
effective date of such assignment, such Purchaser, if not already a
Lender, shall for all purposes be a Lender party to this Agreement and any
other Loan Documents executed by the Lenders and shall have all the rights
and obligations of a Lender under the Loan Documents, to the same extent
as if it were an original party hereto, and no further consent or action
by Borrower, the Lenders or the Agent shall be required to release the
transferor Lender with respect to the percentage of the Aggregate
Revolving Loan Commitment, Loans and Letter of Credit participations
assigned to such Purchaser. Upon the consummation of any assignment to a
Purchaser pursuant to this Section 12.3(B), the transferor Lender, the
Agent and Borrower shall make appropriate arrangements so that replacement
Notes are issued to such transferor Lender and new Notes or, as
appropriate, replacement Notes, are issued to such Purchaser, in each case
in principal amounts reflecting their Revolving Loan Commitment and their
Term Loans, as adjusted pursuant to such assignment.
(C) The Register. The Agent shall maintain at its address referred to
in Section 13.1 a copy of each assignment delivered to and accepted by it
pursuant to this Section 12.3 and a register (the "Register") for the
recordation of the names and addresses of the Lenders and the Revolving
Loan Commitment of and principal amount of the Loans owing to, each Lender
from time to time and whether such Lender is an original Lender or the
assignee of another Lender pursuant to an assignment under this Section
12.3. The entries in the Register shall be conclusive and binding for all
purposes, absent manifest error, and Borrower and each of its
Subsidiaries, the Agent and the Lenders may treat each Person whose name
is recorded in the Register as a Lender hereunder for all purposes of this
Agreement. The Register shall be available for inspection by Borrower or
any Lender at any reasonable time and from time to time upon reasonable
prior notice.
12.4 Confidentiality. Subject to Section 12.5, the Agent and the
Lenders shall hold all nonpublic information obtained pursuant to the
requirements of this Agreement and identified as such by Borrower in
accordance with such Person's customary procedures for handling
confidential information of this nature and in accordance with safe and
sound banking practices and in any event may make disclosure reasonably
required by a prospective Transferee in connection with the contemplated
participation or assignment or as required or requested by any
Governmental Authority or representative thereof or pursuant to legal
process and shall require any such Transferee to agree (and require any of
its Transferees to agree) to comply with this Section 12.4. In no event
shall the Agent or any Lender be obligated or required to return any
materials furnished by Borrower; provided, however, each prospective
Transferee shall be required to agree that if it does not become a
participant or assignee it shall return all materials furnished to it by
or on behalf of Borrower in connection with this Agreement.
12.5 Dissemination of Information. Borrower authorizes each Lender to
disclose to any Participant or Purchaser or any other Person acquiring an
interest in the Loan Documents by operation of law (each a "Transferee")
and any prospective Transferee any and all information in such Lender's
possession concerning the Holdings, Borrower and its Subsidiaries and the
Collateral; provided that prior to any such disclosure, such prospective
Transferee shall agree to preserve in accordance with Section 12.4 the
confidentiality of any confidential information described therein.
ARTICLE XIII: NOTICES
13.1 Giving Notice. Except as otherwise permitted by Section 2.14 with
respect to borrowing notices, all notices and other communications
provided to any party hereto under this Agreement or any other Loan
Documents shall be in writing or by telex or by facsimile and addressed or
delivered to such party at its address set forth below its signature
hereto or at such other address as may be designated by such party in a
notice to the other parties. Any notice, if mailed and properly addressed
with postage prepaid, shall be deemed given when received; any notice, if
transmitted by telex or facsimile, shall be deemed given when transmitted
(answerback confirmed in the case of telexes).
13.2 Change of Address. Borrower, the Agent and any Lender may each
change the address for service of notice upon it by a notice in writing to
the other parties hereto.
ARTICLE XIV: COUNTERPARTS
This Agreement may be executed in any number of counterparts, all of
which taken together shall constitute one agreement, and any of the
parties hereto may execute this Agreement by signing any such counterpart.
This Agreement shall be effective when it has been executed by Borrower,
the Agent and the Lenders and each party as notified the Agent by telex or
telephone, that it has taken such action.
[Remainder of This Page Intentionally Blank]
IN WITNESS WHEREOF, Borrower, the Lenders and the Agent have executed
this Agreement as of the date first above written.
NEWCO, INC.,
as Borrower
By:___________________________
Name:
Title:
Address:
c/o Swing-N-Slide Corp
1212 Barberry Drive
Janesville, Wisconsin 53545
Attention: Richard G. Ruegger
Telephone No.: 414/765-4424
Facsimile No.: 414/765-5062
THE FIRST NATIONAL BANK OF
CHICAGO, as Agent and as a Lender
By:___________________________
Name: Jerry Kane
Title: Senior Vice President
Address:
One First National Plaza
Suite 0173
Chicago, Illinois 60670-0173
Attention: Jerry J. Kane
Telephone No.: 312/732-1614
Facsimile No.: 312/732-1117
<PAGE>
SCHEDULE 6.3(F)(ii)
Computation of Permissible Tax Payments
For purposes of this Section 6.3(F)(ii) in respect of taxes, the following
provisions shall be applicable:
As used herein the term "Affiliated Group" means the affiliated group as
defined is Section 1504 of the Internal Revenue Code of 1986, as amended
(the "Code").
1. Determination of Federal Income Tax Liability.
For each fiscal year or part thereof (each, a "Determination
Period") with respect to which Holdings files a consolidated federal or
state income tax return and Borrower is a member of the Affiliated Group
of which Holdings is the common parent corporation (the "Holdings
Group") Holdings shall determine (i) the federal income tax liability of
the hypothetical Affiliated Group of which Borrower would be the common
parent corporation (the "Borrower Group") and (ii) the state liabilities
of each member of Borrower Group on a separate company or combined
basis, as appropriate for such Determination Period, on a stand-alone
basis taking only the income of the members of Borrower Group into
account, such determination to (i) include any benefit resulting from
ordinary losses, capital losses and tax credits of the members of
Borrower Group from the current year or the carryforward of ordinary
losses, capital losses and tax credits of Borrower group from preceding
years which would be utilizable under the Code or relevant state law and
(ii) take into account the deductibility of state income tax for federal
income tax purposes. The aggregate federal and state income tax
liability for all members of Borrower Group determined in accordance
with this paragraph 1 with respect to any Determination Period is
referred to as the "Borrower Group Tax Liability".
2. Payment of Borrower's Tax Liability to Holdings.
Borrower shall be permitted to pay to Holdings, subject to the
provisions of Section 6.3(F) the lesser of (i) Borrower Group Tax
Liability for the relevant Determination Period (or reasonable estimates
thereof) and (ii) the sum of (x) the amount determined by multiplying
(A) the federal income tax liability of the Holdings Affiliated Group
for such Determination Period, by (B) a fraction, the numerator of which
is the federal income tax liability of Borrower Group for such
Determination Period and the denominator of which is the aggregate
federal income tax liabilities of each member of the Holdings Affiliated
Group having positive liability (determined in the manner described in
paragraph 1 hereof) for such Determination Period, (y) with respect to
each state in which members of Borrower Group file a combined state
income tax return with members of the Holdings Group which are not also
members of Borrower Group, the amount determined by multiplying (C) the
relevant combined state tax liability of the Holdings Group for such
Determination Period by (D) a fraction, the numerator of which is the
combined hypothetical state income tax liability of the members of
Borrower Group (computed in a manner substantially similar to that set
forth in paragraph 1 for such Determination Period) and the denominator
of which is the combined state income tax liability of all members of
the Holdings Group having positive liability for such Determination
Period and (z) with respect to each state in which members of Borrower
Group do not file such a combined return, the aggregate separate state
income tax liabilities of all of the members of Borrower Group for such
Determination Period. Such payments shall be made at such times as
shall be requested by Holdings, but not more frequently than quarterly.
Except as provided in paragraph 3 below, Borrower shall not have any
obligation to Holdings or to any other member of the Affiliated Group to
pay any further amounts on account of the Holdings Group's tax
liability, any such further amounts being the sole responsibility of
Holdings and the other members of the Holdings Group. If as a result of
estimated payments or otherwise, Borrower pays to Holdings for any
fiscal year an amount in excess of the amount determined under paragraph
1, Borrower shall cause Holdings to refund to Borrower the amount of
such excess no later than the date upon which Holdings files the
applicable consolidated federal income tax return for the Holdings
Group. If such amount is not so refunded it shall be deducted from
amounts which could otherwise be paid to Holdings pursuant to Section
6.3(F).
3. Adjustments to Borrower's Federal Income Tax Liability.
In the event that there is an increase or decrease in the amount
determined under paragraph 2 for any fiscal year (whether by amended
return, examination by the Internal Revenue Service, carryback or net
operating loss or unused credits, or otherwise), Borrower shall or shall
cause Holdings, as the case may be, to promptly make a payment to the
other in the amount of such increase or decrease.
CONSENT NO. 1
Dated as of February 14, 1996
to
CREDIT AGREEMENT
with
NEWCO, INC.
Dated as of January 19, 1995
THIS CONSENT NO. 1 ("Consent") is executed as of February 14, 1996 by
the undersigned Lenders and The First National Bank of Chicago ("First
Chicago"), as Agent.
WITNESSETH:
WHEREAS, Newco, Inc. (the "Company") is the borrower under that
certain Credit Agreement dated as of January 19, 1995 with the financial
institutions from time to time parties thereto as Lenders (the "Lenders")
and First Chicago, as contractual representative for the Lenders (the
"Agent") (as amended, restated, modified or supplemented, the "Credit
Agreement");
WHEREAS, the Company has notified the Lenders that pursuant to an
Offer to Purchase dated January 11, 1996, GreenGrass Holdings, a Delaware
general partnership ("GreenGrass") in which Glencoe Growth Closely Held
Business Fund, L.P. ("Glencoe") owns an indirect interest, and pursuant to
the terms of a Transaction Agreement dated as of January 4, 1996 (the
"Transaction Agreement") between Holdings and GreenGrass, GreenGrass has
offered to purchase up to 3,510,000 Shares of the shares of common stock
of Holdings (the "Tender Offer");
WHEREAS, the Company has notified the Lenders that it is anticipated
that the Tender Offer will close on or about February 14, 1996 with the
purchases in connection therewith being consummated on or about February
15, 1996;
WHEREAS, in connection with the consummation of the Tender Offer,
Holdings proposes to issue certain convertible debentures as more
particularly set forth below;
WHEREAS, the Company has requested that the Agent and the Lenders
consent to the issuance by Holdings of the convertible debentures on the
terms and conditions hereinafter set forth and to amend the Credit
Agreement in certain respects in connection therewith;
WHEREAS, the Required Lenders are willing to consent to the issuance
of the convertible debentures on the terms and for the limited purposes
identified herein and to amend the Credit Agreement on the terms and
conditions set forth herein, it being expressly understood that this
Consent shall in no event constitute a waiver by the Lenders or the Agent
of any other breach of the Credit Agreement or any of the Lender's or
Agent's rights or remedies with respect thereto;
NOW, THEREFORE, in consideration of the premises set forth above, the
terms and conditions contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the undersigned have agreed to the following waiver. Terms
defined in the Credit Agreement which are used herein shall have the same
meanings set forth in the Credit Agreement unless otherwise specified
herein.
1. Consent. Upon the effectiveness of this Consent in accordance
with the provisions of Section 3 below, the Required Lenders hereby
consent and the Company hereby agrees that notwithstanding the provisions
of Sections 2.5(B)(i)(A) or 6.3(A)(i) of the Credit Agreement, Holdings,
shall be permitted to pay certain expenses described below and issue
convertible debentures (the debentures issued on such terms being
hereinafter referred to as the "Convertible Debentures") in two series on
substantially the following terms:
(a) The initial principal amount of the initial series of
Convertible Debentures shall be not less than $5,000,000 of
which $4,300,000 shall be issued on February 15, 1996 and
$700,000 shall be issued upon receipt of Holdings'
shareholders' approval, if necessary, and the principal
amount of the second series of Convertible Debentures
offered to Holdings' shareholders other than GreenGrass
shall be not less than $3,300,000;
(b) The stated maturity of the Convertible Debentures shall be
not earlier than eight (8) years from the date of issuance
of the initial series;'
(c) The Convertible Debentures shall have no interest payable
in cash with respect thereto prior to the date that is
three (3) years from the date of issuance thereof (it being
understood and agreed that no Restricted Junior Payments
may be made by the Company in connection therewith whether
prior to or after such 3-year anniversary);
(d) The maximum rate of interest on the Convertible Debentures
shall be 10% per annum;
(e) The obligor with respect thereto shall be Holdings and the
holders thereof shall have no direct claims with respect to
the Company in connection therewith;
(f) The proceeds of the initial $4,300,000 shall be applied as
follows:
(i) Not more than $2,600,000 shall be available for
payment of expenses in connection with the Tender
Offer transaction; and
(ii) within three (3) Business Days after Holdings' receipt
of any Net Cash Proceeds from the issuance of the
first series of Convertible Debentures, Holdings shall
pay the remainder of such Net Cash Proceeds (but not
less than $1,700,000) to the Agent for the account of
the Lenders as Designated Prepayment which shall be
allocated and applied to the unpaid installments of
the Term Loans in the inverse order of maturity;
(g) Not later than February 21, 1996, $540,250 including cash
and 30-day notes issued by members of management of the
Company will be deposited pursuant to an escrow agreement
acceptable to the Agent with The First National Bank of
Chicago (the "Escrowed Funds");
(h) The Escrowed Funds will be used to purchase additional
debentures upon receipt of Holdings' shareholders'
approval, the proceeds of which shall be paid to the Agent
not later than April 30, 1996 for the account of the
Lenders as Designated Prepayment which shall be allocated
and applied to the unpaid installments of the Term Loans in
the inverse order of maturity;
(i) No later than 90 days after the date on which shares of
common stock of Holdings are purchased in the Tender Offer,
Holdings shall file with the Securities and Exchange
Commission a Registration Statement to register the
offering and sale of the second series of Convertible
Debentures to shareholders of Holdings and Holdings shall
exercise its best efforts to cause such Registration
Statement to become effective as soon as possible. No
later than three Business Days' following Holdings'
issuance of the second series of the Convertible
Debentures, the Net Cash Proceeds from such issuance shall
be paid to the Agent for the account of the Lenders as
Designated Prepayment which shall be allocated and applied
to the unpaid installments of the Term Loans in the inverse
order of maturity;
(j) Failure of the Company to make or cause to be made any of
the mandatory prepayments at the times or in the amounts
set forth in this Section 1 shall constitute a Default
under the Credit Agreement.
2. Representations and Warranties. The Company represents and
warrants that: (a) all of the representations and warranties set forth in
Article V of the Credit Agreement are true and correct as of the date
hereof, as if made on and as of such date, and (b) no Default or Unmatured
Default, has occurred or is continuing;
3. Conditions Precedent. This Consent shall become effective as of
its date, provided that all of the following conditions are met in form
and substance satisfactory to the Required Lenders and their counsel;
(a) This Consent shall have been executed and delivered by the
Borrower, agent and the Required Lenders;
(b) On the date the last of the conditions listed herein is
satisfied (the "Delivery Date"), there shall exist no
Default or Unmatured Default;
(c) On the Delivery Date, all representations and warranties of
the Company contained herein or otherwise made in writing
in connection herewith shall be true and correct in all
material respects with the same force and effect as though
such representations and warranties had been made on and as
of such date, and
(d) Holdings shall have executed the Reaffirmation attached
hereto and made a part hereof.
Notwithstanding anything herein to the contrary, in the event the
conditions to effectiveness set forth in this Section 3 are not either
satisfied or waived in writing by the Required Lenders on or prior to
February 14, 1996, then this Consent shall be of no force and effect.
4. Reference to the Effect on the Agreement. Except as
specifically set forth above, the Credit Agreement, and all other
documents, instruments and agreements executed and/or delivered in
connection therewith, shall remain in full force and effect, and are
hereby ratified and confirmed. The execution, delivery and effectiveness
of this Consent shall not, except as expressly provided herein and for the
limited purposes set forth herein, operate as a waiver of any right, power
or remedy of the Agent or any Lender, nor constitute a waiver of any
provision of the Credit Agreement, or any other documents, instruments and
agreements executed and/or delivered in connection therewith.
5. Headings. Section headings in this Consent are included herein
for convenience of reference only and shall not constitute a part of this
Consent for any other purpose.
6. Fees and Expenses. The Company shall pay any and all reasonable
out-of-pocket expenses and fees incurred by the Agent in connection with
the preparation (whether or not any of the transactions contemplated
herein have been consummated), execution, delivery, administration and
modification of this Consent.
7. Governing Law. This Consent shall be governed by and construed
in accordance with the internal laws, and not the conflicts of law
provisions, of the State of Illinois.
8. Counterparts. This Consent may be executed by one or more of
the parties to the Consent on any number of separate counterparts and all
of said counterparts taken together shall be deemed to constitute one and
the same instrument.
9. No Street Construction. The parties hereto have participated
jointly in the negotiation and drafting of this Consent. In the event an
ambiguity or question of intent or interpretation arises, this Consent
shall be construed as if drafted jointly by the parties hereto and no
presumption or burden of proof shall arise favoring or disfavoring any
party by virtue of the authorship of any provisions of this Consent.
10. Entire Agreement. This Consent embodies the entire agreement
and understanding of the parties hereto and supersedes all prior
agreements and understandings, written and oral, relating to the subject
matter hereof.
IN WITNESS WHEREOF, this Consent has been duly executed as of the day
and year first above written.
NEWCO, INC.
By: /s/
Richard G. Mueller, President/C.E.O.
THE FIRST NATIONAL BANK OF CHICAGO,
as the Agent for the Required Lenders
By: /s/
Donna Rae Green
<PAGE>
EXHIBIT A
to
CONSENT NO. 1
ACKNOWLEDGMENT
The undersigned hereby acknowledges receipt of a copy of Consent No.
1 to Credit Agreement with Newco, Inc. dated as of February 14, 1996 (the
"Consent") and, without in any way establishing a course of dealing by the
Agent or any Lender, agrees to all of the terms set forth in such Consent
and reaffirms the terms and conditions of its Pledge Agreement and
acknowledges and agrees that such agreement, together with all other Loan
Documents executed by the undersigned in connection with the Credit
Agreement, remain in full force and effect and are hereby ratified and
confirmed.
SWING-N-SLIDE CORP.
By: /s/
Richard G. Mueller, President/C.E.O.
AMENDMENT NO. 2
TO
CREDIT AGREEMENT
Dated as of January 19, 1995
THIS AMENDMENT NO. 2 ("Amendment") is entered into as of March 31,
1996 by and between Newco, Inc., a Wisconsin corporation (the "Borrower"),
the institutions from time to time a party to the "Credit Agreement" (as
defined below) as lenders (the "Lenders"), and The First National Bank of
Chicago, in its capacity as contractual representative for itself and the
other Lenders (the "Agent"). Capitalized terms used in this Amendment
which are not otherwise defined herein, shall have the meanings given such
terms in the Credit Agreement.
WITNESSETH:
WHEREAS, the Borrower, the Lenders and the Agent are parties to that
certain Credit Agreement dated as of January 19, 1995 (as the same may be
amended, restated, supplemented or otherwise modified from time to time,
the "Credit Agreement");
WHEREAS, the Borrower has requested that the Agent and the Lenders
amend the Credit Agreement on the terms and conditions set forth herein;
WHEREAS, the Agent and the Lenders have agreed to enter into this
Amendment on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises set forth above, the
terms and conditions contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the Borrower, the Agent and the Lenders have agreed to amend
the Credit Agreement as set forth below.
1. Amendments to the Credit Agreement. Effective as of March 31,
1996 and subject to the satisfaction of the conditions precedent set forth
in Section 2 below, the Credit Agreement is hereby amended to delete
subsection (D) of Section 6.4 in its entirety and to substitute the
following therefor:
(D) Maximum Leverage Ratio. Borrower shall not permit the
ratio ("Leverage Ratio") of (i) Indebtedness of Borrower and its
consolidated subsidiaries for borrowed money to (ii) the sum of
(a) EBITA plus (b) depreciation expenses minus (c) Capital
Expenditures, of not greater than the ratio set forth below at
the end of each fiscal quarter ending during the period set
forth below:
(1) 3.40 to 1.00 for each fiscal quarter for the
period commencing with the fiscal quarter ending June 30,
1996 through the fiscal quarter ending September 30, 1996;
(2) 2.50 to 1.00 for each fiscal quarter for the
period commencing with the fiscal quarter ending December
31, 1996 through the fiscal quarter ending September 30,
1997; and
(3) 2.00 to 1.00 for the fiscal quarter ending
December 31, 1997 and for each fiscal quarter thereafter
until the Termination Date.
The Leverage Ratio shall be calculated, in each case, determined
as of the last day of each fiscal quarter based upon (A) for
Indebtedness, Indebtedness as of the last day of each such
fiscal quarter; and (B) for EBITA, depreciation and Capital
Expenditures, the actual amount for the four-quarter period
ending on such day.
2. Conditions of Effectiveness of this Amendment. This Amendment
shall become effective and be deemed effective as of March 31, 1996, if,
and only if the Agent shall have received each of the following:
(a) duly executed originals of this Amendment from the Borrower
and Required Lenders;
(b) the reaffirmation from Holdings in the form attached hereto
as Exhibit A; and
(c) such other documents, instruments or agreement as may be
agreed upon between the Agent and the Borrower.
Notwithstanding anything herein to the contrary, in the event the
conditions to effectiveness set forth in this Section 2 are not either
satisfied or waived in writing by the Agent and the Required Lenders on or
prior to May 15, 1996, then this Amendment shall be of no force and
effect.
3. Representations and Warranties of the Borrower.
3.1 Upon the effectiveness of this Amendment, the Borrower hereby
reaffirms all covenants, representations and warranties made in the Credit
Agreement and the other Loan Documents to the extent the same are not
amended hereby and agrees that all such covenants, representations and
warranties shall be deemed to have been re-made as of the effective date
of this Amendment and that, as of the effective date of this Amendment and
after giving effect hereto, no Unmatured Default or Default has occurred
and is continuing.
3.2 The Borrower hereby represents and warrants that this Amendment,
the Credit Agreement, as previously executed and as amended hereby and
each of the other Loan Documents executed by it, constitute legal, valid
and binding obligations of the Borrower and are enforceable against the
Borrower in accordance with their terms.
4. Reference to the Effect on the Agreement.
4.1 Upon the effectiveness of this Amendment pursuant to Section 2
hereof, on and after the date hereof, each reference in the Credit
Agreement and the other Loan Documents to "this Agreement," "hereunder,"
"hereof," "herein" or words of like import shall mean and be a reference
to the Credit Agreement as amended hereby.
4.2 Except as specifically set forth above, the Credit Agreement,
and all other documents, instruments and agreements executed and/or
delivered in connection therewith, shall remain in full force and effect,
and are hereby ratified and confirmed.
4.3 The execution, delivery and effectiveness of this Amendment
shall not, except as expressly provided herein, operate as a waiver of any
right, power or remedy of the Lenders, nor constitute a waiver of any
provision of the Credit Agreement, or any other documents, instruments and
agreements executed and/or delivered in connection therewith.
5. Headings. Section headings in this Amendment are included
herein for convenience of reference only and shall not constitute a part
of this Amendment for any other purpose.
6. Counterparts. This Amendment may be executed by one or more of
the parties to this Amendment on any number of separate counterparts and
all of said counterparts taken together shall be deemed to constitute one
and the same instrument.
7. Entire Agreement. This Amendment, taken together with the
Credit Agreement and all of the other Loan Documents, embodies the entire
agreement and understanding of the parties hereto and supersedes all prior
agreements and understandings, written and oral, relating to the subject
matter hereof.
8. Governing Law. This Amendment shall be governed by and
construed in accordance with the internal laws (without regard to the
conflict of laws provisions) of the State of Illinois.
9. No Street Construction. The parties hereto have participated
jointly in the negotiation and drafting of this Amendment. In the event
an ambiguity or question of intent or interpretation arises, this
Amendment and the Credit Agreement as hereby amended shall be construed as
if drafted jointly by the parties hereto and no presumption or burden of
proof shall arise favoring or disfavoring any party by virtue of the
authorship of any provisions of this Amendment or the Credit Agreement.
10. Severability. Wherever possible, each provision of this
Amendment shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Amendment shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions
of this Amendment.
11. Full Agreement. Each of the parties hereto agrees that this
Amendment supersedes any and all discussions, negotiations, understandings
or agreements, written or oral, express or implied, among the parties
hereto. THIS AMENDMENT AND THE CREDIT AGREEMENT AS AMENDED HEREBY MAY NOT
BE CONTRADICTED BY EVIDENCE OF ANY ACTUAL OR ALLEGED PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT UNDERSTANDINGS OR AGREEMENTS OF THE PARTIES,
WRITTEN OR ORAL, EXPRESS OR IMPLIED, OTHER THAN A WRITING WHICH EXPRESSLY
AMENDS OR RESTATES THE CREDIT AGREEMENT IN ACCORDANCE WITH THE TERMS
THEREOF. ALL OTHER WRITINGS, ISSUED BY THE AGENT OR ANY LENDERS TO THE
BORROWER PRIOR TO THE DATE HEREOF WITH RESPECT TO THE SUBJECT MATTER
HEREIN CONTAINED, ARE NULL AND VOID AND OF NO EFFECT. THERE ARE NO
UNWRITTEN ORAL UNDERSTANDINGS OR AGREEMENTS AMONG THE PARTIES HERETO.
IN WITNESS WHEREOF, this Amendment No. 2 has been duly executed as of
the day and year first above written.
NEWCO, INC.
as the Borrower
By:
Name:
Title:
THE FIRST NATIONAL BANK OF CHICAGO,
as Agent and as a Lender
By:
Name:
Title:
PROVIDENT BANK,
as a Lender
By:
Name:
Title:
<PAGE>
EXHIBIT A
TO
CREDIT AGREEMENT
Form of Reaffirmation
Attached
<PAGE>
REAFFIRMATION
The undersigned hereby acknowledges receipt of a copy of Amendment
No. 2 to the Credit Agreement dated as of January 19, 1995 by and among
Newco, Inc., the Lenders and the Agent (as so amended, the "Loan
Agreement") which Amendment No. 2 is dated as of March 31, 1996 (the
"Amendment"). Capitalized terms used in this Reaffirmation and not
defined herein shall have the meanings given to them in the Credit
Agreement. Without in any way establishing a course of dealing by the
Agent or any Lender, the undersigned reaffirms the terms and conditions of
each of the Guaranty dated as of January 19, 1995 and the Pledge Agreement
dated as of January 19, 1995 executed by it and acknowledges and agrees
that such agreements and each and every other Loan Document executed by
the undersigned in connection with the Credit Agreement remain in full
force and effect and are hereby ratified, reaffirmed and confirmed. All
references to the Credit Agreement contained in the above-referenced
documents shall be a reference to the Credit Agreement as so amended by
the Amendment and as the same may from time to time hereafter be amended,
modified or restated.
SWING-N-SLIDE CORP.
By:
Name:
Title:
SEVERANCE AND CHANGE OF CONTROL AGREEMENT
THIS SEVERANCE AND CHANGE OF CONTROL AGREEMENT (the "Agreement")
is made and entered into as of the 15th day of February, 1996, by and
between Newco, Inc., a Wisconsin corporation (the "Company"), and the
undersigned employee of the Company (the "Employee"), and joined in by
Swing-N-Slide Corp., a Delaware corporation and the parent corporation of
the Company ("SNSC").
W I T N E S S E T H:
WHEREAS, the Employee is employed by the Company in a management
position; and
WHEREAS, the Employee and the Company desire to enter into this
Agreement to provide for the payment of certain benefits to the Employee
if the Employee's employment with the Company is terminated under certain
circumstances, including a termination following a change of control of
the Company or SNSC.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Definitions. The capitalized terms used in this Agreement
shall have the following meanings (unless otherwise expressly provided
herein):
a. "Affiliates" means, with respect to any Person, any
one or more of the following: (1) any Person directly or indirectly
controlling, controlled by, or under common control with, such
Person; or (2) any Person owning or controlling fifty percent (50%)
or more of the outstanding voting securities of such Person.
b. "Change of Control" means the occurrence of any of the
following events:
(1) any Person or group of Persons acting in concert
become the beneficial owner, directly or indirectly, or
otherwise possess the voting rights of securities representing
in excess of fifty percent (50%) of the voting securities of the
Company or SNSC, except for SNSC, GreenGrass Holdings, a
Delaware general partnership ("GreenGrass Holdings"), GreenGrass
Capital LLC, a Delaware limited liability company ("Capital"),
or any member of Capital on the date hereof, or their respective
Affiliates (the "Permitted Holders");
(2) SNSC or the Company sells or otherwise disposes
of all or substantially all of its assets other than to an
entity which is a Permitted Holder;
(3) Persons who, at the beginning of any twelve (12)
consecutive month period, constitute the Board of Directors of
the Company or SNSC cease, at the end of such period, to
constitute a majority of the Board of Directors of the Company
or SNSC, as the case may be; or
(4) SNSC or the Company merges with or into any other
Person unless the surviving corporation in the merger is a
Permitted Holder.
c. "Good Reason" means any of the following: (1)
reduction in the amount of or material change in terms of payment of
the Employee's base salary; (2) material reduction in the Employee's
perquisites or other benefits (other than any incentive bonus and
reduction in benefits generally applicable to all employees of the
Company); (3) relocation of the Employee's primary place of
employment to a location more than thirty-five (35) miles from the
Company's main office on the date hereof; (4) reassignment to a
position of lesser rank or status following a Change of Control; (5)
breach by the Company of this Agreement or any other material
agreement between the Employee and the Company not cured within ten
(10) days after notice; or (6) any reason or no reason at all in the
event of a Change of Control and the Employee agrees to continue, and
does so continue, his employment with the Company for a period of at
least one year following the date of the Change of Control (provided
that notice of termination of his employment with the Company is
delivered by the Employee within thirty (30) days after expiration of
such one-year period).
d. "Just Cause" means any of the following, provided that
any such occurrence has a substantial and adverse effect on the
Company: (1) conviction for, or plea of nolo contendere to, a felony
or a crime involving moral turpitude; (2) commission of any act of
personal dishonesty or fraud involving personal profit in connection
with the Employee's employment by the Company; (3) willful misconduct
or gross negligence on the part of the Employee in the conduct of his
duties on behalf of the Company; (4) habitual absenteeism after
written notice, chronic alcoholism, or any other form of addiction on
the part of the Employee; (5) willful disclosure of confidential
information or trade secrets of the Company or SNSC; or (6) actions
undertaken for the purpose of aiding a competitor of the Company or
SNSC.
e. "Person" means any individual or any partnership,
limited liability company, corporation, joint venture, trust, or
other entity, and the heirs, personal representatives, successors,
and assigns of the "Person" when the context so permits.
f. "Severance Period" means the period of time beginning
with the Termination Date and ending on the six-month anniversary of
the Termination Date; provided, however, that in the event that the
employment of the Employee with the Company is terminated after
occurrence of a Change of Control under the circumstances set forth
in Section 3 of this Agreement, the Severance Period shall be the
period of time beginning on the Termination Date and ending on the
one-year anniversary of the Termination Date subject to the
Employee's agreement at the time of the Change of Control to continue
employment with the Company for a period of one-year following the
date of Change of Control.
g. "Termination Date" means the date upon which the
Employee's employment with the Company is terminated.
2. Termination Without Change of Control. In the event that
the Employee's employment with the Company is terminated by the Company
without Just Cause or terminated by the Employee for Good Reason, the
Employee shall be entitled to receive the following:
a. continuation of the Employee's salary during the
Severance Period;
b. payment of an amount equal to the Employee's
performance bonus, if any, for the fiscal year immediately preceding
the Termination Date;
c. continuation of coverage for the Employee and any
dependents previously covered under the group health, group life,
group long-term disability, and similar group insurance plans, if
any, maintained by the Company at no cost to the Employee until
expiration of the Severance Period (provided, that if such continued
participation is precluded by the provisions of such plans or by
applicable law, the Company shall provide the Employee with
comparable benefits of equal value), and execution of this Agreement
by the Employee shall not be considered a waiver of any rights or
entitlements he may have under applicable law to continuation of
coverage under the group health plan maintained by the Company; and
d. termination of any restrictions imposed by GreenGrass
Holdings or its Affiliates on the sale, transfer, or other
disposition of SNSC's stock owned directly by the Employee or owned
indirectly by the Employee through GreenGrass Management LLC or
GreenGrass Holdings (subject to the Employee giving SNSC at least
three (3) business days advance notice of his intent to sell a
certain number of shares of such stock and an option for SNSC to
purchase all of said shares on the fourth (4th) business day after
notice, the purchase price of which shall be the highest closing
price of the three (3) preceding business days without deduction for
brokerage commission or other expenses).
3. Termination After Change of Control. If, after the
occurrence of a Change of Control, the Employee's employment with the
Company is terminated by the Company without Just Cause or terminated by
the Employee for Good Reason, then the Employee shall be entitled to
receive the following:
a. continuation of the Employee's salary during the
Severance Period;
b. payment of an amount equal to the Employee's
performance bonus, if any, for the fiscal year immediately preceding
the Termination Date;
c. continuation of coverage for the Employee and any
dependents previously covered under the group health, group life,
group long-term disability, and similar group insurance plans, if
any, maintained by the Company at no cost to the Employee until
expiration of the Severance Period (provided, that if such continued
participation is precluded by the provisions of such plans or by
applicable law, the Company shall provide the Employee with
comparable benefits of equal value), and execution of this Agreement
by the Employee shall not be considered a waiver of any rights or
entitlements he may have under applicable law to continuation of
coverage under the group health plan maintained by the Company;
d. termination of any restrictions imposed by GreenGrass
Holdings or its Affiliates on the sale, transfer, or other
disposition of SNSC's stock owned directly by the Employee or owned
indirectly by the Employee through GreenGrass Management LLC or
GreenGrass Holdings (subject to the notice and purchase option
requirements set forth in Section 2(d) of this Agreement);
e. full vesting of options to purchase stock of SNSC
under: (i) the stock option plans of the Company then in effect for
the fiscal year in which the Change of Control occurred, if the
options for said year would have vested by applying the EBITDA (as
defined in such stock option plans), or other measure of performance
as required by the stock option plans, for the 12-month period
immediately preceding the date of the Change of Control; and (ii) the
stock option plans of the Company then in effect covering future
years beyond the year in which the Change of Control occurred, at the
percentage of fully diluted common stock for each such fiscal year
determined by multiplying the maximum percentage of fully diluted
common stock available for options to be granted in such fiscal years
times the rate by which the percentage of fully diluted common stock
relating to options actually granted under subsection (i) above for
the year of the Change of Control bears to the maximum percentage of
fully diluted common stock available under the plan for such year
(for example, if the Employee received 80% of the maximum percentage
of fully diluted common stock available under the plan for year of
the Change of Control, the Employee would be entitled to receive full
vesting of options representing 80% of the maximum percentage of
fully diluted common stock available under the plan for all future
years covered by the plan); and
f. right to a redemption, in the sole and absolute
discretion of the Employee, of any or all options to purchase stock
of SNSC that are vested in the Employee in exchange for a payment of
cash in the amount of the value of such stock options, determined by
multiplying the applicable number of shares of common stock covered
by such options by the difference between the then fair market value
of such shares and the exercise price for the shares under the stock
options.
4. Payment. Except as otherwise provided in this Agreement,
any amounts due to the Employee hereunder shall be payable in cash within
thirty (30) days after the Termination Date. The Employee may elect, in
his sole and absolute discretion, to receive any salary continuation
payments in equal installments on each regular payroll date of the Company
after the Termination Date. Notwithstanding any provision contained
herein to the contrary, any performance bonus payable to the Employee
hereunder may, at the option of either the Employee or the Company, be
paid one-half (1/2) within thirty (30) days after the Termination Date and
the balance within ninety (90) days after the Termination Date.
5. Deduction and Withholding. All benefits payable to or on
behalf of the Employee pursuant to this Agreement shall be subject to such
deductions and withholding as may be agreed to by the Employee but not
less than required by applicable law.
6. Death. In the event of the Employee's death, any amount
payable or distributable to the Employee pursuant hereto from rights and
benefits accrued to and through the date of his death shall be paid at the
time or times indicated in such Section to the beneficiary designated by
the Employee for purposes of his group term life insurance coverage with
the Company and, if no beneficiary is designated for such purposes, to the
Employee's estate. Unless the Employee's designated beneficiary for
purposes of his group term life insurance coverage is his spouse, no base
salary or annual bonus payment shall be due or payable to the Employee's
surviving spouse under this Agreement and all such payments shall be made
to the estate.
7. Other Benefits. The benefits provided under this Agreement
shall be in addition to, and not in derogation or diminution of, any
benefits that the Employee may be entitled to receive under any other plan
or program now or hereafter maintained by the Company or the Company.
8. Exercise of Stock Options. Unless a different exercise
period is required or permitted upon termination of employment by the
terms and conditions of the governing stock option plan, any and all stock
options that are vested in the Employee under stock option plans adopted
by the Company on or after the date of this Agreement must be exercised
within ninety (90) days after the Termination Date. In the event that any
such stock option is not exercised within such 90-day period, the stock
option shall terminate and no longer be of any effect. Notwithstanding
the foregoing, the parties acknowledge and agree that any and all options
to purchase the stock of SNSC granted to the Employee under stock option
plans of the Company existing prior to the date of this Agreement are to
be considered fully vested and may be exercised by the Employee at any
time prior to the latest date that such particular options are scheduled
to expire in accordance with their terms.
9. Covenant Not to Compete. The Employee hereby agrees that
he will not, during the period of his employment with the Company and for
a period of one (1) year thereafter, as proprietor, partner, member,
shareholder (directly or indirectly owning or controlling 5% or more of
any class of stock), employee, consultant, agent, or otherwise, on his own
behalf or on behalf of another person, do any of the following in
competition with the Company or SNSC, without the prior written consent of
the Company:
a. solicit or assist in the solicitation of customers of
the Company or SNSC;
b. render or assist in rendering services to customers of
the Company or SNSC; or
c. divert or attempt to divert any customer's business
from the Company or SNSC, or otherwise interfere with the business
relationship between the Company or SNSC and any of their respective
customers, employees, or suppliers.
Notwithstanding the foregoing, this Agreement shall not in any
event be construed to prevent the Employee from earning a living utilizing
his skills in any businesses which may, as an incident to a business or
activity significantly different from the business of the Company or SNSC,
make or sell some products or provide some services which may in some
degree compete with the business of the Company or SNSC. However, nothing
in this Section 9 shall be deemed to permit the Employee to accept
employment with companies or divisions thereof which then or thereafter
will directly compete in a major way with the business of the Company or
SNSC with which the Employee was involved or had access to information
while employed by the Company.
10. Confidential Information. The Employee agrees that he will
not, while he is employed by the Company or thereafter, disclose to any
person to whom he is not otherwise authorized to do so by the Company (an
"Unauthorized Person"), or use for his own account, any information (the
"Confidential Information"), whether or not reduced to written or other
tangible form, in which the Company or SNSC has a legally protectible
interest by virtue of the following:
a. such information is not generally known in the
industry;
b. the Employee has had access to (or, either alone or in
cooperation with others, originated or developed) such information
during his employment with the Company;
c. such information has been treated by the Company or
SNSC as confidential;
d. such information relates to the business of the
Company or any of SNSC; or
e. such information is of competitive advantage to the
Company or SNSC, or any of their subsidiaries.
Confidential Information for which the Employee has first
secured the written consent of the Company for its disclosure or use, and
Confidential Information which becomes generally known in the industry, or
which otherwise ceases to be legally protectible (other than by the
Employee's breach of this Agreement), shall cease to be subject to the
restrictions set forth in this Section 10.
11. Transfer Restrictions. The Employee hereby agrees to be
bound by the restrictions on the transfer of common stock of SNSC or
securities exercisable or convertible into common stock of SNSC that are
contained in Section 12 of the Amended and Restated Partnership Agreement
dated February 15, 1996 of GreenGrass Holdings, subject to the express
provisions of this Agreement regarding the termination of any such
restrictions.
12. Termination With Just Cause or Good Reason.
Notwithstanding any provision contained herein to the contrary, in the
event that the Employee's employment with the Company is terminated by the
Company with Just Cause or terminated by the Employee without Good Reason,
the Employee shall not be entitled to any of the benefits identified in
Sections 2 or 3 of this Agreement, and shall be entitled to receive only
those benefits that the Employee would otherwise be entitled to receive
under any other agreements entered into by the Employee and the Company or
under applicable law.
13. Rights in the Event of Dispute. If a claim or dispute
arises concerning the rights of the Employee or his beneficiary (either or
both of whom are hereinafter referred to as the "claimant") under this
Agreement, regardless of the party by whom such claim or dispute is
initiated, the Company shall, upon presentation of appropriate vouchers,
pay all legal expenses, including reasonable attorneys' fees, court costs
and ordinary and necessary out-of-pocket costs of attorneys' billed to and
payable by the claimant in connection with the bringing, prosecuting,
defending, litigating, negotiating, or settling such claim or dispute;
provided, however, that the Company shall not be obligated to pay such
expenses unless and until final resolution of such claim or dispute with
the claimant being entitled to a substantial part of the rights claimed by
him.
14. General Provisions.
a. All notices or other communications required or
permitted hereunder shall be in writing and shall be deemed given (i)
when delivered in person or (ii) when telecopied (at the date and
time indicated on the receipt of transmission if such day is a
business day, and if not, at 9 a.m. on the following business day)
with hard copy delivered by hand or deposited in the United States
mail postage prepaid, registered or certified mail, on or before two
(2) business days after its delivery by telecopy, or (iii) three (3)
business days after being deposited in the United States mail,
postage prepaid, registered or certified mail, or (iv) two (2)
business days after delivery to a nationally recognized express
courier, expenses prepaid, addressed to the appropriate party as
follows: to the Employee at his address on file with the Company; or
to the Company at 1212 Barberry Drive, Janesville, Wisconsin 53545,
telecopier number (608) 755-4763, Attention: President; and with a
copy to Foley & Lardner, 150 East Gilman Street, Madison, Wisconsin
53703, Attention: Joseph P. Hildebrandt.
b. Nothing herein shall be construed as an agreement to
continue the employment by the Company of the Employee.
c. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter contained
herein and supersedes any and all prior understandings,
representatives, negotiations, and agreements with respect thereto.
d. No modification or amendment of any provision of this
Agreement shall be effective unless in a written instrument executed
by both parties. Either party's failure to insist upon strict
compliance with any provision hereof shall not be deemed to be a
waiver of such provision or any other provision hereof.
e. No party may assign this Agreement or its rights
hereunder without the prior written consent of the other party
hereto; provided, however, that the Company may assign this Agreement
to any person or entity acquiring all or substantially all of the
business of the Company (whether by sale of stock, sale of assets,
merger, consolidation, or otherwise).
f. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any
other provision of this Agreement, which shall remain in full force
and effect.
g. The validity, interpretation, construction and
enforceability of this Agreement shall be governed by the laws of the
State of Wisconsin, without regard to conflicts of laws principles.
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first set forth above.
COMPANY: EMPLOYEE:
NEWCO, INC.
Signature: /s/
By: /s/ Joseph Beebe
Richard G. Mueller, President
SNSC:
SWING-N-SLIDE CORP.
By: /s/
Richard G. Mueller, President/C.E.O.
DRAFT
04/11/96
SWING-N-SLIDE CORP.
1996 INCENTIVE STOCK PLAN
Section 1. Purpose
The purpose of the Swing-N-Slide Corp. 1996 Incentive Stock Plan
(the "Plan") is to promote the interests of Swing-N-Slide Corp. (together
with its wholly owned subsidiary, Newco, Inc. and any successors to said
entities, the "Company") and its stockholders, by encouraging and
providing for the acquisition of an equity interest in the success of the
Company by key employees and by enabling the Company and its Affiliates
(as defined below) to attract and retain the services of key employees
upon whose judgment, interest, skills, and special effort the successful
conduct of their operations is largely dependent. In addition, the Plan
is designed to promote the best interests of the Company and its
stockholders by providing a means to attract and retain competent
directors who are not employees of the Company, any Affiliate or of any
GreenGrass Affiliate (as defined below) and to provide opportunities for
stock ownership by such directors which will increase their proprietary
interest in the Company and, consequently, their identification with the
interests of the stockholders of the Company.
Section 2. Effective Date.
The Plan shall become effective on April 1, 1996, subject,
however, to the approval of the Plan by the stockholders of the Company at
the next annual meeting of stockholders within twelve months following the
date of adoption of the Plan by the Board.
Section 3. Definitions
As used in the Plan, the following terms shall have the
respective meanings set forth below:
(a) "Affiliate" means any entity that, directly or through
one or more intermediaries, is controlled by, controls, or is
under common control with, the Company.
(b) "Award" means any Option, Stock Appreciation Right,
Bonus Share or Director Option granted under the Plan.
(c) "Award Agreement" means any written agreement,
contract, or other instrument or document evidencing any Award
granted under the Plan.
(d) "Board" means the Board of Directors of the Company.
(e) "Bonus Shares" means any shares of Stock delivered
pursuant to Section 10 of the Plan.
(f) A "Change of Control" shall be deemed to have occurred
on the date on which (i) any Person or group of Persons acting
in concert become the beneficial owner, directly or indirectly,
or otherwise possess the voting rights of securities
representing in excess of fifty percent (50%) of the voting
securities of the Company, except for GreenGrass Holdings, a
Delaware general partnership ("GreenGrass Holdings"), GreenGrass
Capital LLC, a Delaware limited liability company ("Capital"),
or any member of Capital on the date hereof, or their respective
affiliates (the "Permitted Holders"); (ii) the Company sells or
otherwise disposes of all or substantially all of its assets
other than to an entity which is a Permitted Holder; (iii)
persons who, at the beginning of any twelve (12) consecutive
month period, constitute the Board cease, at the end of such
period, to constitute a majority of the Board, and any Person or
group of Persons acting in concert become the beneficial owner,
directly or indirectly, or otherwise possess the voting rights
of securities representing in excess of fifty percent (50%) of
the voting securities of the Company within such twelve-month
period; or (iv) the Company merges with or into any other entity
unless the surviving corporation in the merger is a Permitted
Holder.
(g) "Code" means the Internal Revenue Code of 1986 and the
regulations thereunder, as amended from time to time.
(h) "Commission" means the United States Securities and
Exchange Commission or any successor agency.
(i) "Committee" means the compensation committee of the
Board designated by such Board to administer the Plan and
composed of not less than two directors, each of whom is a
"disinterested person" within the meaning of Rule 16b-3.
(j) "Exchange Act" means the Securities Exchange Act of
1934, as amended from time to time.
(k) "Fair Market Value" means the fair market value of the
Stock determined by such methods or procedures as shall be
established from time to time by the Committee; provided,
however, that the Fair Market Value shall not be less than the
par value of the Stock; and provided further, that so long as
the Stock is traded on a public market, Fair Market Value means
the closing price of a share of Stock on the relevant date as
reported on the composite list used by the Wall Street Journal
for reporting stock prices, or if no such sale shall have been
made on that day, on the last preceding day on which there was
such a sale.
(l) "GreenGrass Affiliate" means any entity that, directly
or through one or more intermediaries, is controlled by,
controls, or is under common control with Capital.
(m) "Key Employee" means any officer or other key employee
of the Company or of any Affiliate who is responsible for or
contributes to the management, growth or profitability of the
business of the Company or any Affiliate as determined by the
Committee.
(n) "Non-Employee Director" means any member of the Board
who is not an employee of the Company, any Affiliate or of any
GreenGrass Affiliate.
(o) "Option" means the right to purchase Stock at a stated
price for a specified period of time. For purposes of the Plan,
an Option may be either (i) an "incentive stock option" within
the meaning of Section 422 of the Code; or (ii) a "nonqualified
stock option."
(p) "Participant" means any Key Employee designated by the
Committee to be granted an Award under the Plan.
(q) "Rule 16b-3" means Rule 16b-3 as promulgated by the
Commission under the Exchange Act or any successor rule or
regulations thereto.
(r) "Stock" means the Common Stock of the Company, par
value of $.01 per share.
(s) "Stock Appreciation Right" means any right granted
pursuant to Section 9 of the Plan.
Section 4. Administration
The Plan shall be administered by the Committee; provided,
however, that if at any time the Committee shall not be in existence, the
functions of the Committee as specified in the Plan shall be exercised by
a committee comprised solely of those members of the Board who qualify as
"disinterested persons" under Rule 16b-3.
Subject to the terms of the Plan and applicable law, the
Committee shall have full power and authority to: (i) designate
Participants; (ii) determine the type or types of Awards to be granted to
Participants under the Plan; (iii) determine the number of shares to be
covered by (or with respect to which payments, rights, or other matters
are to be calculated in connection with) Awards granted to Participants;
(iv) determine the terms and conditions of any Award granted to a
Participant; (v) determine whether, to what extent, and under what
circumstances Awards granted to Participants may be settled or exercised
in cash, shares of Stock, other securities, other Awards, or other
property, or canceled, forfeited, or suspended to the extent permitted in
Section 15 of the Plan, and the method or methods by which Awards may be
settled, exercised, canceled, forfeited, or suspended; (vi) determine
whether, to what extent, and under what circumstances cash, shares of
Stock, other securities, other Awards, other property, and other amounts
payable with respect to an Award granted to Participants under the Plan
shall be deferred either automatically or at the election of the holder
thereof or of the Committee; (vii) modify or amend any Award or waive any
restrictions or conditions applicable to any Award, (viii) interpret and
administer the Plan and any instrument or agreement relating to, or Award
made under, the Plan (including, without limitation, any Award Agreement);
(ix) establish, amend, suspend, or waive such rules and regulations and
appoint such agents as it shall deem appropriate for the proper
administration of the Plan; and (x) make any other determination and take
any other action that the Committee deems necessary or desirable for the
administration of the Plan. Unless otherwise expressly provided in the
Plan, all designations, determinations, interpretations, and other
decisions under or with respect to the Plan or any Award shall be within
the sole discretion of the Committee, may be made at any time, and shall
be final, conclusive, and binding upon all persons, including the Company,
any Affiliate, any Participant, any Non-Employee Director, any holder or
beneficiary of any Award, any stockholder, and any employee of the Company
or of any Affiliate. Notwithstanding the foregoing, Awards to Non-
Employee Directors under the Plan shall be automatic and the amount, terms
and conditions of such Awards shall be determined as provided in
Section 11 of the Plan.
Section 5. Eligibility and Participation
Participants in the Plan shall be selected by the Committee from
among those Key Employees, including any executive officer or employee-
director of the Company or of any Affiliate, who, in the opinion of the
Committee, are in a position to contribute materially to the Company's
continued growth and development and to its long-term financial success.
All Non-Employee Directors shall receive Awards as provided in Section 11.
Section 6. Stock Subject to Plan
6.1 Number. Subject to adjustment as provided in Section 6.3,
the total number of shares of Stock with respect to which Awards may be
granted pursuant to the Plan shall be 1,200,000. The total number of
shares of Stock subject to issuance pursuant to Options granted under the
Plan and Stock Appreciation Rights granted under the Plan to any one
person may not exceed 350,000. A Stock Appreciation Right that is granted
in connection with an Option pursuant to Section 8.1 shall not be counted
for purposes of applying the limitation of this Section 6.1. The shares
to be delivered under the Plan may consist, in whole or in part, of
authorized but unissued Stock or treasury Stock, not reserved for any
other purpose.
6.2 Unused Stock; Unexercised Rights. If, after the effective
date of the Plan, any shares of Stock covered by an Award granted under
the Plan, or to which any Award relates, are forfeited or if an Award
otherwise terminates, expires or is canceled prior to the delivery of all
of the shares of Stock or of other consideration issuable or payable
pursuant to such Award then the number of shares of Stock counted against
the number of shares available under the Plan in connection with the grant
of such Award, shall again be available for granting of additional Awards
under the Plan to the extent permitted by Section 15 and to the extent
determined to be appropriate by the Committee.
6.3 Adjustment in Capitalization. In the event that the
Committee shall determine that any dividend or other distribution (whether
in the form of cash, Stock, other securities or other property),
recapitalization, stock split, reverse stock split, reorganization,
merger, consolidation, split-up, spin-off, combination, repurchase or
exchange of Stock or other securities of the Company, issuance of warrants
or other rights to purchase Stock or other securities of the Company, or
other similar corporate transaction or event affects the Stock, other than
where such transaction or event is in consideration for additional fair
value, such that an adjustment is determined by the Committee to be
appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan, then the
Committee may, in such manner as it may deem equitable, adjust any or all
of (i) the number and type of shares of Stock subject to the Plan and
which thereafter may be made the subject of Awards under the Plan; (ii)
the number and type of shares of Stock subject to outstanding Awards; and
(iii) the grant, purchase or exercise price with respect to any Award, or,
if deemed appropriate, make provision for a cash payment to the holder of
an outstanding Award; provided, however, in each case, that with respect
to Awards of incentive stock options no such adjustment shall be
authorized to the extent that such authority would cause such options to
cease to be treated as incentive stock options; and provided further,
however, that the number of shares of Stock subject to any Award payable
or denominated in Stock shall always be a whole number. Notwithstanding
the foregoing, Director Options subject to grant or previously granted to
Non-Employee Directors under the Plan at the time of any event described
in the preceding sentence shall be subject to only such adjustments as
shall be necessary to maintain the proportionate interest of the Non-
Employee Directors and preserve, without exceeding, the value of such
Director Options.
Section 7. Term of the Plan
No Award shall be granted under the Plan after March 31, 2001.
However, unless otherwise expressly provided in the Plan or in an
applicable Award Agreement, any Award theretofore granted may extend
beyond such date, and, to the extent set forth in the Plan, the authority
of the Committee to amend, alter, adjust, suspend, discontinue or
terminate any such Award, or to waive any conditions or restrictions with
respect to any such Award, and the authority of the Board to amend the
Plan, shall extend beyond such date.
Section 8. Key Employee Stock Options
8.1 Grant of Options. Subject to the provision of Sections 6
and 7, Options may be granted to Participants at any time and from time to
time as shall be determined by the Committee. The Committee shall have
complete discretion in determining the number of Options granted to each
Participant. The Committee also shall determine whether an Option is to
be an incentive stock option within the meaning of Section 422 of the Code
or a nonqualified stock option. However, in no event shall the aggregate
Fair Market Value (determined at the date of grant) of Stock with respect
to which incentive stock options are exercisable for the first time by a
Participant during any calendar year exceed $100,000. Nor shall any
incentive stock option be granted to any person who owns, directly or
indirectly, stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company. Nothing in this Section 8
of the Plan shall be deemed to prevent the grant of nonqualified stock
options in excess of the maximum established by Section 422 of the Code.
8.2 Award Agreement. Each Option shall be evidenced by an
Award Agreement that shall specify the type of Option granted, the Option
price, the duration of the Option, the number of shares of Stock to which
the Option pertains and such other provisions as the Committee shall
determine.
8.3 Option Price. The Option price shall be determined by the
Committee, but shall not for any incentive stock option be less than 100%
of the Fair Market Value of the Stock on the date the Option is granted.
8.4 Duration of Options. Each Option shall expire at such time
as the Committee shall determine at the time it is granted, provided,
however, that no incentive stock option shall be exercisable later than
the tenth (10th) anniversary date of its grant.
8.5 Exercise of Options. Subject to the provisions of
Section 14, Options granted under the Plan shall be exercisable at such
times and be subject to such restrictions and conditions as the Committee
shall in each instance approve, which need not be the same for all
Participants.
8.6 Payment. The Committee shall determine the method or
methods by which, and the form or forms, including, without limitation,
cash, shares of Stock, other securities, other Awards, or other property,
or any combination thereof, having a Fair Market Value on the exercise
date equal to the relevant exercise price, in which payment of the
exercise price with respect to an Option may be made or deemed to have
been made.
8.7 Incentive Stock Options. The terms of any incentive stock
option granted under the Plan shall comply in all respects with the
provisions of Section 422 of the Code, or any successor provision thereto,
and any regulations promulgated thereunder. Notwithstanding any provision
in the Plan to the contrary, no incentive stock option may be granted
hereunder after the tenth anniversary of the adoption of the Plan by the
Board.
8.8 Restrictions on Stock Transferability. The Committee may
impose such restrictions on any shares of Stock acquired pursuant to the
exercise of an Option under the Plan as it may deem advisable, including,
without limitation, restrictions under applicable Federal securities law,
under the requirements of any stock exchange upon which such shares of
Stock are then listed, under any blue sky or state securities laws
applicable to such shares and under any agreements with Capital,
GreenGrass Management LLC or any of their Affiliates to which the
Participants are bound.
Section 9. Stock Appreciation Rights
9.1 Grant of Stock Appreciation Rights. Subject to the
provisions of Sections 6 and 7, Stock Appreciation Rights may be granted
to Participants. Non-Employee Directors are not eligible to be granted
Stock Appreciation Rights under the Plan. Each grant of Stock
Appreciation Rights shall be in writing. A Stock Appreciation Right may
relate to a specific Option granted under the Plan and may, in such case,
relate to all or part of the Option shares covered by the related Option,
or may be granted independently of any Option granted under the Plan.
9.2 Exercise or Maturity of Stock Appreciation Rights. Stock
Appreciation Rights shall be exercisable or shall mature at such time or
times, on the conditions and to the extent and in the proportion, that any
related Option is exercisable and may be exercised or mature for all or
part of the shares of Stock subject to the related Option. In the case of
a Stock Appreciation Right that is granted independently of any Option
granted under the Plan, such Rights shall be exercisable or shall mature
at such time or times, on the conditions and to the extent and in the
proportion set forth in the grant. Notwithstanding the preceding
sentence, a Stock Appreciation Right granted under the Plan to a
Participant who is an officer of the Company or an Affiliate subject to
Section 16 of the Exchange Act shall not be exercisable until at least six
months have elapsed from the date of grant of such Stock Appreciation
Right.
9.3 Effect of Exercise. Upon exercise of any number of Stock
Appreciation Rights, the number of Option shares subject to any related
Option shall be reduced accordingly and such Option shares may not again
be subject to an Option under this Plan. The exercise of any number of
Options shall result in an equivalent reduction in the number of Option
shares covered by the related Stock Appreciation Right and such shares may
not again be subject to a Stock Appreciation Right under this Plan;
provided, however, that if a Stock Appreciation Right was granted for less
than all of the Option shares covered by any related Option, any such
reduction shall be made at such time as, and only to the extent that, the
number of shares exercised under the related Option exceeds the number of
Option shares not covered by the Stock Appreciation Right.
9.4 Payment of Stock Appreciation Right Amount. On exercise or
maturity of the Stock Appreciation Right, the holder shall be entitled to
receive payment of an amount determined by multiplying:
(a) The difference between the Fair Market Value of a
share of Stock at the date of exercise over the price fixed by
the Committee at the date of grant, by
(b) The number of shares with respect to which the Stock
Appreciation Right is exercised.
In the case of a Stock Appreciation Right which is granted in
conjunction with an Option, the amount determined under (a) above shall be
determined by using a price fixed by the Committee at the date of grant
which does not exceed the option price of any related incentive stock
option. The holder of a Stock Appreciation Right shall receive payment in
cash or a combination of cash and Stock, the Fair Market Value of which is
to be determined as of the date of exercise or maturity of the Stock
Appreciation Right, all in accordance with the terms and conditions of the
written grant of the Stock Appreciation Right.
9.5 Rule 16b-3 Requirements. Notwithstanding any other
provision of the Plan, the Committee may impose such conditions on
exercise of a Stock Appreciation Right (including, without limitation, the
right of the Committee to limit the time of exercise to specified periods)
as may be required to satisfy the requirements of Rule 16b-3 under the
Exchange Act.
Section 10. Bonus Shares
The Committee is authorized to provide Participants the
opportunity to elect to receive such portion, as determined by the
Committee, of cash bonuses under the Company's management incentive
compensation program in the form of shares of Stock ("Bonus Shares"). If
a Participant is subject to Section 16 of the Exchange Act, the election
to receive Bonus Shares must be made at least six months prior to the date
cash bonuses are determined. All elections made under this Section 10 by
persons subject to Section 16 of the Exchange Act are irrevocable and will
remain in effect until another irrevocable election becomes effective.
Bonus Shares shall be issued in an amount equal to (a) the equivalent
dollar amount of bonus a Participant has elected to receive in Stock
(subject to such limits as may be prescribed by the Committee) divided by
(b) the price per share of Stock as determined by the Committee and shall
be subject to such terms and conditions as the Committee deems
appropriate, including, without limitation, restrictions on sale or other
disposition.
Section 11. Non-Employee Director Stock Options
Each Non-Employee Director (including members of the Committee)
who is a director of the Company on the first day after the annual meeting
of stockholders of the Company during the term of the Plan shall
automatically be granted on each such date a fully vested non-qualified
stock option for the purchase of 5,000 shares of Stock ("Director
Options") at a purchase price equal to one hundred percent (100%) of the
Fair Market Value of the shares on the date each Director Option is
granted. Director Options shall be exercisable for ten (10) years from
the date of grant and shall terminate ninety (90) days after the Non-
Employee Director ceases to serve as a director of the Company for any
reason, except that, in the event of a Change of Control, Director Options
will remain exercisable during the remaining term of the Director Option
if the Non-Employee Director ceases to serve as a director of the Company
(or its successor) at any time during the one-year period immediately
following any such Change of Control.
Section 12. Beneficiary Designation
Each Participant and Non-Employee Director under the Plan may,
from time to time, name any beneficiary or beneficiaries (who may be named
contingently or successively) to whom any benefit under the Plan is to be
paid in case of the Participant's or the Non-Employee Director's, as the
case may be, death before he or she receives any or all of such benefit.
Each designation will revoke all prior designations, shall be in a form
prescribed by the Committee and will be effective only when filed by the
Participant or the Non-Employee Director in writing with the Committee
during his or her lifetime. In the absence of any such designation,
benefits remaining unpaid at the Participant's death shall be paid to the
estate of the Participant or the Non-Employee Director.
Section 13. Rights of Employees
Nothing in the Plan shall interfere with or limit in any way the
right of the Company or any Affiliate to terminate any Participant's
employment at any time nor confer upon any Participant any right to
continue in the employ of the Company or any Affiliate.
Section 14. Change of Control
In the event of a "Change of Control" (a) each Participant shall
be entitled to receive full vesting of the Option (i) for the fiscal year
in which the Change of Control occurred, if the Options for said year
would have vested by applying the EBITDA (as defined in the Award
Agreement), or other measure of performance as required by the Award
Agreement for the 12-month period immediately preceding the date of the
Change of Control; and (ii) covering future years beyond the year in which
the Change of Control occurred, at the percentage of fully diluted Stock
for each such fiscal year determined by multiplying the maximum percentage
of fully diluted Stock available for Options to be granted in such fiscal
years times the rate by which the percentage of fully diluted Stock
relating to Options actually granted under subsection (i) above for the
year of the Change of Control bears to the maximum percentage of fully
diluted Stock available under the Plan for such year (for example, if the
Participant received 80% of the maximum percentage of fully diluted Stock
available under the Plan for year of the Change of Control, the
Participant would be entitled to receive full vesting of Options
representing 80% of the maximum percentage of fully diluted Stock
available under the Plan for all future years covered by the Plan);
(b) each holder of an Option and Director Option shall
have the right to a redemption, in the sole and absolute discretion of the
Participant and Non-Employee Director, of any or all Options and Director
Options that are vested in the Participant or Non-Employee Director in
exchange for a payment of cash in the amount of the value of such options,
determined by multiplying the applicable number of shares of Stock covered
by such options by the difference between the then Fair Market Value of
such shares of Stock and the exercise price for the Stock under the
options; and
(c) each Option and Director Option shall remain
exercisable during its full term (i) if at any time the holder ceases to
be an employee or director during the one-year period immediately
following any Change of Control or (ii) if the employee holder gives
notice of his termination within thirty (30) days after expiration of such
one-year period.
The Committee may, in its sole and absolute discretion, amend,
modify or rescind the provisions of this Section 14 if it determines that
the operation of this Section 14 may prevent a transaction in which the
Company or any Affiliate is a party from being accounted for on a pooling-
of-interests basis.
Section 15. Amendment, Modifications and Termination of Plan
The Board may at any time amend, alter, suspend, discontinue or
terminate the Plan; provided, however, that the provisions of Section 11
of the Plan shall not be amended more than once every six (6) months,
other than to comport with changes in the Code, the Employee Retirement
Income Security Act of 1974, as amended, or the rules promulgated
thereunder; and provided further that stockholder approval of any
amendment of the Plan shall also be obtained if otherwise required by (i)
the rules and/or regulations promulgated under Section 16 of the Exchange
Act (in order for the Plan to remain qualified under Rule 16b-3), (ii) the
Code or any rules promulgated thereunder (in order to allow for incentive
stock options to be granted under the Plan, or (iii) the listing
requirements of the American Stock Exchange or any principal securities
exchange or market on which the Stock is then traded (in order to maintain
the listing or quotation of the Stock thereon). Termination of the Plan
shall not affect the rights of Participants or Non-Employee Directors with
respect to Awards previously granted to them, and all unexpired Awards
shall continue in force and effect after termination of the Plan except as
they may lapse or be terminated by their own terms and conditions.
No amendment, modification or termination of the Plan shall in
any manner adversely affect any Award theretofore granted under the Plan,
without the consent of the Participant or the Non-Employee Director, as
the case may be.
Section 16. Tax Withholding
No later than the date as of which an amount first becomes
includible in the gross income of a Participant for federal income tax
purposes with respect to any Award under the Plan, the Participant shall
pay to the Company, or make arrangements satisfactory to the Company
regarding the payment of, any federal, state, local or foreign taxes of
any kind required by law to be withheld with respect to such amount.
Unless otherwise determined by the Committee, withholding obligations
arising with respect to Awards to Participants under the Plan may be
settled with shares of Stock, including shares that are part of, or are
received upon exercise of, the Award that gives rise to the withholding
requirement. The obligations of the Company under the Plan shall be
conditional on such payment or arrangements, and the Company and any
Affiliate shall, to the extent permitted by law, have the right to deduct
any such taxes from any payment otherwise due to the Participant. The
Committee may establish such procedures as it deems appropriate for the
settling of withholding obligations with shares of Stock, including,
without limitation, the establishment of such procedures as may be
necessary to satisfy the requirements of Rule 16b-3.
Section 17. General
17.1 Rule 16b-3 Six-Month Limitations. Notwithstanding any
other provision of the Plan, to the extent required in order to comply
with Rule 16b-3, any equity security offered pursuant to the Plan may not
be sold for at least six months after acquisition, except in the case of
death or disability, and any derivative security issued pursuant to the
Plan shall not be exercisable for at least six months, except in case of
death or disability of the holder thereof. Terms used in the preceding
sentence shall, for the purposes of such sentence only, have the meanings,
if any, assigned or attributed to them under Rule 16b-3.
17.2 No Consideration for Awards. Awards shall be granted to
Participants for no cash consideration unless otherwise determined by the
Committee.
17.3 Limits on Transfer of Awards. No Award and no right under
any such Award, shall be assignable, alienable, saleable or transferable
by a Participant or a Non-Employee Director otherwise than by will or by
the laws of descent and distribution; provided, however, that a
Participant and a Non-Employee Director may designate a beneficiary or
beneficiaries to exercise his or her rights, and to receive any property
distributable, with respect to any Award as provided in Section 12 hereof
or transfer an Award to the extent allowed under Rule 16b-3 of the
Exchange Act, subject to terms and conditions of the Award Agreement and
Committee rules. Each Award, and each right under any Award, shall be
exercisable, during the lifetime of the Participant only by such
individual or, if permissible under applicable law, by such individual's
guardian or legal representative. No Award, and no right under any such
Award, may be pledged, alienated, attached or otherwise encumbered, and
any purported pledge, alienation, attachment or encumbrance thereof shall
be void and unenforceable against the Company or any Affiliate.
Section 18. Legal Construction
18.1 Requirements of Law. The granting of Awards under the Plan
and the issuance of shares of Stock in connection with an Award, shall be
subject to all applicable laws, rules and regulations, and to such
approvals by any governmental agencies or national securities exchanges as
may be required.
18.2 Governing Law. The Plan, and all agreements hereunder,
shall be construed in accordance with and governed by the laws of the
State of Delaware.
18.3 Severability. If any provision of the Plan or any Award
Agreement or any Award is or becomes or is deemed to be invalid, illegal
or unenforceable in any jurisdiction, or as to any person or Award, or
would disqualify the Plan, any Award Agreement or any Award under any law
deemed applicable by the Committee, such provision shall be construed or
deemed amended to conform to applicable laws, or if it cannot be so
construed or deemed amended without, in the determination of the
Committee, materially altering the intent of the Plan, any Award Agreement
or the Award, such provision shall be stricken as to such jurisdiction,
person or Award, and the remainder of the Plan, any such Award Agreement
and any such Award shall remain in full force and effect.
<TABLE>
SWING-N-SLIDE CORP.
Computation of Earnings to Fixed Charges Ratio
(Amounts in Thousands, Except Ratio Data)
<CAPTION>
Company
Predecessor (Note 1)
Year Ended Year Ended Year Ended Year Ended Year Ended
December 31, December 31, 1982 December 31, December 31, December 31,
1991 to Jan. 31 from Feb. 1 1993 1994 1995
<S> <C> <C> <C> <C> <C> <C>
Income (loss) before income
taxes & extraordinary item $9,745 $1,391 $3,942 $12,569 $7,378 $6,727
Interest expense 272 14 7,084 1,149 529 4,312
Amortization of deferred
financing costs 0 0 220 60 16 281
------ ------ ------- ------- ------ -------
Earnings $10,017 $1,405 $11,246 $13,778 $7,923 $11,320
====== ====== ======= ======= ====== =======
Interest expense $272 $14 $7,084 $1,149 $529 $4,312
Amortization of deferred
financing costs 0 0 220 60 16 281
------ ------ ------ ------ ------ ------
Fixed Charges $272 $14 $7,304 $1,209 $545 $4,593
====== ====== ====== ====== ===== ======
Ratio of earnings to fixed
charges 36.83 100.36 1.54 11.40 14.54 2.46
===== ====== ====== ====== ===== ======
<CAPTION>
Pro Forma
Three Months Three Months Year Ended Year Ended
Ended March Ended March December 31, March 31,
31, 1995 31, 1996 1995 1996
<S> <C> <C> <C> <C>
Income (loss) before income $2,008 ($1,414) $6,652 ($1,432)
taxes & extraordinary item
Interest expense 1,161 1,014 4,362 1,026
Amortization of deferred
financing costs 65 73 306 79
------- ------- -------- -------
Earnings $3,236 ($327) $11,320 ($327)
====== ======= ======== =======
Interest expense $1,161 $1,014 $4,362 $1,026
Amortization of deferred
financing costs 66 73 306 79
------- ------- ------- -------
Fixed Charges $1,227 $1,087 $4,668 $1,105
====== ======= ======= =======
Ratio of earnings to fixed
charges 2.64 (Note 2) 2.43 (Note 2)
===== =====
<FN>
NOTE 1: Swing-N-Slide Corp. was formed in January 1992 and acquired substantially all of the assets and business of the
"Predecessor Company" on January 31, 1992.
NOTE 2: Earnings were less than fixed charges by $1,414 and $1,432 for the three months ended March 31, 1996 and the pro
forma three months ended March 31, 1996.
</TABLE>
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
or
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________________ to _________________
Commission file number 0-20450
SWING-N-SLIDE CORP.
(Exact name of registrant as specified in its charter)
Delaware 36-3808989
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
1212 Barberry Drive 53545
Janesville, WI (Zip code)
(Address of principal executive offices)
Registrant's telephone number including area code (608) 755-4777
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
------------------- ------------------------
N/A None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock,
------------------------
par value $.01 per share
Title of class
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [_]
The aggregate market value of the voting stock held by nonaffiliates as of March
11, 1996 was $8,547,938 (excludes shares held by directors and officers of
registrant). This is based on the closing price of the common stock on the AMEX
- - American Stock Exchange.
At March 11, 1996, there were 6,004,000 shares of common stock outstanding.
Part III incorporates information by reference from the Proxy Statement for the
annual meeting of stockholders to be held on April 25, 1996.
<PAGE>
Swing.N.Slide Corp.
PART I
ITEM 1 - BUSINESS
GENERAL
Swing-N-Slide is the leading designer, manufacturer and marketer of do-it-
yourself, wooden home playground equipment sold through home center, building
supply and hardware stores. The Company's primary product lines are wooden swing
set kits, wooden climbing unit kits, plastic slides and related accessories. The
Company's products are sold through more than 8,000 home center, building supply
and hardware stores, including substantially all Payless Cashways, Lowe's, 84
Lumber and Menards stores, and some HWI and Ace Hardware stores.
Swing-N-Slide (previously known as Newco Holdings, Inc,) was incorporated in
Delaware on January 10, 1992, and on January 31 of that year its wholly- owned
subsidiary Newco, Inc., a Wisconsin corporation (previously known as Newco
Acquisition Co., "Newco") and Newco's wholly-owned subsidiary, Newco
Fabricating, Inc., a Wisconsin corporation ("Fabricating"), both of which were
incorporated on November 27, 1991, acquired substantially all of the assets and
business (the "Acquisition") of the Predecessor Company. The Predecessor Company
was liquidated subsequent to the Acquisition. Effective December 31, 1992,
Newco's wholly owned subsidiary, Newco Fabricating, Inc. was liquidated and
merged with Newco.
Swing-N-Slide's swing set and climbing unit kits each contain a well-illustrated
and easy-to-understand assembly plan, hardware, certain accessories and a bill
of materials. The Company does not generally sell the standard-sized lumber,
nails and tools required to construct the do-it-yourself kits. Instead, the same
retailers which carry the Company's products benefit from the sale of these
items, particularly lumber. Swing-N-Slide estimates that the sale of its swing
set and climbing unit kits results in incremental sales of lumber of
approximately one-half to two times the retailers' cost for the kits. Retailers
typically sell the Company's kits and the required lumber for a package price.
Slides and accessories are sold separately.
The number of outlets which carry the Swing-N-Slide product line has increased
from approximately 1,600 in 1989 to over 8,000 in 1995. Swing-N-Slide's
customers currently include 16 of the top 20 home center chains in the U.S.
PRODUCTS AND MARKETS
Swing-N-Slide offers a broad line of wooden swing set and climbing unit kits,
plastic slides and accessories for home playground use. The Company's kits
contain well-illustrated and easy-to-understand instructions to simplify
construction by do-it-yourself consumers. None of Swing-N-Slide's kits require
complex cuts or special tools, and only one of its kits requires cement for
stability. Swing-N-Slide's kits are specifically designed to be assembled by the
consumer, and most of its kits can be combined with each other and the Company's
high density polyethylene slides. Swing-N-Slide estimates that its swing set
kits generally can be assembled by two adults in approximately two to four hours
depending on the kit. Its climbing units generally can be assembled by two
adults in six to twelve hours, depending on the size of the unit.
The following table presents the Company's estimated net sales by product lines
as a percentage of the Company's total net sales for each of the periods shown:
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended
December 31, 1991 December 31, 1992 December 31, 1993 December 31, 1994 December 31, 1995
----------------- ----------------- ----------------- ------------------- -----------------
Net Percent Net Percent Net Percent Net Percent Net Percent
Sales of Total Sales of Total Sales of Total Sales of Total Sales of Total
----------------------------------------------------------------------------------------------------
(dollar amounts in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Swing sets.............. $ 6,412 19% $ 7,623 17% $ 7,529 15% $ 6,884 13% $ 6,761 15%
Climbing units.......... 7,548 23% 10,543 23% 8,323 16% 7,962 15% 4,661 10%
Slides.................. 10,207 31% 15,908 34% 19,663 38% 18,448 36% 15,497 34%
Accessories............. 6,381 19% 9,762 21% 12,669 25% 12,905 25% 12,003 27%
Fabrication and other... 2,789 8% 2,460 5% 2,890 6% 5,617 11% 6,155 14%
----------------------------------------------------------------------------------------------------
Total net sales......... $33,337 100% $46,296 100% $51,074 100% $51,816 100% $45,077 100%
====================================================================================================
</TABLE>
( 2 )
<PAGE>
Swing.N.Slide Corp.
SWING SETS
The swing set kits manufactured and sold by the Company include an assembly
plan, swing hangers, chains and seats, rings, brackets, and hardware in an
attractive box that illustrates and lists the lumber, nails and tools required
to complete the kit.
Swing-N-Slide currently sells five basic designs of swing set kits. These
include the Pioneer(TM) kit which was introduced for 1985 and the Scout(TM)
which was introduced for 1988. These two kits were redesigned for 1992 to allow
consumers to build two or three different designs by using different lumber with
the same Swing-N-Slide(R) kit. The Company believes that none of its competitors
offer more than one design in their kits. Another swing set kit is the Pikes
Peak(R) which was introduced for 1990. For 1993, the Mustang(R) was introduced.
This kit allows consumers to build four different designs and can accommodate
the Giant Cool Wave Slide(R), the Turbo Tube Slide(R), the Wiggle Wave Slide(TM)
or the Side Winder Slide(TM). For 1995, the Competitor(TM) was introduced. The
Competitor(TM) combines a swing set and climbing unit into one activity center.
The majority of Swing-N-Slide's customers advertise and price the swing set kits
and lumber required to complete the kits together as a complete package. Swing-
N-Slide estimates that home center and building supply chains generally sell its
Scout(TM), which does not include a slide, for between $100 and $135 with lumber
and its Mustang(R), with a Giant Cool Wave Slide(R), for between $280 and $320
with lumber. The Company believes that retailers sell comparable metal swing
sets without a slide for between $70 and $90 and with a slide for between $160
and $180. The Company believes that pre-cut wooden kits which include a slide
sell for approximately $400.
CLIMBING UNITS
Swing-N-Slide currently manufactures and sells eight basic designs of climbing
units. The climbing unit kits consist of an assembly plan, climbing rope,
climbing ladder, tarp, fasteners and assembly hardware and a bill of materials
packaged in an attractive box that illustrates and lists the lumber, tools, and
nails required to complete the kits. The Company introduced the Eagles Nest(TM)
climbing unit kit for 1989. This kit was redesigned for 1991 to allow consumers
to build two different designs by using different lumber with the same Swing-N-
Slide(R) kit. For 1994, the Eagles Nest(TM) was again redesigned to have three
design options including a version requiring significantly less lumber. The Sky
Fort(R) was introduced for 1992. For 1993, the Sky Fort(R) was redesigned to
allow consumers to build two designs from the one kit. A new kit for 1993 was
the Twin Towers(R) which features two climbing towers that are joined by the
Tower Tunnel(R) . Both the Sky Fort(R) and Twin Towers(R) can be built to
accommodate the Turbo Tube Slide(R). A new kit for 1994 was the Jolly Roger(TM),
which has two decks and can accommodate the Cool Wave Slide(R), Giant Cool
Wave Slide(R), Side Winder Slide(TM) or Wiggle Wave Slide(TM). Also new for
1994, were the Covered Wagon(R) and Star Tower(TM) climbing unit kits which
feature the Covered Wagon(R) roof. For 1996, the Playdeck(TM) and Sandcastle(TM)
kits are being introduced. The Playdeck(TM) is an open deck featuring solid wood
construction and the ability to handle up to four slides at the same time. The
Sandcastle(TM) kit features three slide platforms, sturdy polyethylene panels
and flags and accepts every slide offered by Swing-N-Slide.
Custom units which are installed by third parties generally cost more than
$2,000. As with the swing set kits, the Company's customers typically advertise
and sell the climbing unit kits and the lumber required to complete the kit as a
package. The Company estimates that the average retail prices at home center and
building supply chains for its climbing unit kits range between $225 and $950,
including the lumber required to complete the kits.
SLIDES
Swing-N-Slide designs and manufactures high density polyethylene slides for use
on both its swing sets and climbing units. In addition, the slides are readily
adaptable for use on pre-cut, do-it-yourself and custom climbing units produced
by other manufacturers. Prior to 1991, the Company marketed only metal slides.
The Company is currently selling only its high density polyethylene Cool Wave
Slides(R), Turbo Tube Slides(R), Side Winder Slides(TM) and Wiggle Wave
Slides(TM). The yellow Cool Wave Slide(R) was introduced for 1991. The Company
believes that its Cool Wave Slide(R) was one of the first plastic slides which
was designed specifically for home use with wooden swing sets or climbing units.
For 1992, Swing-N-Slide introduced the Giant Cool Wave Slide(R) for use on its
Sky Fort(R) climbing unit. The Turbo Tube Slide(R) was introduced in 1993 and is
a fully enclosed tubular spiral slide. The Turbo Tube Slide(R) can be used with
several of the Company's swing sets and climbing units. In 1994, a new color,
teal was introduced. For 1995, the Side Winder Slide(TM) was added to the
Company's line of slides. The Side Winder Slide(TM) features a 90 degree right
hand curve and is available in yellow or teal. The Twister Tube Slide(TM) and
Wiggle Wave Slide(TM) are two new slides for 1996.
All of the Company's climbing unit kits and most of its swing set kits are
specially designed to incorporate the Cool Wave Slides(R), Side Winder
Slide(TM), Wiggle Wave Slide(TM), Twister Tube Slide(TM), or the Turbo Tube
Slide(R). The Company believes that its high density polyethylene slides are
superior to metal slides because they are longer, come in a variety of colors,
do not become as hot in the sun as metal slides and do not rust. The Company
estimates that its Side Winder Slides(TM) and Cool Wave Slides(R), which are
( 3 )
<PAGE>
Swing.N.Slide Corp.
sold with the necessary mounting hardware, are sold by home center and building
supply chains at average prices ranging from $55 to $100 and its Turbo Tube
Slide(R) is sold at average prices ranging from $300 to $375.
ACCESSORIES
Swing-N-Slide sells a broad line of accessories which complement its swing set
and climbing unit kits. Examples of accessories include swing seats, metal and
wood swing hangers, climbing ropes, ladders, nets, merry-go-rounds and
replacement tarps. Both the Company's swing set and climbing unit kits include
between one and four open spots that the consumer can customize with various
accessories. Therefore, a significant portion of the Company's accessories are
sold in connection with the purchase of a swing set or climbing unit kit and as
upgrades or replacement parts for the Company's growing base of installed kits.
The Company also believes that a portion of its accessories are sold as
replacement parts for wooden and metal gym sets produced by other manufacturers.
Swing-N-Slide has a successful history of introducing new accessories to
complement its kits, and this success has contributed to its sales growth. In
fiscal year 1988, the Company's accessory line included eleven individual items.
Currently, Swing-N-Slide offers thirty-one individual accessory items. Included
in the accessory product line is one smaller kit: a Teeter Totter, which was
introduced for 1991. The Child Lawn Swing, Family Swing, Steering Wheel, and
Teddy Bear Swing(R) products were introduced for 1993. For 1995, the Helicopter
Swing, 3-In-1 Glider, and the Horse Swing accessories were introduced. Three new
accessories for 1996 are the Snug-Fit Swing Seat(TM), Poly Ring/Trap Combo and
Telescope. The Company estimates that retail prices charged by home center and
building supply chains for accessory items range from $0.60 for a swing hanger
to $90 for a merry-go-round with the average retail price of an accessory in the
price range of $10 to $20.
COMMERCIAL PLAYGROUND SYSTEMS
In 1994, the Company introduced the new product category of Tuff Kids(TM)
commercial playground systems. This is a complete playground system targeted at
small to medium-size applications such as day care centers, churches,
campgrounds and schools.
Installation options for Tuff Kids(TM) commercial playgrounds range from do-it-
yourself to full installation by a contractor. The Tuff Kids(TM) line is sold
through the same distribution channels as the Company's home playground
equipment. There are five basic models of the Tuff Kids(TM) commercial units. By
using a modular approach, future expandability becomes simplified. Also, three
different commercial slides as well as thirteen accessories are available to
complement the Tuff Kids(TM) line. For 1996, the Tuff Kids swing set is being
introduced.
The Company estimates that home centers and building supply chains generally
sell the basic unit of the Tuff Kids(TM) playground
systems for between $2,700 and $3,000 including lumber and the largest unit of
the Tuff Kids(TM) playground system sells for between $10,000 and $12,000
including lumber.
FABRICATION AND OTHER PRODUCTS
The Company manufactures several component parts for the Swing-N-Slide kits and
accessories and also designs and manufactures custom fabricated metal parts for
a small group of original equipment manufacturer (O.E.M.) customers primarily
based in Wisconsin. During 1991, Swing-N-Slide intentionally reduced the number
of O.E.M. customers from 110 to 35 to ensure adequate capacity for internal
needs and to reduce selling and administrative costs. Sales to five of those
customers constitute substantially all of the production not used in the
Company's swing sets and climbing units. The Company's fabrication operations
produce its EZ Frame Brace(R) and EZ Frame Bracket(R) and provide flexible and
timely design and redesign of subcomponents and prototypes and special tooling
for manufacture and use by the Company and its subcontractors. The Company's
sales to O.E.M. customers enable it to cost-effectively maintain a core of full-
time, highly-skilled workers despite the seasonal nature of Swing-N-Slide's
primary business.
The Company will begin selling in 1996 a line of four pre-cut incense cedar
backyard playground kits. These kits include all required cut, drilled and
sanded lumber, hardware, certain accessories and an easy to follow assembly
plan. High density polyethylene slides are included in three of the four kits.
These kits are expected to retail between $399 and $749.
CUSTOMERS
Because the Company's products are designed for the do-it-yourself consumer, and
because its kits usually require lumber, almost all of Swing-N-Slide's sales are
made to home center and building supply retailers such as Payless Cashways,
Lowe's, 84 Lumber and Menards and hardware stores which carry lumber such as HWI
and Ace Hardware Stores. The Company's market penetration has increased
significantly during the last five years as a result of increased market
acceptance of its products and intense marketing efforts. The total number of
retail outlets which carry the Company's Swing-N-Slide product line has
increased from approximately
( 4 )
<PAGE>
Swing.N.Slide Corp.
1,600 outlets in 1989 to 2,400 in 1990 to 4,900 hundred in 1991 and to over
8,000 as of December 31, 1995. The Company's customers currently include 16 of
the top 20 home center chains in the U.S.
Due to the increasingly competitive nature of the home playground equipment
market, approximately 300 retail outlets that carried the Company's Swing-N-
Slide(R) product line during 1994 chose to switch to a competitor for the 1995
selling season. We expect the market for home playground equipment to remain
highly competitive. Each year customer programs are negotiated for the upcoming
selling season. While we expect that there will be customers that choose to
switch to a competitor, we also expect to add customers who either sold a
competitor's product line or didn't carry a home playground equipment product
line in 1995.
One customer, Lowe's, accounted for 16 percent of sales in 1995. Sales to
another customer, Menard's, were 11 percent of net sales in 1995. The Company's
top five customers accounted for 43 percent of total sales in 1995. The loss of
significant customers, such as Lowe's or Menard's, or a significant decline in
the amount of business from such customers, could have a material adverse effect
on the Company.
MANUFACTURE AND ASSEMBLY
All of Swing-N-Slide's consumer products are assembled and packaged at the
Company's 132,000 square foot modern facility
located in Janesville, Wisconsin. This plant, originally constructed in 1989
with a 44,000 square foot addition in 1990 and a 66,000 square foot addition in
1992, was designed specifically to assemble, package and warehouse the Swing-N-
Slide(R) product line. This facility and the Company's production processes are
designed to ensure maximum production flexibility. The plant has multiple
production lines which enable Swing-N-Slide to produce varying quantities of
products or change production runs depending on customer demand. The Company
believes that its facilities will be sufficient for at least the next twenty-
four months.
Swing-N-Slide typically enters into annual purchase agreements with suppliers of
major subcomponents such as fasteners, polyethylene, swing set chains and hooks.
Annual requirements for the following calendar year are estimated during the
fall and winter months, and the Company commits to purchase agreed upon amounts,
plus or minus 20 percent, at agreed upon prices. These purchase agreements
usually extend from January 1 to December 31. Management believes that alternate
sources of supply are readily available for substantially all raw materials and
components. The Company believes that it currently has an adequate supply of raw
materials and components. Imports represent an insignificant portion of the
Company's raw materials.
Manufacturing of subcomponents of consumer products and products sold to O.E.M.
customers is conducted in a separate building, approximately one-half block away
from the Company's main facility. Equipment located in this facility cuts,
welds, shapes and paints certain subcomponents of the Company's consumer
products, particularly its EZ Frame Brace(R) and EZ Frame Bracket(R) and other
steel brackets, braces, and clamps used in the swing set and climbing unit kits.
The Company also cuts, shapes, welds, and paints a wide variety of customized
parts for a small group of O.E.M. customers. Engineering and manufacturing
support are all performed by the Company based upon specifications prepared by
these O.E.M. customers. The primary raw materials used in these operations
include steel and paint, both of which are in adequate supply. In 1993, the
Company installed a modern powder paint system that has streamlined painting
operations and increased capacity by over 300 percent.
COMPETITION
The market for home playground equipment is highly competitive and the Company
faces competition from manufacturers of metal swing sets and pre-cut and custom
built wood kits. Hedstrom Corporation is a major manufacturer and marketer of
metal gym sets, plastic and metal slides and accessories. Hedstrom Corporation
also manufactures and sells a competing line of wooden swing set and climbing
unit kits. Several other manufacturers also manufacture and market kit products
which are similar to the Company's kits. The Company competes on the basis of
design, a complete merchandising program, quality, timeliness of delivery,
service, price, packaging and brand name recognition. The Company believes that
its design capabilities, complete merchandising program and reputation for
delivery enable it to compete effectively. Swing-N-Slide's reputation as a
pioneer in the market has also been an important element of its successful
operations. Although there are no significant technological or manufacturing
barriers to entry into the home playground equipment business, factors such as
brand recognition, the Company's established relationships with its home center
and building supply retailers and quality assurance may discourage new
competitors from entering the business.
Since assembly of the Company's kits requires lumber, retail prices of the
complete kit package with lumber vary with the price of lumber which has shown
volatility over the past few years. A substantial increase in lumber prices
could cause Swing-N-Slide's products to have less market acceptance or result in
significant price erosion which would have a material adverse effect on
( 5 )
<PAGE>
Swing.N.Slide Corp.
Swing-N-Slide's profitability. In addition, because almost all of the Company's
sales are made to retailers which appeal to do-it-yourself consumers, changes in
economic activity which impact these retailers may also have an impact on the
Company's sales.
SEASONALITY AND BACKLOG
Swing-N-Slide's sales pattern is highly seasonal and the bulk of the Company's
sales take place during the spring and early summer months, the peak selling
season. During fiscal years 1993, 1994 and 1995 approximately 79 percent, 80
percent and 74 percent respectively, of the Company's net sales occurred between
January 1 and June 30. The Company's backlog as of any given date is not a
meaningful measure because, even during peak periods, orders are generally
filled three business days from receipt of the order.
TRADE NAMES AND TRADEMARKS
Swing-N-Slide uses numerous trademarks and trade names in its business. While
the Company believes that the products and services underlying such trade names
and trademarks are of great importance to the Company and that such trademarks
and trade names as a whole are of material importance to the Company's business
in which they are used, none, besides Swing-N-Slide(R), individually is material
to the Company's business.
REGULATION
The Company's products are designed and tested to meet the safety guidelines of
the American Society for Testing and Materials (ASTM) for home playground
equipment. The Company employs PFS Corporation, an independent testing company
located in Madison, Wisconsin, to conduct on-going testing of its products to
ensure that they comply with the ASTM guidelines. These independent test results
are documented by PFS Corporation and kept on file by the Company.
Swing-N-Slide is subject to the environmental laws and regulations of the United
States and the State of Wisconsin as well as local ordinances. The Company has
established procedures for maintaining environmental law compliance, including
procedures for the disposal of limited quantities of hazardous waste, with
United States Environmental Protection Agency ("EPA") licensed haulers and
recyclers. Swing-N-Slide also incurs on-going costs in monitoring compliance
with environmental laws and in connection with disposal of waste materials.
Environmental laws imposed by the EPA and state officials nationwide are
becoming more stringent and may result in higher costs for the Company and its
competitors. Costs for environmental compliance and waste disposal have not been
material to Swing-N-Slide in the past.
In general, the Company has not experienced difficulty complying with
governmental regulations, and compliance has not had a material effect on Swing-
N-Slide's business.
EMPLOYEES
At December 31, 1995, Swing-N-Slide had 208 full-time employees consisting of
four sales and marketing employees, 48 in administration and 156 engaged in
manufacturing and assembling. During peak production seasons, such as March, the
Company hires approximately 90 additional temporary employees for manufacture
and assembly. None of the full-time or temporary employees are represented by a
union. The Company has never suffered a work stoppage or slowdown.
( 6 )
<PAGE>
Swing.N.Slide Corp.
ITEM 2 - PROPERTIES
Swing-N-Slide's manufacturing and assembly facilities and corporate offices are
located in Janesville, Wisconsin. The facilities consist of an approximately
132,000 square foot building and a 30,000 square foot building on approximately
twenty-six acres. All land and facilities are owned by the Company.
The Company has entered into a noncancelable operating lease through 2002 of an
approximately 92,000 square foot building to provide additional warehouse space.
This building is located in Janesville, Wisconsin and should provide sufficient
storage space for an adequate supply of the Company's products to meet demand.
The Company had previously leased additional warehouse space on a short-term
basis during the peak season.
ITEM 3 - LEGAL PROCEEDINGS
Due to the nature of its business, the Company, at any particular time, is
subject to a number of product liability claims for personal injuries allegedly
relating to its products. The Company has to date been successful in defending
or settling such claims. Thus far, no such claims have resulted in any material
payments on account of defending or settling such claims. The Company's products
are designed to meet applicable ASTM guidelines. However, sales of the Company's
products have increased and several of the Company's products are new and,
therefore, the claims experience with such products cannot be predicted. Because
of the foregoing factors, there can be no assurance that the Company will not be
subject to material liabilities on account of product liability claims in the
future.
The Company currently maintains an occurrence based product liability insurance
policy with coverage of up to $2.0 million per occurrence and in the aggregate
with a deductible of $50,000 per occurrence. In addition, the Company maintains
an additional
$25.0 million per occurrence and in the aggregate of excess occurrence based
coverage for product liability claims with a deductible of $10,000 per
occurrence.
In addition to product liability proceedings, the Company has, from time to
time, become a party to other claims and lawsuits in
the ordinary course of business. The Company believes that such claims and
lawsuits to which the Company is currently a party
will not have a material adverse effect on the financial condition or results of
operations of the Company.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's security holders during the
last quarter of the year ended December 31, 1995.
( 7 )
<PAGE>
Swing.N.Slide Corp.
PART II
ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER'S
MATTERS
COMMON STOCK PRICES AND DIVIDENDS
The Company's stock has been traded on the American Stock Exchange (AMEX) since
August 10, 1995, under the symbol "SWG". From July 6, 1995 to August 9, 1995,
the stock was traded on the over-the-counter market and prior to July 6, 1995,
the stock was traded on the Nasdaq National Market System. Set forth below for
the calendar quarters indicated are the high and low closing prices.
<TABLE>
<CAPTION>
---------------- -----------------
1994 1995
---------------- -----------------
HIGH LOW HIGH LOW
<S> <C> <C> <C> <C>
1st Quarter 13 9 1/2 8 7/8 3 3/4
2nd Quarter 11 9 1/2 5 1/4 3 1/4
3rd Quarter 10 1/4 8 1/4 4 13/16 3 5/8
4th Quarter 9 1/2 7 3/4 4 15/16 3 1/2
</TABLE>
As of December 31, 1995, there were approximately 1,150 beneficial owners of the
Company's common stock.
There have been no dividends paid to stockholders since the inception of the
Company in January, 1992. Under the terms of the current credit agreement, the
Company's operating subsidiary cannot pay any dividends to the Company to fund
dividends by Swing-N-Slide to its public stockholders.
On January 19, 1995, Swing-N-Slide purchased 3,600,000 outstanding shares of its
Common Stock pursuant to a self tender offer at $11 per share which was financed
by a new bank credit agreement.
On February 16, 1996, GreenGrass Holdings, a Delaware general partnership
("GreenGrass Holdings"), purchased 3,510,000 shares of Common Stock of Swing-N-
Slide pursuant to a $6.50 per share cash tender offer. This purchase was
financed by contributions from GreenGrass Holdings' two general partners,
GreenGrass Capital LLC, comprised of seven institutional investors, and
GreenGrass Management LLC, comprised of eight senior management executives of
Swing-N-Slide. Upon purchase of the 3,510,000 shares, together with shares of
Common Stock contributed by members of the two general partners, GreenGrass
Holdings owned 60.9% of the shares of Common Stock of Swing-N-Slide.
( 8 )
<PAGE>
Swing.N.Slide Corp.
ITEM 6 - SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Predecessor(1) Company
---------------------- -----------------------------------------------------------
Year Ended
Year Ended December 31, 1992 Year Ended Year Ended Year Ended
December 31, ------------------------- December 31, December 31, December 31,
1991 To Jan. 31, From Feb. 1, 1993 1994 1995
------------ ----------- ------------ ------------ ------------ ------------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C>
Statement of operations data:
Net sales $33,337 $ 3,951 $42,345 $51,074 $51,816 $45,077
Gross profit 17,014 2,229 22,058 26,769 25,500 21,902
Operating income 10,402 1,405 11,038 13,786 7,909 11,131
Income before income taxes
and extraordinary item 9,745 1,391 3,942 12,569 7,378 6,727
Extraordinary item
(net of tax benefit) - - (922) - - -
Net income 9,745 1,391 1,274 7,962 4,591 4,127
Pro forma income taxes (2) 3,815 545 - - - -
Pro forma net income (2) 5,930 846 - - - -
Per common share:
Income before extraordinary item $ 0.28 $ 0.83 $0.48 $0.67
Extraordinary item (0.12) - - -
Net income 0.16 0.83 0.48 0.67
Balance sheet data (at period end):
Working capital(deficit) $ 1,309 $ (277) $ 2,332 $(4,783) $ 2,178 $ (81)
Total assets 7,093 46,548 46,679 44,330 47,610 44,585
Total debt(3) 1,804 45,745 19,720 9,909 7,588 41,738
Total stockholders' equity (deficit)(4) 2,706 (3,627) 22,872 30,834 35,425 (796)
</TABLE>
(1) Swing-N-Slide was formed in January 1992 and acquired substantially all of
the assets and business of the Predecessor Company on January 31, 1992.
(2) The Predecessor Company elected to be treated as an S Corporation for income
tax purposes and accordingly did not pay federal or state income taxes. The
pro forma information has been computed as if the Predecessor Company were
subject to federal and state income taxes for such periods, based on the tax
laws in effect during the respective periods.
(3) Includes seasonal revolving loan and current and long-term portions of debt
and capital leases.
(4) Net of historical stockholder distributions for the Predecessor Company.
( 9 )
<PAGE>
Swing.N.Slide Corp.
ITEM 7- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussions compare the results of the operations of Swing-N-Slide
for the year ended December 31, 1995, to the results of operations of Swing-N-
Slide for the year ended December 31, 1994, and the results of operations of
Swing-N-Slide for the year ended December 31, 1994, to the results of operations
of Swing-N-Slide for the year ended December 31, 1993.
RESULTS OF OPERATIONS:
The following table shows, for the periods indicated, information derived from
the consolidated statements of income of the
Company expressed as a percentage of net sales for such period.
<TABLE>
<CAPTION>
As a Percentage of Net Sales
---------------------------------------------------------
Year ended Year ended Year ended
December 31, 1993 December 31, 1994 December 31, 1995
----------------- ----------------- -----------------
<S> <C> <C> <C>
Net sales...................................... 100.0% 100.0% 100.0%
Cost of goods sold............................. 47.6% 50.8% 51.4%
Gross profit................................... 52.4% 49.2% 48.6%
Operating expenses:
Selling.................................... 12.8% 13.9% 11.8%
General and administrative................. 8.1% 9.1% 9.8%
Amortization of intangible assets.......... 4.5% 10.9% 2.3%
Total operating expenses....................... 25.4% 33.9% 23.9%
Operating income............................... 27.0% 15.3% 24.7%
Income before income taxes..................... 24.6% 14.2% 14.9%
</TABLE>
YEAR ENDED DECEMBER 31, 1995, COMPARED TO THE YEAR ENDED DECEMBER 31, 1994.
NET SALES.
Net sales decreased by $6.7 million, or 13.0 percent, for the year ended
December 31, 1995, as compared to the year ended December 31, 1994. Sales of the
core product line (swing sets, slides, accessories and climbing units) were down
15.8 percent for the twelve months ended December 31, 1995, compared to the same
period in 1994. Competitive pricing on the Cool Wave Slide, the loss of 300
retail outlets to competition and retailers' increased focus on controlling
inventory levels all contributed to the sales decrease. The Company expects the
market place for do-it-yourself home playground equipment kits to remain highly
competitive with the Company both adding and losing customer accounts.
GROSS PROFIT.
Gross profit decreased $3.6 million, or 14.1 percent, and decreased as a
percentage of net sales to 48.6 percent for the year ended December 31, 1995, as
compared to 49.2 percent for the same period in 1994. The primary reasons for
the decrease in gross profit were higher high density polyethylene costs,
reduced slide pricing, an increase in the percentage of custom metal fabrication
sales which carry a lower margin than the core product lines, and the impact of
the allocation of fixed overhead costs to lower sales volume. These negative
factors were partially offset by changes implemented in 1995 which reduced
indirect labor costs and improved manufacturing efficiencies.
SELLING EXPENSES.
Selling and marketing expenses decreased $1.9 million, or 26.5 percent, and
decreased as a percentage of net sales to 11.8 percent for the year ended
December 31, 1995 as compared to 13.9 percent in 1994. This decrease is
primarily due to a reduction in advertising and promotion costs ($1.5 million)
and a decrease in commission expense ($0.4 million).
(10)
<PAGE>
Swing.N.Slide Corp.
GENERAL AND ADMINISTRATIVE EXPENSES.
General and administrative expenses decreased $0.3 million, or 7.0 percent, but
increased as a percentage of net sales to 9.8 percent for the year ended
December 31, 1995, as compared to 9.1 percent for the same period in 1994. The
dollar decrease is mainly due to a decrease in worker's compensation costs ($0.1
million) and a decrease in the costs related to being a publicly-held company
($0.1 million).
AMORTIZATION OF INTANGIBLE ASSETS.
Amortization of financing fees, goodwill and other intangibles was $1.1 million
in the year ended December 31, 1995, as compared to $5.6 million for the same
period in 1994. In the fourth quarter of 1994, the remaining net book value of
the noncompetition agreements was written off. In 1994, amortization costs
included $4.9 million related to the noncompetition agreements.
OTHER EXPENSES AND INCOME.
Interest expense increased $3.8 million to $4.3 million for the year ended
December 31, 1995, as compared to 1994. This increase is due to the interest on
the debt that was incurred in connection with the Company's purchase of 3.6
million shares of its common stock at a price of $11.00 per share on January 19,
1995.
YEAR ENDED DECEMBER 31, 1994, COMPARED TO THE YEAR ENDED DECEMBER 31, 1993.
NET SALES.
Net sales increased by $0.7 million, or 1.5 percent, for the year ended December
31, 1994, as compared to the year ended December 31, 1993. A decrease in the
sales of the core product line of 4.1 percent was offset by an increase in sales
in the custom metal fabrication business and sales related to the introduction
of the clubhouse product line in 1994. Competitive pricing pressure on the Cool
Wave Slide caused the slide category to decrease 6.2 percent in dollars, even
though unit sales were up 5.5 percent. Swing set sales dollars were down 8.6
percent as compared to 1993, while sales of accessories increased 1.9 percent
and climbing unit sales were down 4.3 percent.
GROSS PROFIT.
Gross profit decreased $1.3 million, or 4.7 percent, and decreased as a
percentage of net sales to 49.2 percent for the year ended December 31, 1994, as
compared to 52.4 percent for the prior year. The decrease in gross profit was
primarily due to a higher percentage of custom metal fabrication and clubhouse
sales which carry lower margins than the core product lines ($0.4 million),
higher plastic resin costs ($0.3 million) and an increase in depreciation ($0.3
million), temporary labor costs ($0.3 million) and external warehouse costs
($0.2 million), in the year ended December 31, 1994, as compared to 1993.
SELLING EXPENSES.
Selling expenses increased $0.7 million, or 9.9 percent, and increased as a
percentage of net sales to 13.9 percent for the year ended December 31, 1994, as
compared to 12.8 percent for the year ended December 31, 1993. This increase was
primarily due to increased spending for advertising and promotions with
retailers ($0.6 million), expenses related to the launching of Tuff Kids and
international product lines ($0.4 million), an increase in compensation costs
($0.2 million) which were mitigated by a decrease in display building costs
($0.5 million).
GENERAL AND ADMINISTRATIVE EXPENSES.
General and administrative expenses increased by $0.6 million, or 15.5 percent,
and increased as a percentage of net sales to 9.1 percent for the year ended
December 31, 1994, as compared to 8.1 percent for the year ended December 31,
1993. This increase was mainly due to increased compensation and benefits costs
($0.4 million) and increased costs related to being a publicly held company
($0.2 million).
AMORTIZATION OF INTANGIBLE ASSETS.
Amortization of intangible assets increased $3.3 million to $5.6 million for the
year ended December 31, 1994, as compared to $2.3 million for the year ended
December 31, 1993. This increase was due to the write-off of the remaining net
book value balance of the noncompetition agreements with the shareholders of the
Predecessor Company that were entered into in connection with the acquisition.
(11)
<PAGE>
Swing.N.Slide Corp.
OTHER EXPENSES AND INCOME.
Interest expense decreased $0.6 million, or 54.0 percent, for the year ended
December 31, 1994, as compared to the same period in 1993. This was mainly due
to lower debt levels in 1994 than 1993 and lower average interest rates as
junior subordinated notes at a 12 percent rate were paid off with borrowings at
prime rate in July 1993.
LIQUIDITY AND CAPITAL RESOURCES:
On January 19, 1995, the Company purchased 3.6 million outstanding shares of its
common stock at a price of $11.00 per share, or $39.6 million in the aggregate.
The total amount necessary to purchase such shares and pay the related fees and
expenses was approximately $40.3 million which was funded by the proceeds
borrowed under the term loan facility described below.
In connection with the purchase of shares of common stock, the Company's
operating subsidiary, Newco, Inc., entered into a credit agreement covering a
revolving loan facility and a term loan facility whereby Newco, Inc. may borrow
up to an aggregate of $10.0 million and $45.0 million, respectively. The
revolving loan facility is in effect until January 19, 2001. Borrowings under
the term loan facility are due in twelve semi-annual amounts through December
31, 2000. In addition, mandatory prepayments are required based on excess cash
flows, as defined, and proceeds from sales of equity, sales of assets, or
issuance of debt. Based on the excess cash flow calculation for the year ended
December 31, 1995, a mandatory prepayment of approximately $0.9 million is
required. This amount has been classified as part of the current portion of
long-term debt.
The Company's primary sources of working capital are cash flows from operations
and borrowings under the revolving loan facility. Borrowings under the revolving
loan facility are limited to specified percentages of inventories and accounts
receivable, not to exceed $10.0 million. Under the credit agreement, interest on
borrowings is payable quarterly, at either (i) the greater of 1.5 percent over
the bank's prime rate or 2.0 percent over the federal funds rate, or (ii) 2.75
percent over the LIBOR rate, at the Company's option. At December 31, 1995, the
bank's prime rate was 8.50 percent and the LIBOR rate was approximately 5.56
percent. The Company is subject to an annual commitment fee of 0.5 percent of
the daily unused portion of the commitment. The borrowings under the credit
agreement are secured by substantially all of the assets of the Company. The
Company is subject to certain restrictive covenants which include, among other
things, restrictions on the payments of dividends or issuance of capital stock
and a limitation on additional indebtedness.
Excluding the borrowings used to fund the repurchase of the Company's stock,
total indebtedness decreased by approximately $7.8 million in the year ended
December 31, 1995. Cash generated from operations was used to pay down the debt
which included a payment of $2.5 million on June 30, 1995, and the prepayment on
September 27, 1995, of the $2.5 million payment due December 31, 1995.
Inventory levels decreased $1.9 million to $6.4 million at December 31, 1995, as
compared to the end of 1994. Improved manufacturing efficiencies and planned
reductions in inventory levels resulted in a later start to the 1996 production
season and lower inventory levels at December 31, 1995 versus December 31, 1994.
Swing-N-Slide made capital expenditures of $0.7 million for the year ended
December 31, 1995. The Company expects that its level of total capital
expenditures for 1996 will be similar to 1995. Swing-N-Slide believes that funds
generated from operations and its capacity for borrowing will be sufficient to
fund current business operations as well as future capital expenditures.
On January 4, 1996, the Company entered into an agreement with an unrelated
general partnership of which one of the general partners is a group of the
Company's senior management, pursuant to which the general partnership commenced
a tender offer for up to 3,510,000 shares of Common Stock of the Company at a
purchase price of $6.50 per share. This tender offer was completed on February
15, 1996. The agreement also provided that the general partnership would invest
additional funds through the purchase of the Company's newly authorized
convertible debentures. On February 15, 1996, the general partnership invested
$4.3 million through the purchase of 10 percent convertible subordinated
debentures. The debentures are convertible at the rate of one share of Common
Stock for each $4.80 principal amount of debentures. The partnership intends to
invest, at a minimum, an additional $0.7 million. As a requirement of the
American Stock Exchange, Inc., stockholder approval may be required before the
additional debentures are purchased. The proceeds from the issuance of the
debentures were used to pay down approximately $1.7 million of the Company's
term loan and to pay fees associated with the tender offer and issuance of the
debentures.
(12)
<PAGE>
Swing.N.Slide Corp.
PENDING ACCOUNTING CHANGES:
The Company has applied Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees," in accounting for its stock option plans.
Accordingly, because there was no intrinsic value at the date of grant, no
compensation cost has been recognized. No decision has been reached as to how
the Company will apply, beginning in 1996, recently issued Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," which permits the Company to continue accounting for stock
options in the same manner with fair value disclosures or to measure
compensation cost by the fair value of stock options granted after January 1,
1995.
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be Disposed Of," which requires
impairment losses to be recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash flows estimated
to be generated by those assets are less than the assets' carrying amount.
Statement No. 121 also addresses the accounting for long-lived assets that are
expected to be disposed of. The Company will adopt Statement No. 121 in the
first quarter of 1996 and, based on current circumstances, does not believe the
effect of adoption will be material.
(13)
<PAGE>
Swing.N.Slide Corp.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Financial Statements:
Form 10-K
Page Number
-----------
SWING-N-SLIDE CORP.:
Report of Independent Auditors................................ 15
Consolidated Balance Sheets at December 31, 1994 and 1995..... 16
For the years ended December 31, 1993, 1994 and 1995:
- Consolidated Statements of Income.......................... 17
- Consolidated Statements of Stockholders' Equity (deficit).. 18
- Consolidated Statements of Cash Flows...................... 19
Notes to Consolidated Financial Statements.................... 20-25
(14)
<PAGE>
Swing.N.Slide Corp.
Report of Ernst & Young LLP, Independent Auditors
Board of Directors and Stockholders
Swing-N-Slide Corp.
We have audited the accompanying consolidated balance sheets of
Swing-N-Slide Corp. (the Company) as of December 31, 1994 and 1995, and the
related consolidated statements of income, stockholders' equity (deficit) and
cash flows for each of the three years in the period ended December 31, 1995.
Our audits also included the financial statement schedules listed in the Index
at Item 14(a). These financial statements and schedules are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements and schedules 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 the Company at
December 31, 1994 and 1995, and the consolidated results of its operations and
its cash flows for each of the three years in the period ended December 31,
1995, in conformity with generally accepted accounting principles. Also, in our
opinion, the related financial statement schedules, when considered in relation
to the basic financial statements taken as a whole, present fairly in all
material respects the information set forth therein.
/s/ ERNST & YOUNG LLP
Madison, Wisconsin ----------------------------------------
January 30, 1996 Ernst & Young LLP
(15)
<PAGE>
<TABLE>
<CAPTION>
Swing.N.Slide Corp.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
1994 1995
--------------------------------------------
(In Thousands)
<S> <C> <C>
ASSETS
Current assets:
Cash........................................................................ $ 7 $ 7
Accounts receivable, less allowance for doubtful accounts of $75 and $91.... 4,482 4,569
Other receivables........................................................... 210 165
Refundable income taxes..................................................... 564 --
Inventories................................................................. 8,258 6,405
Prepaid expenses............................................................ 709 967
Deferred income taxes....................................................... 95 50
--------------------------------------------
Total current assets............................................................ 14,325 12,163
Property, plant and equipment, net.............................................. 6,919 6,302
Deferred financing and other costs, net of accumulated amortization
of $132 and $425............................................................. 198 1,504
Patent cost, net of accumulated amortization of $19 and $136.................... 1,381 1,264
Deferred income taxes........................................................... 1,615 1,030
Goodwill, net of accumulated amortization of $1,804 and $2,429.................. 23,172 22,322
---------------------------------------------
$47,610 $44,585
=============================================
DECEMBER 31,
1994 1995
---------------------------------------------
(In Thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Revolving loan............................................................. $ 7,450 $ 1,700
Accounts payable........................................................... 2,875 2,252
Accrued income taxes....................................................... -- 49
Accrued expenses........................................................... 1,722 1,342
Current portion of long-term debt.......................................... 100 6,901
---------------------------------------------
Total current liabilities...................................................... 12,147 12,244
Long-term debt, net of current portion......................................... 38 33,137
Commitments and contingent liability (notes 3 and 9)
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock, $.01 par value, 5,000,000 shares authorized, no shares
issued or outstanding.................................................... -- --
Common stock, $.01 par value, 25,000,000 shares authorized, 9,600,000
shares issued............................................................ 96 96
Class B common stock, $.01 par value, 1,750,000 shares authorized, no
shares issued or outstanding............................................. -- --
Additional paid-in capital................................................. 27,631 27,631
Excess purchase price over predecessor basis............................... (5,627) (5,627)
Retained earnings.......................................................... 13,325 17,452
Cost of 3,600,000 shares of common stock in treasury....................... -- (40,348)
---------------------------------------------
Total stockholders' equity (deficit)........................................... 35,425 (796)
---------------------------------------------
$47,610 $44,585
=============================================
See accompanying notes.
</TABLE>
(16)
<PAGE>
Swing.N.Slide Corp.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1993 1994 1995
------------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Net sales................................................................ $51,074 $51,816 $45,077
Cost of goods sold....................................................... 24,305 26,316 23,175
------------------------------------------------------
Gross profit............................................................. 26,769 25,500 21,902
Operating expenses:
Selling.............................................................. 6,555 7,207 5,296
General and administrative........................................... 4,113 4,750 4,416
Amortization of intangible assets.................................... 2,315 5,634 1,059
------------------------------------------------------
12,983 17,591 10,771
------------------------------------------------------
Operating income......................................................... 13,786 7,909 11,131
Other expense:
Interest expense..................................................... 1,149 529 4,312
Other, net........................................................... 68 2 92
-------------------------------------------------------
Total other expense...................................................... 1,217 531 4,404
------------------------------------------------------
Income before income taxes............................................... 12,569 7,378 6,727
Provision (credit) for income taxes:
Current.............................................................. 4,257 3,857 1,745
Deferred............................................................. (80) (1,295) 630
Benefit applied to reduce goodwill................................... 430 225 225
------------------------------------------------------
4,607 2,787 2,600
------------------------------------------------------
Net income............................................................... $ 7,962 $ 4,591 $ 4,127
======================================================
Net income per share..................................................... $ .83 $ .48 $ .67
======================================================
Weighted average number of common shares outstanding..................... 9,600 9,600 6,178
======================================================
</TABLE>
See accompanying notes.
(17)
<PAGE>
<TABLE>
<CAPTION>
Swing.N.Slide Corp.
Consolidated Statements of Stockholders' Equity (deficit)
Excess
Purchase
Additional Price Over
Common Paid-In Predecessor Retained Treasury
Stock Capital Basis Earnings Stock Total
-----------------------------------------------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1992.......... $ 96 $ 27,631 $ (5,627) $ 772 $ - $ 22,872
Net income......................... - - - 7,962 - 7,962
Balance at December 31, 1993........... 96 27,631 (5,627) 8,734 - 30,834
Net income......................... - - - 4,591 - 4,591
Balance at December 31, 1994........... 96 27,631 (5,627) 13,325 - 35,425
Purchase of Common Stock for Treasury - - - - (40,348) (40,348)
Net income......................... - - - 4,127 - 4,127
----------------------------------------------------------------------------------------
Balance at December 31, 1995........... $ 96 $ 27,631 $ (5,627) $ 17,452 $(40,348) $ (796)
========================================================================================
</TABLE>
See accompanying notes
(18)
<PAGE>
<TABLE>
<CAPTION>
Swing.N.Slide Corp.
Consolidated Statements of Cash Flows
YEAR ENDED DECEMBER 31,
1993 1994 1995
-----------------------------------------------------------------
(In Thousands)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income.................................................. $ 7,962 $ 4,591 $ 4,127
Adjustments to reconcile net income to net cash provided
by operating activities:
Deferred income taxes................................... (80) (1,295) 630
Benefit applied to reduce goodwill...................... 430 225 225
Depreciation............................................ 834 1,134 1,279
Amortization............................................ 2,315 5,634 1,059
Other................................................... 34 7 29
Changes in operating assets and liabilities:
Accounts receivable................................... (897) (1,461) (87)
Other receivables..................................... (104) 36 45
Refundable income taxes............................... 320 (356) 564
Inventories........................................... 1,631 (3,468) 1,853
Prepaid expenses...................................... 25 (489) (258)
Accounts payable...................................... (417) 744 (623)
Accrued income taxes.................................. - - 49
Accrued expenses...................................... (696) 266 (380)
Net cash provided by operating activities 11,357 5,568 8,512
INVESTING ACTIVITIES
Purchase of property, plant and equipment (1,500) (1,591) (669)
Purchase of patent -- (1,400) --
Other -- (155) --
Net cash used in investing activities (1,500) (3,146) (669)
FINANCING ACTIVITIES
Net change in revolving loan 4,220 2,800 (5,750)
Issuance of long-term debt 5,000 -- 45,000
Payments of long-term debt (19,031) (5,121) (5,100)
Debt issuance costs incurred (46) (100) (1,645)
Purchase of treasury stock -- -- (40,348)
Net cash used in financing activities (9,857) (2,421) (7,843)
Net increase in cash -- 1 --
Cash at beginning of year 6 6 7
Cash at end of year $ 6 $ 7 $ 7
Supplemental disclosure of cash flows information --
Cash paid during the year for:
Interest $ 1,235 $ 529 $ 4,313
Income taxes (net of refunds received) 3,960 4,214 1,132
</TABLE>
See accompanying notes
(19)
<PAGE>
Swing.N.Slide Corp.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - DECEMBER 31, 1995
1. SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION
Swing-N-Slide Corp.'s (the Company) consolidated financial statements include
the accounts of Swing-N-Slide Corp. and its wholly owned subsidiary, Newco, Inc.
(Newco).
NATURE OF BUSINESS
The Company operates in one business segment of designing and manufacturing
outdoor playground equipment for the consumer market. Its primary product lines,
kits for wooden swing sets and climbing units, plastic slides and related
accessories, are sold nationwide through home improvement retail centers. The
Company performs periodic credit evaluations of its customers and generally does
not require collateral.
REVENUE RECOGNITION
Revenue is recognized when product is shipped to customers.
INVENTORIES
Inventories are valued at the lower of cost or market using the first-in, first-
out (FIFO) method.
PROPERTY, PLANT AND EQUIPMENT
Additions to property, plant and equipment are recorded at cost. Depreciation is
computed using the straight-line method over the estimated useful lives of the
assets for financial reporting purposes and under accelerated methods for income
tax purposes.
DEFERRED FINANCING AND OTHER COSTS
Costs incurred to obtain long-term financing are amortized on a straight-line
basis over the term of the related debt. Other deferred costs include certain
organization costs that are amortized on a straight-line basis over five years.
GOODWILL
The excess of the cost of acquisition over the fair value of net assets acquired
(goodwill) is amortized on a straight-line basis over 40 years. The carrying
value of goodwill will be 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 Company
over the remaining amortization period, the Company would reduce the carrying
value of the goodwill by the estimated shortfall of cash flows.
INCOME TAXES
Deferred income taxes reflect the impact of temporary differences between the
amount of assets and liabilities recognized for financial reporting purposes and
such amounts recognized for income tax purposes.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the accompanying consolidated financial
statements and notes. Actual results could differ from those estimates.
NET INCOME PER SHARE
Net income per share is computed by dividing net income by the weighted average
number of common shares outstanding. The effect of shares issuable under stock
compensation plans is not significant.
(20)
<PAGE>
Swing.N.Slide Corp.
2. BALANCE SHEET DETAIL
<TABLE>
<CAPTION>
DECEMBER 31
1994 1995
----------------
<S> <C> <C>
(In Thousands)
Inventories consist of the following:
Finished goods and work in process........................ $3,978 $2,137
Raw materials............................................. 4,280 4,268
---------------
$8,258 $6,405
===============
Property, plant and equipment consist of the following:
Land...................................................... $ 253 $ 253
Buildings................................................. 3,071 3,117
Shop equipment............................................ 5,035 5,726
Office equipment.......................................... 605 623
Vehicles.................................................. 2 2
---------------
8,966 9,721
Less accumulated depreciation............................. 2,327 3,599
---------------
6,639 6,122
Construction in progress.................................. 280 180
---------------
$6,919 $6,302
===============
3. BANK LINE OF CREDIT, LONG-TERM DEBT AND LEASE COMMITMENTS
Long-term debt consists of the following:
DECEMBER 31
1994 1995
---------------
(In Thousands)
Term loan................................................. $ -- $40,000
Other..................................................... 138 38
---------------
Total long-term debt...................................... 138 40,038
Less amounts due within one year.......................... 100 6,901
---------------
$ 38 $33,137
===============
</TABLE>
On January 19, 1995, in connection with the purchase of shares of common stock,
the Company's operating subsidiary, Newco, entered into a credit agreement
(Credit Agreement) covering a revolving loan facility and term loan facility,
whereby Newco may borrow up to an aggregate of $10,000,000 and $45,000,000,
respectively. The revolving loan facility is effective until January 19, 2001.
Borrowings under the term loan facility are due in twelve semiannual amounts
through December 31, 2000. In addition, mandatory prepayments are required based
on excess cash flow, as defined, and proceeds from sales of equity, sales of
assets, or issuance of debt. Voluntary prepayments are permitted at any time
without penalty.
Borrowings under the revolving loan facility are limited to specified
percentages of inventories and accounts receivable, not to exceed $10,000,000.
Under the Credit Agreement, interest on borrowings is payable quarterly at LIBOR
plus 2.75% or the greater of the bank's prime rate plus 1.5% or the federal
funds rate plus 2.0%, at the Company's option. The Company is subject to an
annual commitment fee of 0.5% of the daily unused portion of the commitment.
The borrowings under the Credit Agreement are secured by substantially all
assets of the Company. The Company is subject to certain restrictive covenants
which include, among other things, restrictions on the payment of dividends or
issuance of capital stock and a limitation on additional indebtedness.
(21)
<PAGE>
Swing.N.Slide Corp.
3. BANK LINE OF CREDIT, LONG-TERM DEBT AND LEASE COMMITMENTS (CONT.)
The weighted average interest rate on the revolving loan facility at December
31, 1994 and 1995, is 7.7% and 10.0%, respectively.
<TABLE>
<S> <C> <C>
Future maturities of long-term debt at December 31, 1995, are as follows (in thousands): 1996............ $6,901
1997............ 7,000
1998............ 8,000
1999............ 9,000
2000............ 9,137
-------
$40,038
=======
</TABLE>
Future minimum payments under a noncancelable operating lease total $2,115,000
and are due as follows: 1996-$207,000; 1997-$282,000; 1998-$291,000; 1999-
$299,000; 2000-$308,000; thereafter-$728,000.
4. INCOME TAXES
Deferred income taxes consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31
1994 1995
--------------
(In Thousands)
<S> <C> <C>
Deferred tax assets:
Noncompete agreement basis difference (Note 7).............. $2,481 $2,276
Inventory basis difference.................................. 47 18
Property, plant and equipment basis differences............. 34 --
Accrued liabilities not currently deductible for tax........ 270 241
Other....................................................... 36 34
--------------
2,868 2,569
Deferred tax liabilities:
Goodwill basis difference................................... 907 1,243
Prepaid expenses currently deductible for tax............... 251 246
--------------
1,158 1,489
--------------
Net deferred tax asset....................................... $1,710 $1,080
==============
</TABLE>
The components of the provision for income taxes for 1993, 1994 and 1995,
consist of the following:
<TABLE>
<CAPTION>
1993 1994 1995
-------------------------
(In Thousands)
<S> <C> <C> <C>
Current:
Federal............................ $3,636 $ 3,360 $1,578
State.............................. 621 497 167
-------------------------
4,257 3,857 1,745
Deferred:
Federal............................ (71) (1,144) 556
State.............................. (9) (151) 74
-------------------------
(80) (1,295) 630
Benefit applied to reduce goodwill... 430 225 225
-------------------------
$4,607 $ 2,787 $2,600
=========================
</TABLE>
(22)
<PAGE>
Swing.N.Slide Corp.
4. INCOME TAXES (CONT.)
The provision for income taxes differs from the amount computed by applying the
federal statutory rate of 35%, 34% and 34% to income before income taxes in
1993, 1994 and 1995, respectively, as follows:
<TABLE>
<CAPTION>
1993 1994 1995
------------------------
(In Thousands)
<S> <C> <C> <C>
Taxes at statutory rate $4,399 $2,509 $2,287
Effects of graduated rates (100) -- --
State income taxes, net of federal benefit 403 328 212
Other (95) (50) 101
------------------------
$4,607 $2,787 $2,600
========================
</TABLE>
5. 401(K) PLAN
The Company sponsors a 401(k) "employee savings" plan which covers employees who
have completed six months of service and are at least 21 years old. The plan
requires Company contributions of 50% of each participant's deferral, not to
exceed 2% of the participant's eligible income. The Company can also make
discretionary contributions to the plan. The Company expensed $101,000, $173,000
and $157,000, respectively, in connection with this plan in 1993, 1994 and 1995.
6. STOCK PROGRAM
The Company's Stock Program is comprised of a Director Plan and an Employee
Plan. Under the Employee Plan, certain key employees of the Company may be
awarded shares of common stock or granted stock options. Under the Director
Plan, certain directors of the Company may be awarded shares of common stock or
granted stock options. Pursuant to an amendment adopted in 1994 to the Stock
Program, Messrs. Code and Simmons are each granted options to purchase 5,000
shares of common stock on the date of each annual meeting of the Board of
Directors beginning with the 1994 meeting so long as Messrs. Code and Simmons
are directors of the Company on such date. The Stock Program has 510,000 shares
of common stock reserved for issuance of options or awarding of shares.
Options granted under the Stock Program may be either (i) options intended to
qualify as "incentive stock options" under Section 422 of the Internal Revenue
Code, or (ii) nonqualified stock options.
Any incentive stock option that is granted under the Stock Program may not be
granted at a price less than the fair market value of the stock on the date of
grant. Nonqualified stock options may be granted at the exercise price
established by a committee, which may be less than, equal to or greater than the
fair market value of the stock on the date of grant.
Each option granted under the Stock Program may be subject to a vesting schedule
and is exercisable, subject to the vesting schedule, for a period of ten years
from the date of grant or, to the extent applicable, for such shorter period as
determined by a committee and shall lapse upon the expiration of such periods or
earlier upon termination of the participant's employment with the Company.
Through December 31, 1995, no shares of common stock have been awarded. On
February 15, 1995, all previously granted outstanding stock options were amended
to a price which was equal to or greater than the fair market value of the stock
on February 15, 1995. The following table reflects the amended stock option
grants. At December 31, 1994 and 1995, there were 360,000 and 251,780 shares
available for grant, respectively.
(23)
<PAGE>
Swing.N.Slide Corp.
6. STOCK PROGRAM (CONT.)
<TABLE>
<CAPTION>
Year Ended December 31
1993 1994 1995
------------------------
<S> <C> <C> <C>
Changes in option shares are as follows:
Outstanding at beginning of year............................. -- 70,310 150,000
Granted:
1993-$5.38 per share....................................... 70,310 -- --
1994-$5.38 to $10.88 per share............................. -- 79,690 --
1995-$3.63 to $5.91 per share.............................. -- -- 121,680
Exercised.................................................... -- -- --
Canceled or expired.......................................... -- -- (13,460)
------------------------
Outstanding at end of year (1995-$3.63 to $10.88 per share).. 70,310 150,000 258,220
========================
Exercisable at December 31, 1995............................. 73,880
=======
</TABLE>
The Company has applied Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees," in accounting for its stock option plans.
Accordingly, because there was no intrinsic value at the date of grant, no
compensation cost has been recognized. No decision has been reached as to how
the Company will apply, beginning in 1996, recently issued Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," which permits the Company to continue accounting for stock
options in the same manner with fair value disclosures or to measure
compensation cost by the fair value of stock options granted after January 1,
1995.
7. RELATED-PARTY TRANSACTIONS
The Company was obligated to pay an officer of the Company an incentive bonus of
37.5% of the Company's excess earnings, as defined, for 1992 and 1993, up to a
maximum payment, in the aggregate for both years, of $3,000,000. During 1993,
$460,000 was earned.
Under a consulting agreement with a general partnership of which the partners
are three stockholders, the Company was to pay 12.5% of the Company's excess
earnings, as defined, for 1992 and 1993, up to a maximum payment, in the
aggregate for both years, of $1,000,000. During 1993, $153,000 was earned.
During 1994, an additional amount of $155,000 was paid to the officer and the
general partnership representing an adjustment to amounts previously paid.
The obligations of the Company referred to above were recorded as additional
goodwill when earned and are amortized over the remaining life of goodwill.
During the fourth quarter of 1994, the Company recorded a charge to operations
of $3,333,000 resulting from the write-off of the remaining net book value of
noncompetition agreements with certain stockholders. The markets in which the
Company operates have become increasingly competitive and the Company believed
the key knowledge and relationships these stockholders possessed had been
developed by its competitors.
(24)
<PAGE>
Swing.N.Slide Corp.
8. MAJOR CUSTOMERS
Sales to one customer were 13% and 16% of net sales during 1994 and 1995,
respectively. Accounts receivable from this customer represented 49% and 41% of
accounts receivable at December 31, 1994 and 1995, respectively. Sales to
another customer were 11% of net sales during 1995 and accounts receivable from
this customer were not significant.
9. CONTINGENT LIABILITY
The Company has been named as a defendant in the proceeding Robert Barbieri v.
Swing-N-Slide Corp., Thomas R. Baer, Richard G. Mueller, Andrew W. Code, James
M. Dodson, Peter M. Gotsch, Terence S. Malone, Henry B. Pearsall and Brian P.
Simmons. The complaint alleges that the Company's purchase of 3.6 million of
outstanding shares of common stock, which was completed in January 1995, was the
result of a deceptive and manipulative plan on the part of the individual
defendants to enrich themselves. The plaintiff seeks certification of two
classes of stockholders consisting of all stockholders other than the defendants
at November 14, 1994 or at March 15, 1994. The relief sought includes the
imposition of a constructive trust on all proceeds of the repurchase received by
the defendants as well as various non-monetary forms of relief. The parties are
currently conducting discovery and the Company intends to vigorously defend the
claims. The Company believes it has substantial defenses to all the claims and
that resolution of the claims should not have any material adverse effect on the
financial condition or results of operations of the Company.
10. SUBSEQUENT EVENT
On January 4, 1996, the Company entered into an agreement with an unrelated
general partnership of which one of the general partners is a group of the
Company's senior management, pursuant to which the general partnership commenced
a tender offer for up to 3,510,000 shares of common stock of the Company at a
purchase price of $6.50 per share. The agreement also provides that within 30
days after successful completion of the tender offer, the general partnership
will invest between $5,000,000 and $7,380,000 through the purchase of the
Company's newly authorized convertible debentures or convertible preferred
stock. The tender offer expires February 8, 1996, unless extended.
11. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
1994 1995
---------------------------------------------- ------------------------------------------
1st 2nd 3rd 4th 1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter/(a)/ Quarter Quarter Quarter Quarter
---------------------------------------------- ------------------------------------------
(In Thousands, Except Per Share Data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $17,655 $23,853 $4,823 $ 5,485 $13,863 $19,643 $6,763 $4,808
Gross profit 9,512 12,499 1,479 2,010 6,604 10,301 3,014 1,983
Net income (loss) 3,434 4,588 (582) (2,849) 1,233 3,218 60 (384)
Net income (loss)
per share .36 .48 (.06) (.30) .18 .54 .01 (.06)
</TABLE>
(a) See Note 7 for adjustment recorded in the fourth quarter of 1994.
(25)
<PAGE>
Swing.N.Slide Corp.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
(26)
<PAGE>
Swing.N.Slide Corp.
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning directors is incorporated by reference from the Election
of Directors section of the Company's Proxy Statement for the annual meeting of
stockholders on April 25, 1996. Information concerning the executive officers is
included in Exhibit A, Executive Officers of Swing-N-Slide, of the Company's
Proxy Statement for the annual meeting of stockholders on April 25, 1996.
ITEM 11 - EXECUTIVE COMPENSATION
Incorporated by reference from the Executive Compensation section of the
Company's Proxy Statement for the annual meeting of stockholders on April 25,
1996.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Incorporated by reference from the Security Ownership of Management and
Principal Stockholders section of the Company's Proxy Statement for the annual
meeting of stockholders on April 25, 1996.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated by reference from the Executive Compensation and Certain
Relationships and Related Party Transactions sections of the Company's Proxy
Statement for the annual meeting of stockholders on April 25, 1996.
(27)
<PAGE>
Swing.N.Slide Corp.
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Financial Statements and Financial Statement Schedules
The following consolidated financial statements are included in Item 8:
<TABLE>
<CAPTION>
Form 10-K
Page Number
-----------
<S> <C>
SWING-N-SLIDE CORP.:
Consolidated Balance Sheets at December 31, 1994 and 1995........................... 16
For the years ended December 31, 1993, 1994 and 1995:
- Consolidated Statements of Income............................................... 17
- Consolidated Statements of Stockholders Equity (deficit)........................ 18
- Consolidated Statements of Cash Flows........................................... 19
Notes to Consolidated Financial Statement........................................... 20-25
</TABLE>
<TABLE>
<CAPTION>
Form 10-K
Page Number
-----------
<S> <C>
The following consolidated financial statement schedules are included in Item 14(d):
Schedule I - Condensed Financial Information of Registrant......................... 29-30
Schedule II - Valuation and Qualifying Accounts.................................... 31
</TABLE>
All other schedules are omitted since the required information is not present or
is not present in amounts sufficient to require submission of the schedule, or
because the information required is included in the consolidated financial
statements or the notes thereto.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the last quarter of the period covered
by this report.
<TABLE>
<CAPTION>
Form 10-K
Page Number
-----------
<S> <C>
(c) Exhibits
Exhibit Number
22) Subsidiaries..................................... 32
23) Consent of Independent Auditors.................. 33
</TABLE>
(28)
<PAGE>
Swing.N.Slide Corp.
CONDENSED FINANCIAL INFORMATION OF REGISTRANT - SCHEDULE I
<TABLE>
<CAPTION>
CONDENSED BALANCE SHEET DECEMBER 31
1994 1995
----------------------
(In Thousands)
<S> <C> <C>
Investment in, and amounts due from, wholly owned subsidiary................. $35,965 $ 34,395
----------------------
Total assets................................................................. $35,965 $ 34,395
======================
Current liabilities.......................................................... $ 540 $ 570
Amounts due to wholly owned subsidiary....................................... -- 34,621
Stockholders equity:
Common Stock............................................................. 96 96
Cost of 3,600,000 shares of common stock in treasury..................... -- (40,348)
Other stockholders' equity............................................... 35,329 39,456
----------------------
35,425 (796)
----------------------
Total liabilities and stockholders' equity................................... $35,965 $ 34,395
======================
</TABLE>
CONDENSED STATEMENT OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1993 1994 1995
----------------------
(In Thousands)
<S> <C> <C> <C>
Management fees from wholly owned subsidiary...................................... $2,000 $2,100 $2,100
Costs and expenses:
Administrative expenses......................................................... 353 521 432
Interest expense................................................................ 552 -- --
----------------------
905 521 432
----------------------
Income before income taxes and equity in net income of subsidiary................. 1,095 1,579 1,668
Provision for income taxes........................................................ 372 540 570
Equity in net income of subsidiary................................................ 7,239 3,552 3,029
----------------------
Net income........................................................................ $7,962 $4,591 $4,127
======================
</TABLE>
(29)
<PAGE>
Swing.N.Slide Corp.
CONDENSED FINANCIAL INFORMATION OF REGISTRANT - SCHEDULE I (CONT.)
CONDENSED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1993 1994 1995
--------------------------
(In Thousands)
<S> <C> <C> <C>
Operating Activities:
Net Income....................................... $ 7,962 $ 4,591 $ 4,127
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity in net income of subsidiary............. (7,239) (3,552) (3,029)
Increase in current liabilities................ 270 168 34,651
------- ------- --------
Net cash provided by operating activities...... 993 1,207 35,749
Net cash provided by (used in) investing
activities........................................ 7,886 (1,207) 4,599
Financing Activities:
Purchase of treasury stock....................... -- -- (40,348)
Payments on long-term obligations................ (8,879) -- --
------- ------- --------
Net cash used in financing activities.............. (8,879) -- (40,348)
------- ------- --------
Net increase in cash............................... -- -- --
Cash at beginning of year.......................... -- -- --
------- ------- --------
Cash at end of year................................ $ -- $ -- $ --
======= ======= ========
</TABLE>
(30)
<PAGE>
Swing.N.Slide Corp.
VALUATION AND QUALIFYING ACCOUNTS - SCHEDULE II
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
BEGINNING END OF
DESCRIPTION OF YEAR ADDITIONS DEDUCTIONS/(1)/ YEAR
- ----------------------------------------------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year ended December 31, 1993 $ 46 $108 $ 29 $125
==============================================
Year ended December 31, 1994 $125 $150 $200 $ 75
==============================================
Year ended December 31, 1995 $ 75 $ 25 $ 9 $ 91
==============================================
</TABLE>
- --------------------------------------
(1) Uncollectible amounts written off, net of recoveries.
(31)
<PAGE>
Swing.N.Slide Corp.
EXHIBIT 22
The registrant has no parent but has the subsidiary listed below which is
included in the accompanying consolidated financial statements.
Newco, Inc. (Wisconsin Corporation) - Wholly owned
(32)
<PAGE>
Exhibit 23
Consent of Ernst & Young LLP, Independent Auditors
We consent to the incorporation by reference in the Registration Statement (Form
S-8) pertaining to the Swing-N-Slide Corp. Stock Program of our report dated
January 30, 1996, with respect to the consolidated financial statements and
schedules of Swing-N-Slide Corp. included in the Annual Report (Form 10-K) for
the year ended December 31, 1995.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Madison, Wisconsin
March 26, 1996
33
<PAGE>
Swing.N.Slide Corp.
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on behalf of the
undersigned, thereunto duly authorized.
<TABLE>
<CAPTION>
SWING-N-SLIDE CORP. Date
-------
By /s/ Richard G. Mueller 3/29/96
----------------------------------------------
Richard G. Mueller
Chairman, President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Name and Title Signature Date
- ------------------------------------------------ ------------------------- ------
<S> <C> <C>
RICHARD G. MUELLER /s/ Richard G. Mueller 3/29/96
Chairman of the Board of Directors, President and -------------------------
Chief Executive Officer Richard G. Mueller
RICHARD E. RUEGGER /s/ Richard E. Ruegger 3/29/96
Vice President-Finance, Chief Financial Officer, -------------------------
Secretary and Treasurer (Principal Financial and Richard E. Ruegger
Accounting Officer)
THOMAS R. BAER /s/ Thomas R. Baer 3/29/96
Director -------------------------
Thomas R. Baer
DAVID S. EVANS /s/ David S. Evans 3/29/96
Director -------------------------
David S. Evans
GEORGE N. HERRERA /s/ George N. Herrera 3/29/96
Director -------------------------
George N. Herrera
TERENCE S. MALONE /s/ Terence S. Malone 3/29/96
Director -------------------------
Terence S. Malone
ANTOINE G. TREUILLE /s/ Antoine G. Treuille 3/29/96
Director -------------------------
Antoine G. Treuille
CAROLINE L. WILLIAMS /s/ Caroline L. Williams 3/29/96
Director ------------------------
Caroline L. Williams
</TABLE>
(34)
Exhibit 23.(i)(1)
Consent of Ernst & Young LLP, Independent Auditors
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-2) and related Prospectus of Swing-N-Slide
Corp. for the registration of $4,306,722 10% Convertible Subordinated
Debentures due October 15, 2004 and shares of its common stock issuable
upon conversion of the 10% Convertible Subordinated Debentures and to the
incorporation by reference therein of our report dated January 30, 1996,
with respect to the consolidated financial statements and schedules of
Swing-N-Slide Corp. included in its Annual Report (Form 10-K) for the year
ended December 31, 1995, filed with the Securities and Exchange
Commission.
/s/
Madison, Wisconsin ERNST & YOUNG LLP
May 13, 1996
SWING-N-SLIDE CORP.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each individual whose
signature appears below hereby constitutes and appoints RICHARD G. MUELLER
and RICHARD E. RUEGGER, and each of them, his or her true and lawful
attorneys-in-fact and agents, each with the full power of substitution for
him or her and in his or her name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective
amendments) to the Registration Statement on Form S-2, under the
Securities Act of 1933, as amended, filed by Swing-N-Slide Corp., a
Delaware corporation, and to file the same, with all exhibits thereto, and
all documents in connection therewith with the Securities and Exchange
Commission hereby ratifying and confirming all that each of said
attorneys-in-fact or any of them, or their or his substitutes, may do or
cause to be done by virtue thereof.
The validity of this Power of Attorney shall not be affected in
any manner by reason of the execution, at any time, of other powers of
attorney by the undersigned in favor of persons other than the attorneys-
in-fact named herein.
/s/ Richard G. Mueller
Richard G. Mueller
Director, Chairman of the Board,
President and Chief Executive Officer
/s/ Richard E. Ruegger
Richard E. Ruegger
Vice President - Finance, Chief
Financial Officer, Secretary and
Treasurer (Principal Financial and
Accounting Officer)
/s/ Thomas R. Baer
Thomas R. Baer
Director
/s/ David S. Evans
David S. Evans
Director
/s/ George N. Herrera
George N. Herrera
Director
/s/ Timothy R. Kelleher
Timothy R. Kelleher
Director
/s/ Terence S. Malone
Terence S. Malone
Director
/s/ Caroline L. Williams
Caroline L. Williams
Director
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE UNAUDITED
CONSOLIDATED BALANCE SHEET OF THE COMPANY FOR THE PERIOD ENDED MARCH 31, 1996
AND THE UNAUDITED CONSOLIDATED INCOME STATEMENT OF THE COMPANY FOR THE PERIOD
ENDING MARCH 31, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 7
<SECURITIES> 0
<RECEIVABLES> 10,138
<ALLOWANCES> 119
<INVENTORY> 9,933
<CURRENT-ASSETS> 22,155
<PP&E> 9,965
<DEPRECIATION> 3,894
<TOTAL-ASSETS> 55,144
<CURRENT-LIABILITIES> 21,526
<BONDS> 35,550
0
0
<COMMON> 96
<OTHER-SE> (2,028)
<TOTAL-LIABILITY-AND-EQUITY> 55,144
<SALES> 9,602
<TOTAL-REVENUES> 9,602
<CGS> 4,583
<TOTAL-COSTS> 7,393
<OTHER-EXPENSES> 2,609
<LOSS-PROVISION> 26
<INTEREST-EXPENSE> 1,014
<INCOME-PRETAX> (1,414)
<INCOME-TAX> (263)
<INCOME-CONTINUING> (1,151)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,151)
<EPS-PRIMARY> (0.19)
<EPS-DILUTED> (0.19)
</TABLE>
