<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 28, 1998
REGISTRATION NO. 333-53987
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
AMENDMENT NO.2
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
JACKSON PRODUCTS, INC.
SEE TABLE OF ADDITIONAL REGISTRANTS BELOW
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 3231 75-2470881
(STATE OR OTHER JU- (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
RISDICTION OF CLASSIFICATION NUMBER) IDENTIFICATION NUMBER)
INCORPORATION OR
ORGANIZATION)
JACKSON PRODUCTS, INC.
2997 CLARKSON ROAD
CHESTERFIELD, MISSOURI 63017
(314) 207-2700
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------
CHRISTOPHER T. PAULE
JACKSON PRODUCTS, INC.
2997 CLARKSON ROAD
CHESTERFIELD, MISSOURI 63017
(314) 207-2700
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
---------------
WITH A COPY TO:
JAMES B. CARLSON, ESQ.
MAYER, BROWN & PLATT
1675 BROADWAY
NEW YORK, NEW YORK 10019
(212) 506-2515
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
CALCULATION OF REGISTRATION FEE
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- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE(1) REGISTRATION FEE
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
9 1/2% Series B Senior
Subordinated Notes
Due 2005.............. $115,000,000 100% $115,000,000 $33,925(2)
- -------------------------------------------------------------------------------------------
Guarantees of 9 1/2%
Series B
Senior Subordinated
Notes Due 2005 ....... (3) (3) (3) (3)
</TABLE>
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- -------------------------------------------------------------------------------
(1) Estimated solely for the purpose of calculating the registration fee.
(2) Previously paid.
(3) No additional consideration will be paid by the purchasers of such
securities. Pursuant to Rule 457 under the Securities Act of 1933, no
separate fee is payable therefor.
---------------
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 THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
(continued on following page)
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<PAGE>
(continued from previous page)
<TABLE>
<CAPTION>
PRIMARY ADDRESS, INCLUDING ZIP CODE,
STATE OR OTHER STANDARD I.R.S. AND TELEPHONE NUMBER,
EXACT NAME OF JURISDICTION OF INDUSTRIAL EMPLOYER INCLUDING AREA CODE, OF
REGISTRANT AS SPECIFIED INCORPORATION CLASSIFICATION IDENTIFICATION REGISTRANT'S PRINCIPAL
IN ITS CHARTER OR ORGANIZATION CODE NUMBER NUMBER EXECUTIVE OFFICES
----------------------- --------------- -------------- -------------- ----------------------------
<S> <C> <C> <C> <C>
Flex-O-Lite, Inc. ...... Delaware 3231 23-2466378 2997 Clarkson Road
Chesterfield, Missouri 63017
(314) 207-2700
American Allsafe Delaware 3231 43-1812817 2997 Clarkson Road
Company................ Chesterfield, Missouri 63017
(314) 207-2700
Silencio/Safety Direct, Nevada 3231 75-2651894 2997 Clarkson Road
Inc. .................. Chesterfield, Missouri 63017
(314) 207-2700
OSD Envizion, Inc. ..... Delaware 3231 43-1760221 2997 Clarkson Road
Chesterfield, Missouri 63017
(314) 207-2700
Crystaloid Technologies, Delaware 3231 43-1813390 2997 Clarkson Road
Inc. .................. Chesterfield, Missouri 63017
(314) 207-2700
</TABLE>
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED JULY 28, 1998
PROSPECTUS
JACKSON PRODUCTS, INC.
OFFER TO EXCHANGE ITS 9 1/2% SERIES B SENIOR SUBORDINATED NOTES DUE 2005, WHICH
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT, FOR ANY AND ALL OF ITS
OUTSTANDING 9 1/2% SERIES A SENIOR SUBORDINATED NOTES DUE 2005.
Notwithstanding the designation of the Notes as Senior Subordinated Notes,
the Company has not issued, and does not have any current firm arrangements to
issue, any significant indebtedness to which the Notes would be senior, and the
Notes will be effectively subordinate to essentially all of the outstanding
indebtedness of the Company and its subsidiaries. The Company does not have any
current or pending arrangements or agreements to incur any additional
significant indebtedness to which the Notes would be subordinate.
Jackson Products, Inc., a Delaware corporation (the "Company"), hereby
offers, upon the terms and subject to the conditions set forth in this
Prospectus and in the accompanying Letter of Transmittal (the "Letter of
Transmittal") (which together constitute the "Exchange Offer"), to exchange up
to $115 million aggregate principal amount of 9 1/2% Series B Senior
Subordinated Notes due 2005 (the "New Notes"), of the Company for a like
principal amount of the Company's issued and outstanding 9 1/2% Series A Senior
Subordinated Notes due 2005 (the "Old Notes" and collectively with the New
Notes, the "Notes"), with the holders (each holder of Old Notes, a "Holder")
thereof. The New Notes will be fully and unconditionally guaranteed, on a
senior subordinated basis, by all of the Company's Domestic Subsidiaries (as
defined). The terms of the New Notes are substantially identical to the terms
of the Old Notes that are to be exchanged therefor. See "Description of Notes."
The Company will receive no proceeds in connection with the Exchange Offer.
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON , 1998, UNLESS EXTENDED.
The Notes will be general unsecured obligations of the Company, subordinated
in right of payment to all existing and future Senior Indebtedness of the
Company, including indebtedness under the New Credit Agreement, and pari passu
or senior in right of payment to any future subordinated indebtedness of the
Company. As of March 31, 1998, the aggregate principal amount of Senior
Indebtedness (as defined) of the Company to which the Notes would have been
subordinated would have been approximately $78.3 million and there would have
been no Indebtedness (as defined) as to which the Notes would have been senior.
The Indenture permits the Company and its subsidiaries to incur additional
indebtedness, including Senior Indebtedness, subject to certain limitations.
Other than with respect to drawings under the New Credit Agreement, the Company
has no current intentions or plans to incur such additional indebtedness. See
"Description of Notes."
The Company will accept for exchange any and all Old Notes that are validly
tendered and not withdrawn on or prior to 5:00 p.m., New York City time, on
, 1998, unless the Exchange Offer is extended (the "Expiration Date").
Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m., New York
City time, on the Expiration Date. The Exchange Offer is not conditioned upon
any minimum principal amount of Old Notes being tendered for exchange. However,
the Exchange Offer is subject to certain customary conditions which may be
waived by the Company. The Company has agreed to pay the expenses of the
Exchange Offer. There will be no cash proceeds to the Company from the Exchange
Offer. See "Use of Proceeds."
The Old Notes were issued and sold on April 22, 1998 (the "Old Note
Offering"), in a transaction not registered under the Securities Act of 1933,
as amended (the "Securities Act"), in reliance upon the exemption provided in
Section 4(2) of the Securities Act. Accordingly, the Old Notes may not be
reoffered, resold or otherwise pledged, hypothecated or transferred in the
United States unless so registered or unless an applicable
(Cover continued on following page)
-----------
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY HOLDERS OF
OLD NOTES WHO TENDER THEIR OLD NOTES IN THE EXCHANGE OFFER, SEE "RISK FACTORS"
ON PAGE OF THIS PROSPECTUS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
-----------
The date of this Prospectus is , 1998
<PAGE>
(Continued from previous page)
exemption from the registration requirements of the Securities Act is
available. The New Notes are being offered for exchange in order to satisfy
certain obligations of the Company under a Registration Rights Agreement (as
defined) between the Company and the Initial Purchasers (as defined). The New
Notes will be obligations of the Company evidencing the same indebtedness as
the Old Notes and will be entitled to the benefits of the same Indenture (as
defined), which governs both the Old Notes and the New Notes. The form and
terms (including principal amount, interest rate, maturity and ranking) of the
New Notes are the same as the form and terms of the Old Securities, except
that the New Notes (i) have been registered under the Securities Act and
therefore will not be subject to certain restrictions on transfer applicable
to the Old Notes, (ii) will not be entitled to registration rights and (iii)
will not provide for any Liquidation Damages (as defined). See "The Exchange
Offer--Registration Rights; Liquidated Damages."
Prior to the Exchange Offer, there has been no established trading market
for the Old Notes or the New Notes. The Company does not intend to apply for
listing or quotation of the New Notes on any securities exchange or stock
market. Therefore, there can be no assurance as to the liquidity of any
trading market for the New Notes or that an active public market for the New
Notes will develop. Any Old Notes not tendered and accepted in the Exchange
Offer will remain outstanding. To the extent that Old Notes are tendered and
accepted in the Exchange Offer, a holder's ability to sell untendered, or
tendered but unaccepted, Old Notes could be adversely affected. Following
consummation of the Exchange Offer, the holders of Old Notes will continue to
be subject to the existing restrictions on transfer thereof and the Company
will have no further obligations to such holders to provide for the
registration of the Old Notes under the Securities Act. See "The Exchange
Offer--Consequences of Not Exchanging Old Notes."
The Company is making the Exchange Offer pursuant to the registration
statement of which this Prospectus is a part in reliance upon the position of
the staff of the Securities and Exchange Commission (the "Commission") set
forth in certain no-action letters addressed to other parties in other
transactions. However, the Company has not sought its own no-action letter and
there can be no assurance that the staff of the Commission would make a
similar determination with respect to the Exchange Offer as in such other
circumstances. Based on these interpretations by the staff of the Commission,
the Company believes that the New Notes issued pursuant to the Exchange Offer
may be offered for resale, resold and otherwise transferred by holders thereof
(other than (i) any such holder that is an "affiliate" of the Company within
the meaning of Rule 405 under the Securities Act, (ii) an Initial Purchaser
who acquired the Old Notes directly from the Company solely in order to resell
pursuant to Rule 144A of the Securities Act or any other available exemption
under the Securities Act, or (iii) a broker-dealer who acquired the Old Notes
as a result of market making or other trading activities) without compliance
with the registration and prospectus delivery requirements of the Securities
Act, provided that such New Notes are acquired in the ordinary course of such
Holders' business and such Holders have no arrangement with any person to
participate in the distribution (within the meaning of the Securities Act) of
such New Notes. Each broker-dealer that receives New Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Notes. By tendering, each
Holder which is not a broker-dealer will represent to the Company that, among
other things, the person receiving the New Notes, whether or not such person
is the Holder, (i) will acquire the New Notes in the ordinary course of such
person's business, (ii) has no arrangement or understanding with any person to
participate in a distribution the New Notes and (iii) is not engaged in and
does not intend to engage in a distribution of the New Notes. If any Holder or
any such other person has an arrangement or understanding with any person to
participate in a distribution of such New Notes, is engaged in or intends to
engage in a distribution of such New Notes, is an "affiliate," as defined
under Rule 405 of the Securities Act, of the Company, or acquired the Old
Notes as a result of market making or other trading activities, then such
Holder or any such other person (i) can not rely on the applicable
interpretations of the staff of the Commission and (ii) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. The Letter of Transmittal states that
by so acknowledging and by delivering a prospectus, a broker-dealer will not
be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be amended or supplemented from
time to time, may be used by a broker-dealer in connection with resales of New
Notes received in exchange for Old Notes where such Old Notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities. The Company has agreed that, for a period of 180 days after the
Expiration Date (as defined), it will make this Prospectus available to any
broker-dealer for use in connection with any such resale. See "Plan of
Distribution."
<PAGE>
SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, appearing
elsewhere in this Prospectus. Unless otherwise indicated, all references in
this Prospectus to the Company's business and pro forma data give effect to the
consummation of the Acquisitions and the acquisition by the Company in 1997 of
Lansec (as defined herein). Unless otherwise indicated, references in this
Prospectus to the "Company" are to Jackson Products, Inc., its subsidiaries and
their respective predecessors and references to a fiscal year are to the twelve
months ended December 31 of such year.
THE COMPANY
Jackson Products, Inc. ("JPI" or the "Company") is a leading designer,
manufacturer and distributor of safety products serving a variety of niche
applications within the personal and highway safety markets throughout North
America and Europe. JPI markets its products under established, well-known
brand names to an extensive network of over 8,000 distributors, wholesalers,
contractors and government agencies. Management believes that the Company holds
leading market share positions in each of its primary product lines, reflecting
the Company's (i) proprietary technology, (ii) strong reputation and
relationships with its customer base, (iii) breadth of product lines and (iv)
low cost manufacturing operations.
Due to strong industry fundamentals, its solid competitive position and
strategic acquisitions, the Company has achieved significant and consistent
growth under its current management team. Net sales grew from $92.8 million in
1994 to $173.6 million on a pro forma basis in 1997, representing a compounded
annual growth rate ("CAGR") of 23.2%. In addition, the Company has improved
profitability through the rationalization of non-core product lines and
implementation of cost control initiatives. During the same period, the
Company's EBITDA grew from $16.9 million to $30.7 million on a pro forma basis,
representing a CAGR of 22.0%. In addition, due to its low capital expenditure
requirements, the Company has historically generated significant free cash
flow. The Company currently focuses on two product groups: (i) personal safety
products, which represented approximately 60% of pro forma net sales in 1997,
and (ii) highway safety products, which represented approximately 40% of pro
forma net sales in 1997.
PERSONAL SAFETY PRODUCTS
Personal safety products generated net sales of $103.5 million on a pro forma
basis for the Company in 1997. The Company offers over 10,000 SKU's of personal
safety products designed to protect individuals from various head, eye, ear and
face hazards in the workplace. The Company's product offerings include welding
helmets and auto-darkening welding filter lenses, hardhats, face shields,
safety spectacles and prescription safety eyewear frames. Approximately 43% of
the Company's personal safety product sales are to distributors in the welding
industry. Management believes that JPI is the leading supplier of welding
safety equipment in North America, with an estimated 55% market share. JPI's
Electronic Quick Change ("EQC") product line offers a technologically advanced
range of welding helmet filter lenses featuring the world's fastest auto-
darkening switching speed. Switching speed represents the time required for a
lens to switch from a light to dark state. Auto-darkening technology allows
welders to see without lifting the helmet, therefore improving worker
productivity while significantly reducing repetitive motion and eye injuries.
The U.S. industrial market for personal safety products focused on the eye,
face, ear and head is estimated by management to have been in excess of $610
million in 1997. JPI's sales of personal safety products have benefited and are
expected to continue to benefit from increased workplace regulation and safety
awareness. The Company believes the outlook for the U.S. personal safety
products market is continually being influenced by heightened social awareness
regarding worker health and safety, which in turn stimulates legislation
requiring
1
<PAGE>
and monitoring the use of safety products in commercial and industrial
environments. The Company expects that the enforcement of safety regulations by
government agencies, such as the Occupational Safety and Health Administration
("OSHA"), and the efforts of employers and insurance carriers to contain group
health care and workers' compensation costs should maintain the growth of the
market.
In order to capitalize on these strong industry fundamentals, the Company has
made several recent acquisitions to build its personal safety products
business. In 1996, the Company acquired OSD Envizion, Inc. ("OSD"), providing
JPI with an estimated 70% market share of the North American auto-darkening
welding filter lens market and establishing JPI as the only North American-
based manufacturer of auto-darkening welding filter lenses. The acquisition of
Crystaloid Electronics Company (to be renamed Crystaloid Technologies, Inc.
("Crystaloid")) and its expertise in liquid crystal technology is expected to
strengthen the Company's lead in auto-darkening technology and allow for the
development of additional applications in new markets. In 1997, the Company
acquired Lansec Holding GmbH ("Lansec"), providing the Company with
distribution capabilities throughout Europe. The acquisition of American
Allsafe Company ("Allsafe") and Silencio/Safety Direct, Inc. ("Silencio/Safety
Direct") will further expand the range of the Company's personal safety
products and enhance the Company's channels of distribution.
HIGHWAY SAFETY PRODUCTS
Highway safety products generated net sales of $70.1 million on a pro forma
basis for the Company in 1997. Highway safety products offered by the Company
include traffic cones and markers, barricades, reflective clothing and glass
beads. Glass beads provide the reflective agent in an extensive range of
applications, such as highway striping, traffic signs, aviation runways,
license plates and reflective tape. The Company believes that it has a leading
market share in North America in the majority of its primary highway safety
product categories.
The U.S. market for highway safety products sold by JPI is estimated by the
Company to be approximately $450 million. The demand for highway safety
products is primarily driven by state and federal expenditures on highway
construction and maintenance. Management expects such government spending to
increase in the future to address the deteriorating and increasingly congested
North American highway infrastructure. The U.S. Federal Highway Administration
has estimated that nearly one-third of the nation's interstate highways are in
need of immediate repair. Federal highway funding since 1991 has been governed
by the Intermodel Surface Transportation Efficiency Act of 1991 ("ISTEA") which
provided $124 billion for highway programs to be funded over its initial six-
year period ending October 1997. The U.S. Senate and House of Representatives
approved a new joint public works bill, the Transportation Equity Act for the
21st Century ("TEA-21"), on May 22, 1998. TEA-21 provides for $173 billion in
highway funding over the next six years, a 39.5% increase over ISTEA.
COMPETITIVE STRENGTHS
The Company believes that it benefits from the following competitive
strengths:
Leading Market Share Positions. The Company has focused on serving distinct
niche markets in which it has been able to build leading market share
positions, providing the Company with a number of marketing, pricing and cost
advantages. The Company is the leading supplier of welding safety equipment in
North America with an estimated 55% market share and the leading supplier of
auto-darkening welding filter lenses with an estimated 70% share of the North
American market. The Company is the only North American manufacturer and
distributor of high index glass beads, the second largest manufacturer of
traffic and industrial glass beads, and the North American market leader in
each of its other primary highway safety product categories.
Proprietary Technology. In December 1994, the Company acquired EQC auto-
darkening technology for use in welding helmets. This technology provides the
Company with the most advanced welding helmet filter
2
<PAGE>
lenses on the market, with a switching speed at 1/25,000th of a second, which
is five times faster than competing auto-darkening lenses. Management believes
that the Crystaloid Acquisition will enable the Company to further develop this
technology within the safety products industry. The Company's EQC products have
experienced rapid growth in net sales, as they increased from approximately $1
million in 1991 to approximately $23 million on a pro forma basis in 1997.
Strong Customer Relationships and Brand Name Recognition. The Company has
developed strong relationships and achieved brand name recognition in most of
its distribution channels due to its focus on providing superior customer
service and quality products that address the specialized needs of its end-
users. Each of the Company's major brand names, including Jackson, Morsafe,
Flex-O-Lite, SMC, American Allsafe Co. and Team Silencio, are well established
with good recognition among end-users. As a result of its reputation and
relationships, the Company has been able to generate substantial repeat
business and build stability throughout its extensive network of over 8,000
distributors, wholesalers, contractors and government agencies.
Breadth of Product Line. In an industry characterized by small niche
manufacturers, management believes those manufacturers that provide "one-stop
shopping," such as the Company, hold a significant advantage as customers seek
to consolidate supply sources. The Company believes that this breadth of
product line will prove particularly helpful in building upon JPI's recent
entry into the European welding safety product market.
Low-Cost Manufacturing. Management believes that the Company has achieved
low-cost producer status in several key product areas. Proximity of Company
facilities to natural gas pipelines and major customers and the Company's ready
access to supplies of glass contribute to lower transportation and product
costs in its glass bead business. The Company has also implemented a number of
programs over the last several years aimed at improving its overall cost
structure, including plant consolidations, shifting of production resources and
non-core product rationalizations.
BUSINESS STRATEGY
The Company's business strategy includes the following key elements:
Leverage Synergies Across Subsidiaries. The Company has identified a number
of material synergies that can be realized between its existing and newly
acquired subsidiaries. It is expected that similar synergies will also be
available in future acquisitions. In order to realize such synergies, the
Company intends to (i) effectively allocate production among its manufacturing
facilities, (ii) implement cross selling programs to access new channels of
distribution and customers, and (iii) access newly acquired sales capabilities
to expand its distribution base.
Continue to Develop Innovative New Products. Capitalizing on its market
knowledge, its in-house technological capabilities and its new product
development team, JPI intends to continue developing new products to respond to
the changing demands of its end-users and to create additional sales. During
the last three fiscal years, the Company has introduced more than 50 new
products or product enhancements, including an expansion of the highly
innovative EQC product line, several new safety eyewear styles, nonskid
reflective tape, high-intensity reflective beads and a light-weight DuraBill
channelizer base. Management believes JPI's new product development efforts
will be significantly enhanced with the acquisition of Crystaloid's liquid
crystal display technological capabilities.
Further Develop Presence in European Markets. The Company established a
European market presence with the October 1997 acquisition of Lansec. The
acquisition of Lansec provides JPI in-house European distribution for its auto-
darkening product line as well as an overseas platform for distribution of
other JPI welding safety products. The Company intends to continue to develop
its European distribution since it believes the breadth of its product line,
its EQC technology and lower labor costs offer substantial competitive
advantages over existing European welding safety product manufacturers.
3
<PAGE>
Selectively Pursue Strategic Acquisitions. The highly fragmented industry in
which the Company operates offers significant opportunity for additional
synergistic acquisitions. The Company intends to selectively pursue
acquisitions that will further its growth strategy by providing new geographic
markets, additional distribution channels, complementary product lines and
expanded technological capabilities.
THE ACQUISITIONS
Pursuant to a stock purchase agreement, dated March 30, 1998, the Company
acquired all of the outstanding capital stock of Allsafe and Silencio/Safety
Direct for $29.5 million (the "Allsafe Acquisition"). Products sold by these
companies include safety goggles, spectacles, hardhats, hazard warnings and
hearing safety products. The Allsafe Acquisition provides JPI with
complementary product lines, additional channels of distribution and new end-
users. Management has identified a number of potential manufacturing cost
synergies and cross-selling opportunities from the Allsafe Acquisition. Allsafe
and Silencio/Safety Direct generated an aggregate of approximately $32.5
million of net sales in 1997.
Pursuant to a stock purchase agreement, dated March 31, 1998, the Company
acquired all of the outstanding capital stock of Crystaloid for $6.5 million
(the "Crystaloid Acquisition"), $0.5 million of which is payable 18 months from
the April 23, 1998 closing of the Crystaloid Acquisition. Crystaloid is a
manufacturer of liquid crystal displays for use in aviation and industrial
equipment, including the Company's line of auto-darkening filter lenses and
welding helmets. The acquisition provides JPI with an in-house auto-darkening
technology base for both existing and new safety products and an in-house
source for its current liquid crystal shutter needs. Crystaloid generated
approximately $8.6 million of net sales in 1997.
In addition to its acquisition of Allsafe, Silencio/Safety Direct and
Crystaloid for approximately $45 million, on July 22, 1998, the Company,
through Allsafe, acquired all of the outstanding capital stock of Kedman
Company for a total purchase price of approximately $10.0 million.
----------------
Each of the following is a registered trademark of the Company: Jackson,
Morsafe, Flex-O-Lite, EQC, Aden, AOP, Contour Marker, American Allsafe Co.,
Team Silencio, and Lamba.
4
<PAGE>
THE EXCHANGE OFFER
Securities Offered........ $115 million principal amount of 9 1/2% Series B
Senior Subordinated Notes due 2005. The terms of
the New Notes and the Old Notes are identical in
all material respects, except for certain transfer
restrictions and registration rights relating to
the Old Notes and except for certain Liquidated
Damages provisions relating to the Old Notes
described below under "--Summary Description of
the New Notes."
Issuance of Old Notes;
Registration Rights...... The Old Notes were issued on April 22, 1998 to
Jefferies & Company, Inc. and Goldman, Sachs & Co.
(collectively, the "Initial Purchasers"), pursuant
to April 16, 1998, the terms of a Purchase
Agreement, dated as of April 16, 1998, by and
between the Company and the Initial Purchasers.
Pursuant to a registration rights agreement
between the Company and the Initial Purchasers
(the "Registration Rights Agreement"), the Company
agreed (i) to file a registration statement (the
"Registration Statement") on or prior to 90 days
after April 22, 1998 with respect to the Exchange
Offer and (ii) to use their best efforts to cause
the Registration Statement to be declared
effective by the Commission on or prior to 150
days after April 22, 1998. In certain
circumstances, the Company will be required to
provide a shelf registration statement (the "Shelf
Registration Statement") to cover resale of the
Old Notes by the holders thereof. If the Company
does not comply with its obligations under the
Registration Rights Agreement, it will be required
to pay Liquidated Damages to holders of the Old
Notes under certain circumstances. See "The
Exchange Offer--Registration Rights; Liquidated
Damages." Holders of Old Notes do not have any
appraisal rights in connection with the Exchange
Offer.
The Exchange Offer........ The New Notes are being offered in exchange for a
like principal amount of Old Notes. The issuance
of the New Notes is intended to satisfy the
obligations of the Company contained in the
Registration Rights Agreement. Based upon the
position of the staff of the Commission set forth
in no-action letters issued to third parties in
other transactions substantially similar to the
Exchange Offer, the Company believes that the New
Notes issued pursuant to the Exchange Offer may be
offered for resale, resold and otherwise
transferred by holders thereof (other than (i) any
such holder that is an "affiliate" of the Company
within the meaning of Rule 405 under the
Securities Act, (ii) an Initial Purchaser who
acquired the Old Notes directly from the Company
solely in order to resell pursuant to Rule 144A of
the Securities Act or any other available
exemption under the Securities Act, or (iii) a
broker-dealer who acquired the Old Notes as a
result of market making or other trading
activities) within further compliance with the
registration and prospectus delivery requirements
of the Securities Act, provided that such New
Notes are acquired in the ordinary course of such
holder's business and such holder is not
participating and has no arrangement or
understanding with any person to participate in a
distribution (within the meaning of the Securities
Act) of such New Notes. By tendering, each Holder,
which is not a broker-dealer will represent to the
Company that, among other things, the person
receiving the New Notes, whether or
5
<PAGE>
not such person is the Holder, (i) will acquire
the New Notes in the ordinary course of such
person's business, (ii) has no arrangement or
understanding with any person to participate in a
distribution of the New Notes and (iii) is not
engaged in and does not intend to engage in a
distribution of the New Notes. If any Holder or
any such other person has an arrangement or
understanding with any person to participate in a
distribution of such New Notes, is engaged in or
intends to engage in a distribution of such New
Notes, is an "affiliate," as defined under Rule
405 of the Securities Act, of the Company, or
acquired the Old Notes as a result of market
making or other trading activities, then such
Holder or any such other person (i) can not rely
on the applicable interpretations of the staff of
the Commission and (ii) must comply with the
registration and prospectus delivery requirements
of the Securities Act in connection with any
resale transaction. Each broker-dealer that
receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale
for such New Notes. Although there has been no
indication of any change in the staff's position,
there can be no assurance that the staff of the
Commission would make a similar determination with
respect to the resale of the New Notes. See "Risk
Factors."
Procedures for Tendering.. Tendering holders of Old Notes must complete and
sign the Letter of Transmittal in accordance with
the instructions contained therein and forward the
same by mail, facsimile or hand delivery, together
with any other required documents, to the Exchange
Agent, either with the Old Notes to be tendered or
in compliance with the specified procedures for
guaranteed delivery of Old Notes. Holders of the
Old Notes desiring to tender such Old Notes in
exchange for New Notes should allow sufficient
time to ensure timely delivery. Certain brokers,
dealers, commercial banks, trust companies and
other nominees may also effect tenders by book-
entry transfer. Holders of Old Notes registered in
the name of a broker, dealer, commercial bank,
trust company or other nominee are urged to
contact such person promptly if they wish to
tender Old Notes pursuant to the Exchange Offer.
Letters of Transmittal and certificates
representing Old Notes should not be sent to the
Company. Such documents should only be sent to the
Exchange Agent. Questions regarding how to tender
and requests for information should be directed to
the Exchange Agent. See "The Exchange Offer--
Procedures for Tendering Old Notes."
Tenders, Expiration
Date; Withdrawal.......... The Exchange Offer will expire the earlier of (i)
5:00 p.m., New York City time, on ,
1998, or (ii) the date when all Old Notes have
been tendered, or such later date and time to
which it is extended, provided it may not be
extended beyond , 1998. The tender of
Old Notes pursuant to the Exchange Offer may be
withdrawn at any time prior to the Expiration
Date. Any Old Note not accepted for exchange for
any reason will be returned without expense to the
tendering holder thereof as promptly as
practicable after the expiration or termination of
the Exchange Offer. See "The Exchange Offer--Terms
of the Exchange Offer; Period for Tendering Old
Notes" and "--Withdrawal Rights."
6
<PAGE>
Certain Conditions to the
Exchange Offer........... The Exchange Offer is subject to certain customary
conditions, all of which may be waived by the
Company, including the absence of (i) threatened
or pending proceedings seeking to restrain the
Exchange Offer or resulting in a material delay to
the Exchange Offer; (ii) a general suspension of
trading on any national securities exchange or in
the over-the-counter market; (iii) a banking
moratorium; (iv) a commencement of war, armed
hostilities or other similar international
calamity directly or indirectly involving the
United States; and (v) change or threatened change
in the business, properties, assets, liabilities,
financial condition, operations, results of
operations or prospects of the Company and its
subsidiaries taken as a whole that, in the
reasonable judgment of the Company, is or may be
adverse to the Company. The Company shall not be
required to accept for exchange, or to issue New
Notes in exchange for, any Old Notes, if at any
time before the acceptance of such Old Notes for
exchange or the exchange of New Notes for such Old
Notes, any of the foregoing events occurs which,
in the sole judgment of the Company, make it
inadvisable to proceed with the Exchange Offer
and/or with such acceptance for exchange or with
such exchange. In the event the Company asserts or
waives a condition to the Exchange Offer which
constitutes a material change to the terms of the
Exchange Offer, the Company will disclose such
change in a manner reasonably calculated to inform
prospective investors of such change, and will
extend the period of the Exchange Offer by five
business days. If the Company fails to consummate
the Exchange Offer because the Exchange Offer is
not permitted by applicable law or Commission
policy, it will file with the Commission a Shelf
Registration Statement to cover resales of the
Transfer Restricted Securities (as defined) by the
holders thereof who satisfy certain conditions. If
the Company fails to consummate the Exchange Offer
or file a Shelf Registration Statement in
accordance with the Registration Rights Agreement,
the Company will pay Liquidated Damages to each
holder of Transfer Restricted Securities until the
cure of all defaults. The Exchange Offer is not
conditioned upon any minimum aggregate principal
amount of Old Notes being tendered for exchange.
See "The Exchange Offer--Registration Rights;
Liquidated Damages" and "--Certain Conditions to
the Exchange Offer."
Federal Income Tax
Consequences.............. For Federal income tax purposes, the exchange
pursuant to the Exchange Offer should not result
in any income, gain or loss to the Holders or the
Company. See "Certain Federal Income Tax
Considerations."
Use of Proceeds........... There will be no proceeds to the Company from the
exchange pursuant to the Exchange Offer.
Appraisal Rights.......... Holders of Old Notes will not have dissenters'
rights or appraisal rights in connection with the
Exchange Offer.
Exchange Agent............ State Street Bank and Trust Company is serving as
Exchange Agent in connection with the Exchange
Offer.
7
<PAGE>
CONSEQUENCES OF NOT EXCHANGING THE OLD NOTES
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon as a
consequence of the issuance of the Old Notes pursuant to exemptions from, or in
transactions not subject to, the registration requirements of the Securities
Act and applicable state securities laws. In general, the Old Notes may
not be offered or sold, unless registered under the Securities Act, except
pursuant to an exemption from, or in a transaction not subject to, the
Securities Act and applicable state securities laws. The Company does not
currently anticipate that it will register the Old Notes under the Securities
Act. See "Risk Factors--Consequences of Exchange and Failure to Exchange" and
"The Exchange Offer--Consequences of Exchanging Old Notes."
SUMMARY DESCRIPTION OF THE NEW NOTES
Notwithstanding the designation of the Notes as Senior Subordinated Notes,
the Company has not issued, and does not have any current firm arrangements to
issue, any significant indebtedness to which the Notes would be senior, and the
Notes will be effectively subordinate to essentially all of the outstanding
indebtedness of the Company and its subsidiaries. The Company does not have any
current or pending arrangements or agreements to incur any additional
significant indebtedness to which the Notes would be subordinate.
The terms of the New Notes and the Old Notes are identical in all material
respects, except for certain transfer restrictions and registration rights
relating to the Old Notes and except that, if the Exchange Offer is not
consummated by September 19, 1998, subject to certain exceptions, with respect
to the first 90-day period immediately following thereafter, the Company will
be obligated to pay Liquidated Damages to each Holder of Old Notes in an amount
equal to $.05 per week for each $1,000 principal amount of Old Notes, as
applicable, held by such Holder. The amount of the Liquidated Damages will
increase by an additional $.05 per week with respect to each subsequent 90-day
period until the Exchange Offer is consummated, or any other Registration
Default (as defined) is cured, up to a maximum of $.40 per week for each $1,000
principal amount of Old Notes, as applicable.
The New Notes will bear interest from the most recent date to which interest
has been paid on the Old Notes or, if no interest has been paid on the Old
Notes, from April 22, 1998. Accordingly, registered Holders of New Notes on the
relevant record date for the first interest payment date following the
consummation of the Exchange Offer will receive interest accruing from the most
recent date to which interest has been paid or, if no interest has been paid,
from April 22, 1998. Old Notes accepted for exchange will cease to accrue
interest from and after the date of consummation of the Exchange Offer. Holders
of Old Notes whose Old Notes are accepted for exchange will not receive any
payment in respect of interest on such Old Notes otherwise payable on any
interest payment date the record date for which occurs on or after consummation
of the Exchange Offer.
8
<PAGE>
THE NEW NOTES
Issuer.................... Jackson Products, Inc.
Securities Offered........ $115 million aggregate principal amount of 9 1/2%
Series B Senior Subordinated Notes due 2005.
Maturity.................. April 15, 2005.
Interest.................. The Old Notes bear interest and the New Notes will
bear interest at a rate of 9 1/2% per annum,
payable semi-annually in cash in arrears on each
April 15 and October 15, commencing October 15,
1998.
Optional Redemption....... On or after April 15, 2001, the Notes will be
redeemable at the option of the Company, in whole
or in part, at any time at the redemption prices
set forth herein, plus accrued and unpaid interest
and Liquidated Damages, if any, to the date of
redemption. Notwithstanding the foregoing, at any
time prior to April 15, 2001, the Company may
redeem up to one-third of the aggregate principal
amount of the Notes ever issued with the net
proceeds of one or more Equity Offerings (as
defined) at a redemption price equal to 109.50% of
the principal amount thereof, plus accrued and
unpaid interest and Liquidated Damages, if any, to
the date of redemption, provided that at least
two-thirds of the aggregate principal amount of
Notes ever issued remains outstanding immediately
after the occurrence of any such redemption. See
"Description of Notes-Redemption of Notes--
Optional-Redemption."
Mandatory Redemption...... None.
Change of control......... Upon the occurrence of a Change of Control (as
defined), each Holder of Notes will have the right
to require the Company to purchase such Holder's
Notes pursuant to an Offer (as defined) at a
purchase price in cash equal to 101% of the
aggregate principal amount thereof, plus accrued
and unpaid interest and Liquidated Damages, if
any, to the date of purchase. Certain transactions
with affiliates of the Company may not be deemed
to be a Change of Control. Transactions
constituting a Change of Control are not limited
to hostile takeover transactions not approved by
the current management of the Company. Except as
described under "Description of Notes--Change of
Control," the Indenture does not contain
provisions that permit the Holders of Notes to
require the Company to purchase or redeem the
Notes in the event of a takeover, recapitalization
or similar restructuring, including an issuer
recapitalization or similar transaction with
management. See "Description of Notes--Mandatory
Offers to Purchase Notes."
The Company expects that prepayment of the Notes
following a Change of Control would, and the
exercise by holders of Notes of the right to
require the Company to purchase Notes would,
constitute a default under the New Credit
Agreement. In the event a Change of Control
occurs, the Company will likely be required to
refinance the Indebtedness outstanding under the
New Credit Agreement and the Notes. If there is a
Change of Control, any Indebtedness under the New
Credit Agreement could be accelerated. Moreover,
there can be no assurance that sufficient funds
will be available at the time of any
9
<PAGE>
Change of Control to repay Senior Indebtedness
(including under the New Credit Agreement) and
make any required repurchases of the Notes given
the degree of the Company's leverage. The
occurrence of a Change of Control may also have an
adverse impact on the ability of the Company to
obtain additional financing in the future. See
"Description of Notes--Mandatory Offers to
Purchase Notes."
Guarantees................ The Notes will be fully and unconditionally
guaranteed (the "Note Guarantees"), jointly and
severally, on a senior subordinated basis, by all
of the Company's Domestic Subsidiaries (the
"Guarantors").
Ranking...................
The Notes will be general unsecured obligations of
the Company, subordinated in right of payment to
all existing and future Senior Indebtedness (as
defined) of the Company including Indebtedness (as
defined) under the New Credit Agreement, and pari
passu or senior in right of payment to any future
subordinated Indebtedness of the Company. As of
March 31, 1998, the aggregate principal amount of
Senior Indebtedness to which the Notes would have
been subordinated would have been $78.3 million
and there would have been no Indebtedness as to
which the Notes would have been senior. As of
April 22, 1998, based on trailing twelve months
performance, the Company could incur $7 million of
additional indebtedness based on its leverage
ratio of total indebtedness to EBITDA of 6.5x. The
Indenture permits the Company and its subsidiaries
to incur additional indebtedness, including Senior
Indebtedness, subject to certain limitations,
including a specified Leverage Coverage Ratio (as
defined). Other than with respect to drawings
under the New Credit Agreement, the Company has no
current intent or plans to incur such additional
indebtedness. See "Description of Senior Notes--
Certain Covenants" and "Description of Certain
Indebtedness."
The Company believes that prepayment of the Notes
pursuant to a Change of Control would constitute a
default under the New Credit Agreement. In the
event a Change of Control occurs, the Company will
likely be required to refinance the Indebtedness
outstanding under the New Credit Agreement and the
Notes. If there is a Change of Control, any
Indebtedness under the New Credit Agreement could
be accelerated, which Indebtedness is secured and
effectively ranks senior to the Notes. Moreover,
there can be no assurance that sufficient funds
will be available at the time of any Change of
Control to make any required repurchases of the
Notes given the Company's high leverage. See "Risk
Factors--Leverage and Coverage."
Certain Covenants......... The Indenture contains certain covenants that,
among other things, limit the ability of the
Company and its Restricted Subsidiaries
(as defined) to (i) pay dividends, redeem capital
stock or make certain other restricted payments or
investments; (ii) incur additional indebtedness or
issue preferred equity interests; (iii) merge,
consolidate or sell all or substantially all of
their assets; (iv) create liens on assets; (v)
engaged in certain asset sales; (vi) enter into
certain transactions with affiliates or related
persons; and (vii) incur senior subordinated
indebtedness. See "Description of Notes--Certain
Covenants."
10
<PAGE>
Satisfaction and
Discharge................. The Indenture contains provisions which would
allow the Company to terminate all of its and any
future guarantors obligations under the Notes, any
guarantees of Notes and the Indenture, including
the covenants contained in the Indenture, except
for certain specified obligations. In order to
exercise this option with respect to the Notes
outstanding, the Company must irrevocably deposit
in trust with the trustee money or U.S. Government
obligations (as defined) for the payment of
principal of and premium and unpaid interest and
Liquidated Damages, if any, on the Notes then
outstanding to redemption or maturity, as the case
may be, and must comply with certain other
conditions. See "Description of Notes--Legal
Defeasance and Covenant Defeasance."
RISK FACTORS
Holders of Old Notes should consider carefully all of the information set
forth in this Prospectus and, in particular, should evaluate the specific
factors set forth under "Risk Factors." Risk factors which Holders of Old Notes
should evaluate include the consequences of exchanging and not exchanging Old
Notes for New Notes, the Company's leverage and coverage, the ranking of the
Notes among other indebtedness of the Company, the Company's dependence on
intercompany transfers to meet its debt service and other obligations, the
restrictive covenants contained in the Indenture and the New Credit Agreement,
the absence of a market for the New Notes, the ability of the Company to
purchase the Notes upon a Change of Control, the influence of the Company's
principal stockholders and fraudulent transfer considerations.
11
<PAGE>
SUMMARY FINANCIAL INFORMATION
The following table sets forth the summary combined historical financial data
of (i) the Company's predecessor, Jackson Holding Company, for the periods
January 1, 1993 to March 31, 1993; (ii) the Company's predecessor, Jackson
Holding Company, for the periods April 1, 1993 to December 31, 1993, 1994; and
January 1, 1995 to August 16, 1995; (iii) the Company for the periods August
17, 1995 to December 31, 1995, 1996 and 1997; and (iv) the Company for the
periods January 1 to March 31, 1997 and 1998 and the pro forma financial data
for the year ended December 31, 1997 and the three months ended March 31, 1998.
The pro forma financial information was prepared as if each of the
Acquisitions, the acquisition of Lansec and the Offering had been consummated
on the first day of the period presented for Statement of Operations Data and
Other Data and at March 31, 1998 for Balance Sheet Data. The pro forma data is
unaudited. The pro forma information does not purport to represent what the
consolidated results of the Company would have been had such transactions
actually occurred at the beginning of the relevant period, and does not purport
to project the combined financial position or the combined results of
operations of the Company for the current year or for any future period. The
summary and pro forma financial information set forth below should be read in
conjunction with the historical and pro forma financial statements and the
related notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
THE COMPANY
------------------------------------------------------------------------------
THREE THREE THREE
AUGUST 17, MONTHS MONTHS MONTHS
1995 TO ENDED ENDED PRO
DECEMBER 31, PRO FORMA MARCH 31, MARCH 31, FORMA
1995 1996 1997 1997 1997 1998 1998
------------ ------------ -------- ---------- --------- --------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA:
Net sales.............. $37,558 $111,788 $123,417 $173,602 $26,683 $31,106 $41,793
Cost of sales.......... 30,566 80,485 87,466 122,014 19,140 21,849 28,588
Selling, general &
administrative
expenses.............. 4,965 14,440 15,205 26,141 3,715 5,256 7,372
Operating income
(loss)................ 339 (3,036) 4,033 5,177 (842) 2,237 3,180
Other Data
EBITDA(1).............. $7,209 $21,145 $24,660 $30,694 $5,014 $5,398 $7,516
Depreciation and
amortization.......... 3,141 23,131 20,292 25,182 5,856 3,161 4,336
Capital expenditures... 465 1,910 3,246 4,224 397 809 938
Cash (used in) provided
by operating
activities............ 7,410 6,833 10,313 -- (1,335) (4,492) --
Cash used in investing
activities............ (129,154) (14,552) (5,890) -- (1,524) (1,101) --
Cash (used in) provided
by financing
activities............ 121,619 7,719 (3,900) -- 2,859 5,322 --
<CAPTION>
PREDECESSORS
----------------------------------------------
JANUARY 1, APRIL 1, JANUARY 1,
1993 TO 1993 TO 1995 TO
MARCH 31, DECEMBER 31, AUGUST 16,
1993 1993 1994 1995
------------ ------------ -------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA:
Net sales.............. $8,497 $29,718 $92,838 $72,541
Cost of sales.......... 5,232 18,573 67,348 52,416
Selling, general &
administrative
expenses.............. 1,402 4,706 12,337 9,640
Operating income
(loss)................ 405 1,369 6,420 7,476
Other Data
EBITDA(1).............. $2,321 $8,086 $16,894 $13,219
Depreciation and
amortization.......... 1,916 6,496 10,138 5,548
Capital expenditures... 11 331 2,055 1,744
Cash provided by
operating activities.. 931 3,134 7,104 2,774
Cash used in investing
activities............ (11) (57,741) (44,485) (1,661)
Cash (used in) provided
by financing
activities............ (293) 56,294 35,694 (1,113)
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
AT DECEMBER 31, AT MARCH 31, 1998
------------------ ------------------
1996 1997 ACTUAL PRO FORMA
-------- -------- ------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.............. $ -- $ 523 $ 252 $ 252
Total assets........................... 135,015 125,047 128,727 171,697
Redeemable preferred stock and long-
term debt, including current portion.. 134,194 133,452 139,230 192,575
Total stockholders' deficit(2)......... (17,738) (31,277) (33,078) (47,207)
</TABLE>
- --------
(1) EBITDA, as defined in the Indenture, represents operating income plus
depreciation, amortization and certain non-cash charges. See "Description
of Notes--Certain Definitions" and "Selected Historical Financial Data."
EBITDA is not included herein as operating data and should not be construed
as a substitute for operating income or a better indicator of liquidity
than cash flow from operating activities, which are determined in
accordance with GAAP. The Company has included EBITDA because the Company
understands that it is one measure used by certain investors to determine
the Company's operating cash flow and historical ability to service its
indebtedness and because the Cash Flow Coverage Ratio, when calculated on a
Pro Forma Basis (each as defined in the Indenture), is calculated on a
similar basis.
(2) The pro forma March 31, 1998 stockholders' deficit includes adjustments to
reflect (i) the write-off of existing deferred financing fees of $4,870,
(ii) the writeoff of the unamortized debt discount of $478 and premium on
the repayment of the Prior Notes of $2,210, (iii) the $2,421 difference
between the accreted value and the carrying amount of the Preferred Stock
and (iv) the repurchase for $4,150 of common equity held by an
Institutional Investor.
13
<PAGE>
RISK FACTORS
Holders of the Old Notes should carefully consider the following risk
factors, as well as other information set forth in this Prospectus, before
tendering their Old Notes in the Exchange Offer. The risk factors set forth
below (other than "Consequences of Exchange and Failure to Exchange") are
generally applicable to the Old Notes as well as the New Notes.
CONSEQUENCES OF EXCHANGE AND FAILURE TO EXCHANGE
Issuance of the New Notes in exchange for the Old Notes pursuant to the
Exchange Offer will be made only after timely receipt by the Exchange Agent of
such Old Notes, a properly completed and duly executed Letter of Transmittal
and all other required documents. Therefore, Holders of the Old Notes desiring
to tender such Old Notes in exchange for New Notes should allow sufficient
time to ensure timely delivery. The Company is under no duty to give
notification of defects or irregularities with respect to tenders of Old Notes
for exchange. Holders of Old Notes who do not exchange their Old Notes for New
Notes pursuant to the Exchange Offer will continue to be subject to the
restrictions on transfer of such Old Notes as set forth in the legend thereon
as a consequence of the issuance of the Old Notes pursuant to exemptions from,
or in transactions not subject to the registration requirements of the
Securities Act and applicable state securities laws. In general, the Old Notes
may not be offered or sold, unless registered under the Securities Act, except
pursuant to an exemption from, or in a transaction not subject to, the
Securities Act and applicable state securities laws. The Company does not
currently anticipate that it will register the Old Notes under the Securities
Act. In addition, upon the consummations of the Exchange Offer holders of Old
Notes which remain outstanding will not be entitled to any rights to have such
Old Notes registered under the Securities Act or to any rights under the
Registration Rights Agreement. To the extent that Old Notes are tendered and
accepted in the Exchange Offer, a holder's ability to sell untendered, or
tendered but unaccepted, Old Notes could be adversely affected. See "The
Exchange Offer--Consequences of Not Exchanging Old Notes."
Based on interpretations by the staff of the Commission set forth in no
action letters issued to third parties in other transactions substantially
similar to the Exchange Offer, the Company believes that New Notes issued
pursuant to the Exchange Offer in exchange for Old Notes may be offered for
resale, resold and otherwise transferred by a holder thereof (other than (i)
an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act, (ii) an initial Purchaser who acquired Old Notes directly from
the Company solely in order to resell pursuant to Rule 144A of the Securities
Act or any other available exemption under the Securities Act, or (iii) a
broker-dealer who acquired the Old Notes as a result of market making or other
trading activities) without further compliance with the registration and
prospectus delivery requirements of the Securities Act, provided that such New
Notes are acquired in the ordinary course of such holder's business and that
such holder is not participating and has no arrangement or understanding with
any person to participate, in a distribution (within the meaning of the
Securities Act) of such New Notes. Any holder that cannot rely upon such
interpretations must comply with the registration and prospectus delivery
requirements of the Securities act in connection with a secondary resale
transaction, unless such sale is made pursuant to an exemption from such
requirements. See "The Exchange Offer--Purpose of the Exchange Offer."
SUBSTANTIAL LEVERAGE AND ABILITY TO SERVICE DEBT
Upon the consummation of the Acquisitions and the Offering, the Company will
be highly leveraged and will have indebtedness that is substantial in relation
to stockholders' equity. As of March 31, 1998, on a pro forma basis after
giving effect to the Acquisitions and the Offering, the Company would have had
total indebtedness of approximately $192.6 million (including the Notes) and
stockholders' deficit of approximately $47.2 million. As of such date, the
aggregate principal amount of Senior Indebtedness was approximately $78.3
million. For the three months ended March 31, 1998, the Company's ratio of
EBITDA to cash interest expense on a pro forma basis was 1.8x. The Company and
its subsidiaries will be permitted to incur substantial additional
indebtedness in the future. See "Capitalization," "Selected Historical
Financial Data" and "Description of Notes."
14
<PAGE>
The Company's high degree of leverage could have important consequences to
the holders of the Notes, including the following: (i) the Company's ability
to obtain additional financing for working capital, capital expenditures,
acquisitions, general corporate purposes or other purposes may be impaired in
the future; (ii) 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, however according to the New Credit Agreement, the Company has no
required principal payments until June 30, 2001 and therefore, the Company
will have no debt service obligations until such time (iii) certain of the
Company's borrowings are and will continue to be at variable rates of
interest, which exposes the Company to the risk of higher interest rates; (iv)
the indebtedness outstanding under the New Credit Facility on April 22, 1998
was $77 million and will be secured by substantially all of the assets of the
Company and will mature prior to the Notes; (v) the Company may be
substantially more leveraged than certain of its competitors, which may place
the Company at a competitive disadvantage; and (vi) the Company's substantial
degree of leverage may hinder its ability to adjust rapidly to changing market
conditions and could make it more vulnerable in the event of a downturn in
general economic conditions or its business.
The Company's ability to make scheduled payments of principal of, or to pay
interest or Liquidated Damages, if any, on, or to refinance, its indebtedness
(including the Notes) will depend on its future financial and operating
performance, which, in turn, is subject to prevailing economic conditions and
to certain financial, business and other factors that are beyond its control.
If the Company's cash flow and capital resources are insufficient to fund its
debt service obligations, the Company may be forced to reduce or delay planned
expansion and capital expenditures, sell assets, obtain additional equity
capital or restructure its debt. There can be no assurance that the Company's
operating results, cash flow and capital resources will be sufficient to
service its indebtedness (including the Notes) in the future. In the absence
of such operating results and resources, the Company could face substantial
liquidity problems and might be required to dispose of material assets or
operations to meet its debt service and other obligations, and there can be no
assurance as to the timing of such sales or the amount of proceeds which the
Company could realize therefrom. In addition, there can be no assurance that
the Company will be able to refinance its indebtedness on commercially
reasonable terms, if at all.
The New Credit Facility and the Indenture will contain a number of
significant covenants that, among other things, will restrict the ability of
the Company to dispose of assets, incur additional indebtedness, repay other
indebtedness or amend other debt instruments, pay dividends, create liens on
assets, enter into investments or acquisitions, engage in mergers or
consolidations, make capital expenditures, or engage in certain transactions
with subsidiaries and affiliates and otherwise restrict corporate activities.
The Credit Agreement will prohibit the Company from honoring its obligations
under the Indenture to repurchase Notes in the event of a Change of Control or
Asset Sale Trigger Date (as defined herein). Accordingly, the Company would
need to seek the consent of its lenders under the Credit Agreement in order to
repurchase Notes under such circumstances. The failure of the Company to
obtain such consent would result in an event of default under the Indenture.
In addition, the Company will be required to comply with specified financial
ratios and tests under the New Credit Facility. The Company's ability to
comply with the covenants contained in the New Credit Facility and the
Indenture may be affected by events beyond its control, including prevailing
economic, financial and industry conditions. The breach of any of such
covenants or restrictions could result in a default under the New Credit
Facility, which would permit the senior lenders thereunder to declare all
amounts borrowed thereunder to be due and payable, together with accrued and
unpaid interest, and the commitments of the senior lenders to make further
extensions of credit under the New Credit Facility could be terminated. If the
Company were unable to repay its indebtedness to its senior lenders, which
indebtedness matures prior to the Notes, such lenders could proceed against
the collateral securing such indebtedness, which collateral consists of
substantially all of the assets of the Company. In addition, the degree to
which the Company is leveraged could prevent it from repurchasing all of the
Notes tendered to it upon the occurrence of a Change of Control. See
"Description of Notes--Mandatory Offers to Purchase Notes" and "Description of
Certain Indebtedness--New Credit Facility."
SUBORDINATION; DEPENDENCE ON SUBSIDIARIES; LIMITATIONS ON ACCESS TO CASH FLOW
OF SUBSIDIARIES
The Notes will be subordinated in right of payment to all current and future
Senior Indebtedness of the Company. However, the Indenture will provide that
the Company will not incur or otherwise become liable for any indebtedness
that is subordinate or junior in right of payment to any Senior Indebtedness
and senior in any
15
<PAGE>
respect in right of payment to the Notes. Upon any distribution to creditors
of the Company in a liquidation or dissolution of the Company or in a
bankruptcy, reorganization, insolvency, receivership or similar proceeding
relating to the Company or its property, the holders of Senior Indebtedness
will be entitled to be paid in full in cash before any payment may be made
with respect to the Notes. In addition, the subordination provisions of the
Indenture will provide that payments with respect to the Notes will be blocked
in the event of a payment default on Senior Indebtedness and may be blocked
for up to 179 days each year in the event of certain non-payment defaults on
Senior Indebtedness. In the event of a bankruptcy, liquidation or
reorganization of the Company, holders of the Notes will participate ratably
with all holders of subordinated indebtedness of the Company that is deemed to
be of the same class as the Notes, and potentially with all other general
creditors of the Company, based upon the respective amounts owed to each
holder or creditor, in the remaining assets of the Company. In any of the
foregoing events, there can be no assurance that there would be sufficient
assets to pay amounts due on the Notes. As a result, holders of Notes may
receive less, ratably, than the holders of Senior Indebtedness. See
"Description of Notes--Subordination." As of March 31, 1998 on a pro forma
basis after giving effect to the Acquisitions and the Offering, the aggregate
principal amount of Senior Indebtedness (exclusive of unused commitments of
approximately $46.7 million) of the Company and the Guarantors would have been
approximately $78.3 million. The Indenture will permit the incurrence of
substantial additional indebtedness, including Senior Indebtedness, by the
Company and its subsidiaries in the future. See "Description of Notes--Certain
Covenants" and "Description of Certain Indebtedness--New Credit Facility."
A substantial portion of the Company's business is conducted through its
subsidiaries. Accordingly, the Company's ability to pay the principal of, and
interest and Liquidated Damages, if any, on the Notes is dependent upon the
earnings of its subsidiaries and the distribution of funds from its
subsidiaries. The Company's subsidiaries will be permitted under the terms of
the Indenture to incur certain additional indebtedness that may severely
restrict or prohibit the making of distributions, the payment of dividends or
the making of loans by such subsidiaries to the Company. There can be no
assurance that the Company's operations will generate sufficient cash flow to
support payment of principal of, and interest and Liquidated Damages, if any,
on the Notes, or that dividends, distributions or loans will be available from
the Company's subsidiaries to fund such payments. See "Description of Certain
Indebtedness."
The Notes will be unconditionally guaranteed on a senior subordinated basis
by the Guarantors. The Note Guarantees will be general unsecured obligations
of the Guarantors, will be subordinated in right of payment to all existing
and future Senior Indebtedness of the Guarantors, including indebtedness under
the New Credit Facility, and will rank senior in right of payment to any
future subordinated indebtedness of the Guarantors. The Indenture will permit
the Company and its subsidiaries to incur additional indebtedness, including
Senior Indebtedness, subject to certain limitations. See "Description of
Notes--Certain Covenants." If any subsidiary indebtedness were to be
accelerated, there can be no assurance that the assets of such subsidiary
would be sufficient to repay such indebtedness or that the assets of the
Company and of the other subsidiaries would be sufficient to repay in full the
indebtedness of the Company, including the Notes. See "Description of Certain
Indebtedness--New Credit Facility."
COMPETITION
The personal and highway safety products industries are highly competitive.
The Company believes that participants in these industries compete primarily
on the basis of product characteristics (such as functional performance,
design and style), price, brand name recognition and service. Some of the
Company's competitors have greater financial and other resources than the
Company, and the Company's cash flows from operations could be adversely
affected by competitors' new product innovations and pricing changes made by
the Company in response to competition from existing or new competitors.
Individual competitors have advantages and strengths in different sectors of
the industry, in different products and in different areas, including
manufacturing and distribution systems, geographic market presence, customer
service and support, breadth of product, delivery time and price. There can be
no assurance that the Company will be able to compete successfully against
current and future competitors or that the competitive pressures faced by the
Company will not adversely affect its financial condition or operations.
16
<PAGE>
Additionally, the Company is a manufacturer of traffic beads, which
accounted for approximately 7.8% of the Company's pro forma net sales in 1997.
Historically prices for traffic beads have fluctuated and have generally
declined following the entrance of new competitors in this market. While
prices for traffic beads have been generally stable since 1993, there can be
no assurance that traffic bead prices will not decline in the future. Any such
decline could have a material adverse effect on the Company's net sales.
See "Business--Competition."
CONCENTRATION OF CUSTOMERS
The Company markets its Jackson line of safety products through wholesalers
who sell to distributors and end-users. Two wholesalers accounted for
approximately 17.0% of the Company's pro forma net sales in 1997. While there
can be no assurance that these wholesalers will remain customers of the
Company, the Company believes that it could replace such wholesalers with
alternative distribution in the event that such wholesalers ceased to purchase
the Company's products.
EFFECT OF REGULATORY CONDITIONS AND FEDERAL SPENDING ON SALES
The Company's net sales may be adversely affected by changes in safety
regulations covering industrial workers in the U.S. and Canada and in the
level of enforcement of such regulations. Certain changes in regulations could
reduce the utility of certain products manufactured by the Company, requiring
the Company to reengineer such products and thereby creating opportunities for
its competitors. In addition, road and highway marking requirements and
specifications for products approved for use on highways are subject to
comprehensive regulation by various governmental authorities. The Company
sells a significant portion of its highway safety products in the U.S. to
various governmental agencies through fixed price contracts awarded by
competitive bids submitted to state and local agencies. The terms and
conditions of such sales and the government contract process are subject to
extensive regulation by various federal, state and local authorities in the
U.S. and Canada. See "Business--Government Regulation and Industrial
Standards."
The Company sells glass traffic beads to the U.S. federal government, state
governments, over 260 local and municipal government agencies, and the
provincial and local governments of Canada. The Company also sells glass
traffic beads to 119 independent highway line stripers who contract with
state, local and provincial governments. Approximately 65% of the Company's
glass traffic beads' sales are to government agencies, and any reduction in
the spending patterns of the government agencies could adversely affect
revenue from sales of the Company's products. See "The Company--General."
ISTEA, which governed Federal highway funding and provided $124 billion for
highway programs over a six-year period initially ending in October 1997, has
been extended through the period ending May 1998. The U.S. Senate and House of
Representatives approved TEA-21 on May 22, 1998 providing for $173 billion in
highway funding for a further six-year period. If funding approvals under TEA-
21 occur later than June 1998, the Company may experience a short-term
reduction in net sales as the delay in federal funding will coincide with the
summer highway construction season. See "Business--Highway Safety Products."
DEPENDENCE ON KEY PERSONNEL
The operations of the Company depend significantly upon the efforts of
certain members of senior management, particularly those listed in the
"Management" section of this Offering Circular. The extended loss of the
services of these or other officers could have a material adverse effect upon
the Company's business, results of operations and financial condition. See
"Management."
17
<PAGE>
CONTROL OF THE COMPANY
Following the consummation of the Offering, the Jordan Investors (as
defined) and the Management Investors (as defined) of the Company will
continue to own, directly or indirectly, approximately 66.4% and 19.6%,
respectively, of the then outstanding shares of the capital stock of the
Company. Affiliates of The Jordan Company may, as a practical matter, have
substantial influence in connection with the election of the board of
directors of the Company and, in general, in the determination of the outcome
of corporate transactions or other matters submitted to the stockholders for
approval, including the election of directors, any merger, consolidation or
sale of all or substantially all of the Company's assets, which could prevent
or cause a change in control of the Company. In addition, pursuant to the
Stockholders Agreement dated as of August 16, 1995 (the "Stockholders
Agreement"), all of the holders of the Common Stock of the Company prior to
the Offering (the "Current Holders") have agreed to vote all of their shares
of Common Stock for the election of directors designated by certain
stockholders. Further, the Stockholders Agreement contains prohibitions and
restrictions on the transfer by the Current Holders of Common Stock of the
Company including certain co-sale rights and rights of first refusal for the
Company and each Current Holder to purchase the shares of Common Stock prior
to transfer by any other Current Holder, which could prevent or cause a change
of control of the Company. See "Principal Stockholders" and "Management."
PRODUCT LIABILITY EXPOSURE
The Company faces an inherent business risk of exposure to product liability
claims arising from the potential failure of its products to prevent the types
of personal injury or death against which they are intended to protect.
Although the Company has not experienced any material uninsured losses due to
product liability claims, there can be no assurance that it will not
experience such losses in the future. In the event any of the Company's
products prove to be defective, the Company may be required to recall or
redesign such products. The Company maintains insurance against product
liability claims, but there can be no assurance that such insurance coverage
will be adequate for liabilities actually incurred. A successful claim brought
against the Company in excess of available insurance coverage, or any claim or
product recall that results in significant expense or adverse publicity
against the Company, may have a material adverse effect on the Company's
business, operating results and financial condition.
UNPREDICTABILITY OF PATENT PROTECTION AND OTHER INTELLECTUAL PROPERTY
The Company's success depends, in part, on its ability to obtain and enforce
patents, maintain trade secret protection and operate without infringing on
the proprietary rights of third parties. While the Company has been issued
patents and has registered trademarks with respect to many of its products,
there can be no assurance that competitors of the Company will not
independently develop similar or superior products or technologies, duplicate
any of the Company's designs, trademarks, processes or other intellectual
property or design around any processes or designs on which the Company has or
may obtain patents or trademark protection. In addition, it is possible that
third parties may have or acquire licenses for other technology or designs
that the Company may use or desire to use, so that the Company may need to
acquire licenses to, or to contest the validity of, such patents or trademarks
of third parties. There can be no assurance that any such license would be
made available to the Company on acceptable terms, if at all, or that the
Company would prevail in any such contest. In addition to patent and trademark
protection, the Company also protects trade secrets, know-how and other
confidential information against unauthorized use by others or disclosure by
persons who have access to them, such as employees of the Company, through
contractual arrangements. There can be no assurance that these agreements will
provide meaningful protection for the Company's trade secrets, know-how or
other proprietary information in the event of any unauthorized use,
misappropriation or disclosure of such trade secrets, know-how or other
proprietary information. If the Company is unable to maintain the proprietary
nature of its technologies, the Company could be materially adversely
affected. See "Business--Intellectual Property."
RISKS ASSOCIATED WITH ENVIRONMENTAL MATTERS
The Company's operations are subject to federal, state, local and foreign
laws and regulations relating to the storage, handling, generation, treatment,
emission, release, discharge and disposal of certain substances and wastes
18
<PAGE>
and the clean up of properties affected by hazardous substances. While the
Company believes that it is currently in material compliance with those laws
and regulations, some risk of environmental liability is inherent in the
Company's business, and there can be no assurance that the Company will not
incur significant costs to remediate violations thereof or to comply with
changes in existing laws and regulations (or the enforcement thereof). Such
costs could have a material adverse effect on the Company's business, results
of operations and financial condition. See "Business--Environmental Matters."
FRAUDULENT CONVEYANCE
Under applicable provisions of federal bankruptcy law or comparable
provisions of state fraudulent transfer law, if, among other things, the
Company or any of the Guarantors, at the time it incurred the indebtedness
evidenced by the Notes or its Note Guarantee, as applicable, (i) (a) was or is
insolvent or rendered insolvent by reason of such occurrence or (b) was or is
engaged in a business or transaction for which the assets remaining with the
Company or such Guarantor constituted unreasonably small capital or (c)
intended or intends to incur, or believed or believes that it would incur,
debts beyond its ability to pay such debts as they mature, and (ii) the
Company or such Guarantor received or receives less than reasonably equivalent
value or fair consideration for the incurrence of such indebtedness, then the
Notes or its Note Guarantee, as applicable, and any pledge or other security
interest securing such indebtedness, could be voided, or claims in respect of
the Notes or such Note Guarantee, as applicable, could be subordinated to all
other debts of the Company or such Guarantor. In addition, the payment of
interest and principal by the Company pursuant to the Notes or by such
Guarantor pursuant to its Note Guarantee could be voided and required to be
returned to the person making such payment, or to a fund for the benefit of
the creditors of the Company or such Guarantor.
The measures of insolvency for purposes of the foregoing considerations will
vary depending upon the law applied in any proceeding with respect to the
foregoing. Generally, however, the Company or such Guarantor would be
considered insolvent if (i) the sum of its debts, including contingent
liabilities, were greater than the saleable value of all of its assets at a
fair valuation or if the present fair saleable value of its assets were less
than the amount that would be required to pay its probable liability on its
existing debts, including contingent liabilities, as they become absolute and
mature or (ii) it could not pay its debts as they become due. Among other
things, a legal challenge to the Note Guarantees on fraudulent conveyance
grounds may focus on the benefits, if any, realized by the Guarantors as a
result of the issuance by the Company of the Notes.
On the basis of historical financial information, recent operating history
and other factors, the Company believes that, after giving effect to the
indebtedness incurred in connection with the Offering, it will not be
insolvent, will not have unreasonably small capital for the business in which
it is engaged and will not incur debts beyond its ability to pay such debts as
they mature. There can be no assurance, however, as to what standard a court
would apply in making such determinations or that a court would agree with the
Company's conclusions in this regard.
POSSIBLE INABILITY TO REPURCHASE NOTES UPON CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each holder of the Notes will
have the right to require the Company to repurchase all or any part of such
holder's Notes at an offer price in cash equal to 101% of the aggregate
principal amount thereof, plus any accrued and unpaid interest and Liquidated
Damages, if any, to the date of purchase. There can be no assurance that the
Company will have sufficient resources to satisfy its repurchase obligation
with respect to the Notes following a Change of Control. See "Description of
Notes--Mandatory Offers to Purchase Notes--Change of Control."
ABSENCE OF PUBLIC MARKET; RESTRICTIONS ON TRANSFER
The New Notes are being offered to Holders of the Old Notes. The Old Notes
were issued on April 22, 1998 to a small number of institutional investors and
are eligible for trading in the Private Offering, Resale and Trading through
Automated Linkages (PORTAL) Market, the National Association of Securities
Dealers'
19
<PAGE>
screenbased, automated market for trading of securities eligible for resale
under Rule 144A. The New Notes are new securities for which there currently is
no market. Although the Initial Purchasers have advised the Company that they
currently intent to make a market in the New Notes, they are not obligated to
do so and may discontinue such market making at any time without notice. The
Company does not intend to list the Notes on any national securities exchange
or to seek the admission thereof to trading in the National Association of
Securities Dealers Automated Quotation System. Accordingly, no assurance can
be given that an active market will develop for any of the Notes or as to the
liquidity of the trading market for any of the Notes. If a trading market does
not develop or is not maintained, holders of the Notes may experience
difficulty in reselling such Notes or may be unable to sell them at all. If a
market for the Notes develops, any such market may be discontinued at any
time. If a trading market develops for the Notes, future trading prices of
such Notes will depend on many factors, including, among other things,
prevailing interest rates, the Company's results of operations and the market
for similar securities. Depending on prevailing interest rates, the market for
similar securities and other factors, including the financial condition of the
Company, the Notes may trade at a discount from their principal amount.
YEAR 2000
Many information and process control systems used in the current business
environment were designed to use only two digits in the date field, and thus
may not function properly in the year 2000. Currently, most of the major
systems of the Company have been modified to be year 2000 compliant. The
Company anticipates that the appropriate modifications to all information and
process control systems will be completed by the middle of 1999. The cost of
achieving year 2000 compliance is included in the Company's operating and
administrative expenses. The Company does not currently expect year 2000
issues to materially affect the Company's costs or to cause any significant
disruption in operations.
20
<PAGE>
THE COMPANY
GENERAL
The Company is a leading designer, manufacturer and distributor of safety
products serving a variety of niche applications within the personal and
highway safety markets throughout North America and Europe. JPI markets its
products under established, well-known brand names to an extensive network of
over 8,000 distributors, wholesalers, contractors and government agencies.
The organizational structure of the Company and its material subsidiaries
and operating units following the Acquisitions will be as follows:
[GRAPHIC]
The Company currently focuses on two product groups: (1) personal safety
products, which represented approximately 60% of pro forma net sales in 1997
and (2) highway safety products, which represented approximately 40% of pro
forma net sales in 1997.
Personal Safety Products
Jackson. Jackson, founded in 1932, designs, manufactures and distributes
safety products primarily to welding and other industrial markets. These
products are designed to protect individuals from various head, eye and face
hazards. Jackson's product offering includes welding helmets, hardhats, face
shields, safety spectacles and prescription safety eyewear frames. Management
believes that, through its Jackson and Morsafe brand names, Jackson is the
leading supplier of welding safety equipment in North America, with an
estimated 55% market share.
OSD. OSD, founded in 1990 and acquired by the Company in 1996, is the only
manufacturer of auto-darkening welding filter lenses in North America. OSD
offers a wide range of auto-darkening welding filter lenses and distributes
these products internationally through welding distributors. Management
estimates that Jackson and OSD combine for approximately 70% of the North
American auto-darkening welding filter lens market.
Allsafe. Allsafe, founded in 1929 and acquired by the Company in 1998,
designs, manufactures and distributes safety products to industrial,
construction, janitorial, healthcare and food service customers. These
products are designed to protect individuals from various head, eye, ear and
face and other hazards. Allsafe's product offering includes safety goggles,
hardhats, hearing protection products and general hazard warnings.
Crystaloid. Crystaloid, founded in 1976 and acquired by the Company in 1998,
designs and manufactures liquid crystal displays and filters for mid-market
manufacturers of industrial, commercial and aviation equipment. The Crystaloid
Acquisition will provide the Company with in-house production of liquid
crystal shutters for use in the Company's auto-darkening welding filter lenses
and in-house technology for further development of auto-darkening related
safety products for eye protection.
21
<PAGE>
Lansec. Lansec, founded in 1983 and acquired by the Company in 1997,
operates business divisions in Germany, France, the United Kingdom and the
Netherlands. These businesses, all of which are represented by the Lansec
brand name, distribute welding safety products throughout Europe and into
Eastern Europe. The acquisition of Lansec provides JPI with in-house European
distribution capabilities for its auto-darkening product line as well as an
overseas infrastructure platform for other JPI safety products.
Silencio/Safety Direct. Silencio/Safety Direct, founded in 1972 and acquired
by the Company in 1998, designs, manufactures and distributes hearing
protection products for the sporting industry.
Highway Safety Products
Flex-O-Lite. Flex-O-Lite, Inc. ("Flex-O-Lite"), founded in 1942 and acquired
by the Company in 1994, designs, manufactures and distributes reflective and
industrial glass beads. Reflective glass beads are used as the reflective
agent in a wide range of applications, including pavement striping, aviation
runways, reflective sheeting, pavement tape, license plates and essentially
any product with reflective characteristics. Within the U.S. market, Flex-O-
Lite is the second largest manufacturer of traffic and industrial glass beads
with estimated market shares of 23% and 33%, respectively. Additionally, Flex-
O-Lite is the only North American manufacturer and distributor of high index
glass beads, which offer a high degree of reflectivity required for
applications such as reflective sheeting and signage products.
Services and Materials. Services and Materials ("SMC"), founded in 1971 and
acquired by the Company in 1994, manufactures and distributes a broad range of
safety products primarily to highway construction markets. Its broad product
offering includes traffic cones, channelizers, barricade lights, traffic
flags, reflective vests and reflective pavement tape. SMC has a leading market
share in North America in each of its primary product categories.
THE ACQUISITIONS
Pursuant to a stock purchase agreement, dated March 30, 1998, the Company
has acquired all of the outstanding capital stock of Allsafe and
Silencio/Safety Direct for $29.5 million. These companies generated an
aggregate of $32.5 million of net sales in 1997.
Pursuant to a stock purchase agreement, dated March 31, 1998, the Company
has acquired all of the outstanding capital stock of Crystaloid for $6.5
million, of which $0.5 million is payable 18 months from the April 23, 1998
closing of the Crystaloid Acquisition. Crystaloid generated approximately $8.6
million of net sales in 1997.
----------------
The Company was incorporated in the State of Delaware on July 27, 1995. Its
principal executive offices are located at 2997 Clarkson Road, Chesterfield,
Missouri 63017, and its telephone number is (314) 207-2700.
22
<PAGE>
USE OF PROCEEDS
The net proceeds from the Offering, together with initial borrowings under
the Credit Agreement, were used to (i) repay the Existing Bank Debt, (ii)
redeem the Prior Notes, (iii) redeem the Preferred Stock, (iv) repurchase
common equity from one of the Institutional Investors (v) pay the cash portion
of the purchase price for the Acquisitions and (vi) pay related fees and
expenses. Entities advised by an affiliate of The Jordan Company will receive
a portion of the net proceeds from the Offering. See "Principal Stockholders"
and "Certain Transactions."
The following table sets forth the estimated sources and uses of funds as of
March 31, 1998 in connection with the Offering and the Acquisition.
<TABLE>
<CAPTION>
SOURCES USES
- ------------------------------------ -------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Senior Subordinated Notes. $114,277 Repay Existing Bank Debt(2)....... $ 84,884
Credit Agreement(1)....... 78,298 Redeem Prior Notes(3)............. 36,731
Redeem Preferred Stock(4)......... 23,810
Repurchase Common Equity(5)....... 4,150
Allsafe Acquisition(6)............ 29,500
Crystaloid Acquisition(6)......... 6,000
Fees and expenses(7).............. 7,500
-------- --------
Total sources........... $192,575 Total uses........................ $192,575
======== ========
</TABLE>
- --------
(1) Borrowings under the Credit Agreement as of the Closing Date were $77.0
million.
(2) Approximately $84.8 million of principal and accrued interest was
outstanding as of March 31, 1998 under the Company's then current credit
agreement (the "Existing Bank Debt"), which was scheduled to mature in
September 2003. The weighted average interest rate on the Existing Bank
Debt at March 31, 1998 was 9.5%.
(3) Consists of $34.0 million aggregate principal amount of 12.25% Senior
Subordinated Notes due August 15, 2004 (the "Prior Notes"). The amount set
forth in the table reflects accrued interest and other expenses incurred
in connection with the redemption of the Prior Notes.
(4) Consists of all of the Company's outstanding Series A Cumulative 13.25%
Exchangeable Preferred Stock (the "Preferred Stock"). The amount set forth
in the table includes accrued dividends. Certain of the Jordan Investors
are holders of the Preferred Stock. See "Principal Stockholders" and
"Certain Transactions."
(5) Reflects the repurchase from one of the Institutional Investors of common
stock and warrants representing approximately 9.5% of the Company's
common stock on a fully diluted basis. See "Principal Stockholders" and
"Certain Transactions."
(6) For a description of the purchase prices for and the conditions to the
Acquisitions, see "The Company--The Acquisitions."
(7) Includes estimated fees to the Initial Purchasers in connection with the
Offering, and fees and expenses in connection with the Acquisitions,
negotiation of the New Credit Facility, fees payable to TJMC (as defined)
and rating, legal, accounting, printing and other related transaction
expenses. See "Certain Transactions."
23
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of March
31, 1998 and the pro forma capitalization of the Company as of March 31, 1998,
as adjusted to reflect the Acquisitions and the consummation of the Offering
and the application of the net proceeds of the Offering as described in "Use
of Proceeds." The table should be read in conjunction with the financial
statements of the Company and related notes thereto included elsewhere in this
Prospectus. See "The Company--The Acquisitions," "Selected Historical
Financial Data," the Unaudited Pro Forma Consolidated Financial Statements of
the Company, the historical financial statements of the Company and the
related notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1998
------------------
PRO
ACTUAL FORMA
-------- --------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Cash and cash equivalents................................... $ 252 $ 252
======== ========
Long-term debt, including current portion:
New Credit Facility(1).................................... $ -- $ 78,298
9 1/2% Senior Subordinated Notes due 2005................. -- 114,277
Existing Bank Debt........................................ 84,319 --
Prior Notes(2)............................................ 33,522 --
-------- --------
Total long-term debt, including current portion......... $117,841 $192,575
Preferred Stock............................................. 21,389 --
Stockholders' deficit(3).................................... (33,078) (47,207)
-------- --------
Total capitalization.................................... $106,152 $145,368
======== ========
</TABLE>
- --------
(1) For additional information, see "Description of Certain Indebtedness--New
Credit Facility."
(2) Net of unamortized debt discount of $478.
(3) The pro forma March 31, 1998 stockholders' deficit includes adjustments to
reflect (i) the write-off of existing deferred financing fees of $4,870,
(ii) the write-off of the unamortized debt discount of $478 and premium at
closing on the repayment of the Prior Notes of $2,210, (iii) the $2,421
difference between the accreted value and the carrying amount of the
Preferred Stock and (iv) the repurchase for $4,150 of common equity held
by an Institutional Investor.
24
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
The following table sets forth historical operating, balance sheet and other
data of (i) the Company's predecessor, Jackson Holding Company, for the
periods January 1, 1993 to March 31, 1993; (ii) the Company's predecessor,
Jackson Holding Company, for the periods April 1, 1993 to December 31, 1993,
1994; and January 1, 1995 to August 16, 1995; (iii) the Company for the
periods August 17, 1995 to December 31, 1995; 1996 and 1997; and (iv) the
Company for the periods January 1 to March 31, 1997 and 1998. The historical
financial information for the periods ended March 31, 1997 and 1998 were
derived from unaudited consolidated financial statements included elsewhere in
this Prospectus. The historical financial information of the Company and its
predecessors as of and for the periods ending December 31, 1995, 1996 and 1997
were derived from the audited consolidated financial statements of the Company
and its predecessor for such dates and such periods, which are included
elsewhere in this Prospectus. The historical financial information for the
predecessors as of the dates and for the periods presented through December
31, 1994 were derived from the audited consolidated financial statements of
such predecessors for such dates and such periods, which are not included in
this Prospectus. The financial information set forth below should be read in
conjunction with the financial statements and the related notes thereto
appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
PREDECESSORS THE COMPANY
------------------------------------------- -------------------------------------------------------------
THREE THREE
JANUARY 1, APRIL 1, JANUARY 1, AUGUST 17, MONTHS MONTHS
1993 TO 1993 TO 1995 TO 1995 TO ENDED ENDED
MARCH 31, DECEMBER 31, AUGUST 16, DECEMBER 31, MARCH 31, MARCH 31,
1993 1993 1994 1995 1995 1996 1997 1997 1998
---------- ------------ ------- ---------- ------------ --------- -------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS:
Net sales....... $ 8,497 $29,718 $92,838 $72,541 $ 37,558 $ 111,788 $123,417 $26,683 $31,106
Cost of sales... 5,232 18,573 67,348 52,416 30,566 80,485 87,466 19,140 21,849
Selling, general
&
administrative
expenses....... 1,402 4,706 12,337 9,640 4,965 14,440 15,205 3,715 5,256
Asset sales..... -- -- -- -- -- 1,050 335 -- --
Amortization of
intangibles.... 1,458 5,070 6,733 3,009 1,688 18,849 16,378 4,670 1,764
------- ------- ------- ------- -------- --------- -------- ------- -------
Operating income
(loss)......... 405 1,369 6,420 7,476 339 (3,036) 4,033 (842) 2,237
Other expenses:
Interest
expense........ (2,030) (3,539) (6,676) (5,279) (4,381) (11,306) (12,050) (3,008) (2,996)
Amortization of
deferred
financing
costs.......... (99) (467) (765) (525) (340) (1,076) (1,261) (318) (309)
Other........... (73) 9 (102) 14 14 (599) (401) (173) (172)
Sale of company
expenses....... -- -- -- (4,391) -- -- -- -- --
------- ------- ------- ------- -------- --------- -------- ------- -------
Loss before
income tax
provision and
extraordinary
items.......... (1,797) (2,628) (1,123) (2,705) (4,368) (16,017) (9,679) (4,341) (1,240)
Income tax
expense........ -- -- 700 -- -- 429 684 30 159
------- ------- ------- ------- -------- --------- -------- ------- -------
Loss before
extraordinary
items.......... (1,797) (2,628) (1,823) (2,705) (4,368) (16,446) (10,363) -- --
Extraordinary
items:
Loss due to
early
extinguishment
of debt........ (1,288) -- (1,914) (7,236) -- -- -- -- --
------- ------- ------- ------- -------- --------- -------- ------- -------
Net loss........ $(3,085) $(2,628) $(3,737) $(9,941) $ (4,368) $ (16,446) $(10,363) $(4,371) $(1,399)
======= ======= ======= ======= ======== ========= ======== ======= =======
OTHER DATA:
EBITDA(1)....... $ 2,321 $ 8,086 $16,894 $13,219 $ 7,209 $ 21,145 $ 24,660 $5,014 $5,398
Depreciation and
amortization... 1,916 6,496 10,138 5,548 3,141 23,131 20,292 5,856 3,161
Capital
expenditures... 11 331 2,055 1,744 465 1,910 3,246 397 809
Ratio of
earnings to
fixed
charges(2)..... -- -- -- -- -- -- -- -- --
Cash (used in)
provided by
operating
activities..... 931 3,134 7,104 2,774 7,410 6,833 10,313 (1,335) (4,492)
Cash used in
investing
activities..... (11) (57,741) (44,485) (1,661) (129,154) (14,552) (5,890) (1,524) (1,101)
Cash (used in)
provided by
financing
activities..... (293) 56,294 35,694 (1,113) 121,619 7,719 (3,900) 2,859 5,322
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31, DECEMBER 31, AUGUST 16, DECEMBER 31, DECEMBER 31, DECEMBER 31, MARCH 31,
1993 1993 1994 1995 1995 1996 1997 1998
--------- ------------ ------------ ---------- ------------ ------------ ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA: (DOLLARS IN THOUSANDS)
Cash and cash
equivalents........... $ 2,806 $ 1,687 $ -- $ -- $ -- $ -- $ 523 $ 252
Total assets........... 47,613 66,272 112,658 108,739 141,525 135,015 125,047 128,727
Redeemable preferred
stock and long-term
debt, including
current portion....... 58,320 45,559 79,488 80,953 122,771 134,194 133,452 139,230
Total stockholders'
equity (deficit)...... (18,104) 12,306 14,215 4,329 1,517 (17,738) (31,277) (33,078)
</TABLE>
(footnotes on next page)
25
<PAGE>
- --------
(1) EBITDA, as defined in the Indenture, represents operating income plus
depreciation, amortization and certain non-cash charges. See "Description
of Notes--Certain Definitions." EBITDA is not included herein as operating
data and should not be construed as a substitute for operating income or a
better indicator of liquidity than cash flow from operating activities,
which are determined in accordance with GAAP. The Company has included
EBITDA because the Company understands that it is one measure used by
certain investors to determine the Company's operating cash flow and
historical ability to service its indebtedness and because the Cash Flow
Coverage Ratio, when calculated on a Pro Forma Basis (each as defined in
the Indenture), is calculated on a similar basis. EBITDA has not been
reduced by management fees payable pursuant to the TJC Management
Agreement (as defined) and directors fees, both of which are subordinated
to the Company's obligations under the Notes. EBITDA has also not been
reduced by non-cash, non-recurring charges which consist of (i) $221, $336
and $429 in 1993, 1994 and 1995, respectively, for post-retirement
benefits, (ii) purchase accounting adjustments of $3,647 in 1995 related
to inventory, and (iii) $1,050 and $335 in 1996 and 1997, respectively,
related to the writedown of assets in connection with the Company's
discontinuation and sale of certain product lines.
(2) In the computation of the ratio to fixed charges, earnings consist of
income before income taxes and extraordinary (loss), plus fixed charges.
Fixed charges consist of interest expense on indebtedness, plus that
portion of lease rental expense representative of the interest factor.
Earnings were insufficient to cover fixed charges by approximately $1,797
for the period from January 1, 1993 to March 31, 1993; $2,628 for the
period from April 1, 1993 to December 31, 1993; $1,123 for 1994; $2,705
for the period from January 1, 1995 to August 16, 1995; $4,368 for the
period from August 17, 1995 to December 31, 1995; $16,017 for 1996; $9,679
for 1997; $4,341 for the period from January 1, 1997 to March 31, 1997;
and $1,240 for the period from January 1, 1998 to March 31, 1998.
26
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The following discussion and analysis of the Company's financial condition
and results of operations should be read in conjunction with the Company's
consolidated financial statements, including the notes thereto, appearing
elsewhere in this Prospectus. All statements, trend analysis and other
information contained in this Prospectus relative to markets for the Company's
services and trends in the Company's operations or financial results, as well
as other statements including words such as "anticipate," "believe," "plan,"
"estimate," "expect," and "intend" and other similar expressions, constitute
forward-looking statements as defined in Section 21E(i)(1) of the Exchange Act
and are subject to business and economic risks, including but not limited to
those discussed in "Risk Factors," and actual results may differ materially
from those contemplated by the forward-looking statements.
OVERVIEW
The Company, which was founded in 1932, operated as a subsidiary of
Thermadyne Industries, Inc. during the period January 1, 1993 to March 31,
1993. From April 1, 1993 to August 16, 1995, the Company was operated as
Jackson Holding Company. On August 17, 1995, the Company was acquired by
members of management and affiliates of The Jordan Company. In October 1996,
the Company acquired OSD, and in October 1997, the Company acquired Lansec.
RESULTS OF OPERATIONS
The following table sets forth certain financial information of the Company
for the years 1995, 1996 and 1997 as well as for the three months ended March
31, 1997 and March 31, 1998:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
FISCAL YEAR MARCH 31
--------------------------- ----------------
1995 1996 1997 1997 1998
-------- -------- -------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net sales......................... $110,099 $111,788 $123,417 $26,683 $31,106
Cost of sales..................... 82,982 80,485 87,466 19,140 21,849
Selling, general & administrative. 14,605 14,440 15,205 3,715 5,256
Operating income (loss)........... 7,815 (3,036) 4,033 (842) 2,237
Income tax expense................ -- 429 684 30 159
EBITDA............................ 20,428 21,145 24,660 5,014 5,398
</TABLE>
THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THREE MONTHS ENDED MARCH 31,
1997
Net sales -- Net sales for the three months ended March 31, 1998 increased
16.6% to $31.1 million from $26.7 million in 1997. The increase in net sales
resulted from the growth of highway safety products and the October 1997
acquisition of Lansec. The Lansec acquisition resulted in sales of $2.9
million for the three months ended March 31, 1998.
Cost of sales -- Cost of sales for the three months ended March 31, 1998
increased 14.2% to $21.8 million from $19.1 million in 1997, primarily as a
result of the increase in net sales. Cost of sales as a percentage of sales
decreased to 70.2% from 71.7% due to various cost reduction programs.
Selling, general & administrative expenses -- Selling, general and
administrative expenses for the three months ended March 31, 1998 increased
41.5% to $5.3 million from $3.7 million due to the Lansec acquisition.
Operating income -- Operating Income for the three months ended March 31,
1998 increased to $2.2 million from a net loss of $0.8 million in 1997 due to
the reduction in amortization expenses as certain intangibles were fully
amortized during 1997.
Income tax expense -- Income tax expense for the three months ended March
31, 1998 increased to $0.2 million due to an increase in foreign taxes. The
Company's effective income tax rate is substantially lower than the statutory
rate due to non-deductible amortization expenses of certain intangibles.
27
<PAGE>
EBITDA -- EBITDA for the three months ended March 31, 1998 increased 7.7% to
$5.4 million from $5.0 million in 1997 due to increased net sales and an
improvement in gross margin due to various cost reduction programs.
FISCAL YEAR ENDED DECEMBER 31, 1997 COMPARED TO FISCAL YEAR ENDED DECEMBER 31,
1996
Net sales -- Net sales in 1997 increased 10.4% to $123.4 million from $111.8
million in 1996. The increase in net sales resulted from sales growth of
welding safety products and high index glass bead products, and the October
1996 acquisition of OSD. Net sales were offset in 1997 as a result of a
decision by management to eliminate certain low margin product lines within
the highway safety products group. The welding safety products sales growth
was initiated by a sales management reorganization implemented in late 1996,
improved factory responsiveness and sales force product retraining. The high
index glass bead sales growth was the result of redirected marketing efforts
from the product rationalization process. Approximately $6.8 million of the
increase in sales in 1997 were the direct result of the OSD acquisition.
Cost of sales -- Cost of sales in 1997 increased 8.7% to $87.5 million from
$80.5 million in 1996, primarily as a result of the net sales increases of
welding safety products and high index glass bead products and the acquisition
of OSD. Cost of sales as a percentage of sales decreased to 70.9% from 72.0%
due to improved product mix resulting from the product rationalization process
discussed above and the increased sales of welding safety and high index glass
bead products. Cost of sales also improved through the reduction of certain
material costs and from manufacturing productivity improvements.
Selling, general & administrative expenses -- Selling, general and
administrative expenses in 1997 increased 5.3% to $15.2 million from $14.4
million in 1996. The increase was primarily volume driven and consisted of
increases in advertising and commissions. Selling, general and administrative
expenses as a percent of sales decreased to 12.3% in 1997 from 12.9% in 1996.
Operating income -- Operating income in 1997 increased to $4.0 million from
a net loss of $3.0 million in 1996 due to the increase in gross profit and
reduced amortization expenses.
Income tax expense -- Income tax expense in 1997 increased to $0.7 million
from $0.4 million in 1996 due to an increase in foreign taxes. The Company's
effective income tax rate is substantially lower than the statutory rate due
to non-deductible amortization expenses of certain intangibles.
EBITDA -- EBITDA in 1997 increased 16.6% to $24.7 million from $21.1 million
in 1996 as a result of the net sales increase and the profit margin
improvement due to expense reductions arising from the product rationalization
process.
FISCAL YEAR ENDED DECEMBER 31, 1996 COMPARED TO FISCAL YEAR ENDED DECEMBER 31,
1995
Net sales -- Net sales in 1996 increased 1.5% to $111.8 million from $110.1
million in 1995. This increase reflected flat welding safety product sales due
to an inventory consolidation effort initiated by the Company's wholesalers,
and a decision by management to eliminate certain low margin product lines
within the highway safety products group.
Cost of sales -- Cost of sales in 1996 decreased 3.0% to $80.5 million from
$83.0 million in 1995, primarily due to acquisition accounting for inventory
in August 1995. The inventory adjustment reflects a $3.6 million increased
valuation of inventory at date of acquisition in accordance with APB Opinion
No. 16, Accounting for Business Combinations. This adjustment was subsequently
written off over the remainder of 1995. Cost of sales as a percentage of sales
decreased to 72.0% from 75.4% due to the combination of the acquisition
adjustment and the elimination of certain low margin product lines.
Other comparative data -- On August 17, 1995 the Company was sold to members
of management and affiliates of The Jordon Company. It is management's belief
that presenting combined data of the Company and
28
<PAGE>
its predecessor beyond sales and cost of sales is not comparable due to the
change in control. For this reason, other data comparing these two periods
such as operating income and selling, general and administrative expenses is
omitted.
LIQUIDITY AND CAPITAL RESOURCES
Cash used by operating activities for the three months ended March 31, 1998
and 1997 was $4.5 million and $1.3 million, respectively. Changes in working
capital resulted in cash uses of $6.6 million and $3.2 million for the three
months ended March 31, 1998 and 1997, respectively.
Cash provided by operating activities in 1997 and 1996 was $10.3 million and
$6.8 million, respectively. Changes in working capital resulted in cash uses
of $1.0 million and $2.0 million in 1997 and 1996, respectively.
The Company typically makes capital expenditures related to the maintenance
and improvements of manufacturing facilities and the related processing
equipment such as injection molding machines and glass bead furnaces. Capital
expenditures for the three months ended March 31, 1998 and 1997 were $0.8
million and $0.4 million, respectively. Capital expenditures in 1997 and 1996
were $3.2 million and $1.9 million, respectively.
Net cash provided by financing activities for the three months ended March
31, 1998 and 1997 was $5.3 million and $2.9 million, respectively. Net cash
used in financing activities in 1997 and $3.9 million and net cash provided by
financing activities in 1996 was $7.7 million.
Following the consummation of the Acquisitions, the Offering and related
transactions, the Company's primary capital requirements will be for debt
service, working capital and capital expenditures. Historically, the Company's
capital expenditures have been approximately $3.5 million per annum. The
Company anticipates that its capital expenditure requirements for 1998 will be
approximately $5.5 million due to a one-time expenditure of approximately $2.0
million required to reduce air emissions and ensure continued compliance with
clean air regulations at its glass bead facility in Paris, Texas. The Company
believes that cash flow from operating activities and borrowings under the
Credit Agreement will be adequate to meet the Company's short-term and long-
term liquidity requirements for the foreseeable future, although no assurance
can be given in this regard. The Company anticipates that capital expenditures
following the 1998 fiscal year will approximate historical levels on a pro
forma basis.
The Credit Agreement consists of a $30.0 million revolving credit facility
and a $95.0 million acquisition facility.
NEW ACCOUNTING STANDARDS
During 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income" and SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." In February 1998, the FASB issued SFAS
No. 132, "Employers' Disclosures about Pension and Other Postretirement
Benefits." The Company will be required to implement these standards in 1998.
Although the implementation of these standards should have no effect on
reported operations, the Company is assessing the impact of the required
disclosures on its quarterly and annual reports.
SEASONALITY AND INFLATION
The Company experiences seasonal fluctuations in its net sales and
profitability, with generally lower net sales and profitability in the first
and fourth quarters and increased working capital requirements in the first
half of its fiscal year. The seasonality of net sales and profitability is
primarily due to the winter slowdown of highway construction and maintenance
projects. In 1997, the Company's net sales were divided approximately evenly
between the first half and second half.
The impact of inflation on the Company's operations has not been significant
to date. However, there can be no assurance that a high rate of inflation in
the future would not have an adverse effect on the Company's operating
results.
29
<PAGE>
BUSINESS
THE COMPANY
Jackson Products, Inc. is a designer, manufacturer and distributor of safety
products serving a variety of niche applications within the personal and
highway safety markets throughout North America and Europe. JPI markets its
products under established, well-known brand names to an extensive network of
over 8,000 distributors, wholesalers, contractors and government agencies.
Management believes that the Company holds leading market share positions in
each of its primary product lines, reflecting the Company's (i) proprietary
technology, (ii) strong reputation and relationships with its customer base,
(iii) breadth of product lines and (iv) low cost manufacturing operations.
Due to strong industry fundamentals, its solid competitive position and
strategic acquisitions, the Company has achieved significant and consistent
growth under its current management team. Net sales grew from $92.8 million in
1994 to $173.6 million on a pro forma basis in 1997, representing a CAGR of
23.2%. In addition, the Company has improved profitability through the
rationalization of non-core product lines and implementation of cost control
initiatives. During the same period, the Company's EBITDA grew from $16.9
million to $30.7 million on a pro forma basis, representing a CAGR of 22.0%.
Due to its low capital expenditure requirements, the Company has historically
also generated significant free cash flow. The Company currently focuses on
two product groups: (i) personal safety products, which represented
approximately 60% of pro forma net sales in 1997, and (ii) highway safety
products, which represented approximately 40% of pro forma net sales in 1997.
PERSONAL SAFETY PRODUCTS
Personal safety products generated net sales of $103.5 million on a pro
forma basis for the Company in 1997. The Company offers over 10,000 SKU's of
personal safety products designed to protect individuals from various head,
eye, ear and face hazards in the workplace. The Company's product offerings
include welding helmets and auto-darkening welding filter lenses, hardhats,
face shields, safety spectacles and prescription safety eyewear frames.
Approximately 43% of the Company's personal safety product sales are to
distributors in the welding industry. Management believes that JPI is the
leading supplier of welding safety equipment in North America, with an
estimated 55% market share competing with such companies as Fibre-Metal,
Sellstrom and Arc-One. JPI's EQC product line offers a technologically
advanced range of welding helmet filter lenses featuring the world's fastest
auto-darkening switching speed. Switching speed represents the time required
for a lens to switch from a light to dark state. Auto-darkening technology
allows welders to see without lifting the helmet, therefore improving worker
productivity while significantly reducing repetitive motion and eye injuries.
The U.S. industrial market for personal safety products focused on the eye,
face, ear and head is estimated to have been in excess of $610 million in
1997. JPI's sales of personal safety products have benefited and are expected
to continue to benefit from increased workplace regulation and safety
awareness. The Company believes the outlook for the U.S. personal safety
products market is continually being influenced by heightened social awareness
regarding worker health and safety, which in turn stimulates legislation
requiring and monitoring the use of safety products in commercial and
industrial environments. The Company expects that the enforcement of safety
regulations by government agencies, such as OSHA, and the efforts of employers
and insurance carriers to contain group health care and workers' compensation
costs should maintain the growth of the market.
In order to capitalize on these strong industry fundamentals, the Company
has made several recent acquisitions to build its personal safety products
business. In 1996, the Company acquired OSD, providing JPI with an estimated
70% market share of the North American auto-darkening welding filter lens
market and establishing JPI as the only North American-based manufacturer of
auto-darkening welding filter lenses. Other worldwide competitors in this
market include Xelux and Hornell. The acquisition of Crystaloid and its
expertise in liquid crystal technology is expected to strengthen the Company's
lead in auto-darkening technology and allow for the development of additional
applications in new markets. In 1997, the Company acquired Lansec,
30
<PAGE>
providing the Company with distribution capabilities throughout Europe. The
acquisition of Allsafe and Silencio/Safety Direct will further expand the
range of the Company's personal safety products and enhance the Company's
channels of distribution.
HIGHWAY SAFETY PRODUCTS
Highway safety products generated net sales of $70.1 million on a pro forma
basis for the Company in 1997. Highway safety products offered by the Company
include traffic cones and markers, barricades, reflective clothing and glass
beads. Glass beads provide the reflective agent in an extensive range of
applications, such as highway striping, traffic signs, aviation runways,
license plates and reflective tape. The Company believes that it has a leading
market share in North America in the majority of its primary highway safety
product categories. Within the glass beads products market, the Company's
primary competitors include Potters and Cataphote. The competition within the
Company's various other product lines is comprised of a number of smaller,
niche companies, usually with annual sales between $5 million and $20 million.
The U.S. market for highway safety products sold by JPI is estimated by the
Company to be approximately $450 million. The demand for highway safety
products is primarily driven by state and federal expenditures on highway
construction and maintenance. Management expects such government spending to
increase in the future to address the deteriorating and increasingly congested
North American highway infrastructure. The U.S. Federal Highway Administration
has estimated that nearly one-third of the nation's interstate highways are in
need of immediate repair. Federal highway funding since 1991 has been governed
by ISTEA which provided $124 billion for highway programs to be funded over
its initial six-year period ending October 1997. The U.S. Senate and House of
Representatives approved a new joint public works bill, the Transportation
Equity Act for the 21st Century ("TEA-21"), on May 22, 1998. TEA-21 provides
for $173 billion in highway funding over the next six years, a 39.5% increase
over ISTEA.
COMPETITIVE STRENGTHS
The Company believes that it benefits from the following competitive
strengths:
Leading Market Share Positions. The Company has focused on serving distinct
niche markets in which it has been able to build leading market share
positions, providing the Company with a number of marketing, pricing and cost
advantages. The Company is the leading supplier of welding safety equipment in
North America with an estimated 55% market share and the leading supplier of
auto-darkening welding filter lenses with an estimated 70% share of the North
American market. The Company is the only North American manufacturer and
distributor of high index glass beads, the second largest manufacturer of
highway and industrial glass beads, and the North American market leader in
each of its other primary highway safety product categories.
Proprietary Technology. In December 1994, the Company acquired EQC auto-
darkening technology for use in welding helmets. This technology provides the
Company with the most advanced welding filter lenses on the market, with a
switching speed at 1/25,000th of a second, which is five times faster than the
competing auto-darkening lenses. Management believes that the Crystaloid
Acquisition will enable the Company to further develop this technology within
the safety products industry. The Company's EQC products have experienced
rapid growth in net sales, as they increased from approximately $1 million in
1991 to approximately $23 million on a pro forma basis in 1997.
Strong Customer Relationships and Brand Name Recognition. The Company has
developed strong relationships and achieved brand name recognition in most of
its distribution channels due to its focus on providing superior customer
service and quality products that address the specialized needs of its end-
users. Each of the Company's major brand names, including Jackson, Morsafe,
Flex-O-Lite, SMC, American Allsafe Co. and Team Silencio, are well established
with good recognition among end-users. As a result of its reputation and
relationships, the Company has been able to generate substantial repeat
business and build stability throughout its extensive network of over 8,000
distributors, wholesalers, contractors and government agencies.
Breadth of Product Line. In an industry characterized by small niche
manufacturers, management believes those manufacturers that provide "one-stop
shopping," such as the Company, hold a significant advantage as
31
<PAGE>
customers seek to consolidate supply sources. The Company believes that this
breadth of product line will prove particularly helpful in building upon JPI's
recent entry into the European welding safety product market.
Low-Cost Manufacturing. Management believes that the Company has achieved
low-cost producer status in several key product areas. Proximity of Company
facilities to natural gas pipelines and major customers and the Company's ready
access to supplies of glass contribute to lower transportation and product
costs in its glass bead business. The Company has also implemented a number of
programs over the last several years aimed at improving its overall cost
structure, including plant consolidations, shifting of production resources and
non-core product rationalizations.
BUSINESS STRATEGY
The Company's business strategy includes the following key elements:
Leverage Synergies Across Subsidiaries. The Company has identified a number
of material synergies that can be realized between its existing and newly
acquired subsidiaries. It is expected that similar synergies will also be
available in future acquisitions. In order to realize such synergies, the
Company intends to (i) effectively allocate production among its manufacturing
facilities, (ii) implement cross selling programs to access new channels of
distribution and customers, and (iii) access newly acquired sales capabilities
to expand its distribution base.
Continue to Develop Innovative New Products. Capitalizing on its market
knowledge, its in-house technological capabilities and its new product
development team, JPI intends to continue developing new products to respond to
the changing demands of its end-users and to create additional sales. During
the last three fiscal years, the Company has introduced more than 50 new
products or product enhancements, including an expansion of the highly
innovative EQC product line, several new safety eyewear styles, nonskid
reflective tape, high-intensity reflective beads and a light-weight DuraBill
channelizer base. Management believes JPI's new product development efforts
will be significantly enhanced with the acquisition of Crystaloid's liquid
crystal display technological capabilities.
Further Develop Presence in European Markets. The Company established a
European market presence with the October 1997 acquisition of Lansec. The
acquisition of Lansec provides JPI with in-house European distribution for its
auto-darkening product line as well as an overseas platform for distribution of
other JPI safety products. The Company intends to continue to develop its
European distribution since it believes the breadth of its product line, its
EQC technology and lower labor costs offer substantial competitive advantages
over existing European welding safety product manufacturers.
Selectively Pursue Strategic Acquisitions. The highly fragmented industry in
which the Company operates offers significant opportunity for additional
synergistic acquisitions. The Company intends to selectively pursue
acquisitions that will further its growth strategy by providing new geographic
markets, additional distribution channels, complementary product lines and
expanded technological capabilities.
32
<PAGE>
PRODUCT GROUPS
As shown in the table below, the Company focuses on two specific product
groups: (i) personal safety products and (ii) highway safety products.
[GRAPHIC]
33
<PAGE>
PERSONAL SAFETY PRODUCTS GROUP
The Company sells over 10,000 different safety products (a figure which
includes different styles of similar products) including welding helmets and
auto-darkening welding filter lenses, safety caps and hardhats, face shields
and visors, safety goggles and spectacles, prescription safety eyewear frames
and hearing protection products under the Jackson, Morsafe, Aden, AOP, Contour
Marker, American Allsafe Co., Team Silencio and Lamba brand names. Primary
customers for these products are found in the welding, construction,
janitorial, healthcare, sporting, and food service sectors as well as
throughout general industry, including oil, gas and chemical processors, metal
fabricators and auto and aircraft manufacturers. The Company's products are
designed to protect workers from various head/eye/face hazards in
manufacturing environments, including flying debris, chemical splashes,
excessive noise, noxious fumes and ultraviolet rays. The Company
differentiates itself within its market by providing broad lines of innovative
products, often employing proprietary technology, that meet the specialized
needs of its end-users.
A 1996 study prepared by Frost & Sullivan (the "Frost & Sullivan Report")
estimated that the size of the segment of the personal safety products market
in which the Company competes would be approximately $610 million in the U.S.
in 1997, and an additional $960 million within Europe. Historically, a large
number of relatively small, independent manufacturers with limited product
lines have served the personal safety products market, and the industry
remains highly fragmented. Management believes that manufacturers offering a
wide range of products having a high degree of market acceptance and strong
brand names, such as the Company, benefit from several competitive advantages,
including (i) economies of scale in manufacturing, sales and distribution,
(ii) greater appeal to large industrial distributors and national retailers
seeking to rationalize their sources of supply and (iii) an extensive
distribution network for introducing new product categories and product
enhancements.
Several factors are driving growth in the personal safety products market.
Employers are now increasingly aware of savings in insurance costs and
workers' compensation costs that can be achieved through the consistent use of
effective personal safety products. Significant growth in demand will also
continue to be realized as government regulations which mandate the use of
personal safety products are instituted and enforced by agencies like OSHA and
the National Institute of Occupational Safety and Health ("NIOSH"). In
addition, improvements in comfort, performance, and styling have resulted in
the increased acceptance of personal safety products by their users. The
market for personal safety products is expanding beyond the traditional U.S.
industrial distributor. Retail home centers and mass merchandisers are
offering a greater variety of personal safety products for the consumer do-it-
yourself market. As manufacturing employment and safety awareness grow outside
of the U.S. and Europe, international demand for personal safety products
could increase.
Products. The Company currently offers a broad range of products to the
personal safety products market. Primary examples of these products include:
Auto-Darkening Welding Filter Lenses and Welding Helmets. In 1991, Jackson
introduced welding helmets with an auto-darkening welding filter lens which
automatically changes tint when the welder begins to weld. Jackson's product
has the fastest switching speed at 1/25,000th of a second, which is five times
faster than any competing auto-darkening technology in the world. Switching
speed represents the time required for a lens to switch from a light to dark
state. It is estimated that auto-darkening filter lenses and auto-darkening
helmets are used by 20% of the total U.S. welding market. Management believes
it is the largest supplier of auto-darkening welding helmets in the world and
it is the only manufacturer of auto-darkening welding filter lenses in North
America.
Prior to the introduction of the auto-darkening welding filter lens, filters
were opaque, forcing a welder to lift the helmet to see when not welding. By
eliminating this process, the auto-darkening filter lens has greatly enhanced
welder efficiency, quality and safety and has reduced welder fatigue. The
auto-darkening technology also protects against eye damage from arc light and
eliminates cumulative trauma disorder associated with repetitive flipping of
the helmet up and down.
In December 1994, Jackson acquired the technology rights to manufacture
auto-darkening filters from OSD as well as the related manufacturing
equipment. As a result of this initial asset purchase, Jackson brought
in-house the manufacturing control and related profit margin previously
realized by OSD. In October 1996,
34
<PAGE>
Jackson purchased OSD as part of a stock purchase including an additional
product line, patents, patent rights and inventory. With the acquisition of
Crystaloid, Jackson gains the in-house knowledge of liquid crystal technology.
Crystaloid has estimated that it will be able to supply Jackson with all of
its liquid crystal shutters for the welding filter lens by July 1, 1998. The
Company also plans to exploit other liquid crystal technology applications
within the personal safety market.
The Company's auto-darkening welding filter lenses utilize a high speed
auto-darkening surface mode device liquid crystal filter. In addition to
placing these filters in its own helmets, the Company sells a variety of auto-
darkening welding filter lenses in standard U.S. and international sizes to
other helmet manufacturers. The Crystaloid Acquisition allows the Company to
bring liquid crystal technology in-house, so that the entire production of the
auto-darkening welding filter lens is under the Company's control.
In late 1997 the Company acquired Lansec which operates business divisions
in Germany, France, United Kingdom and the Netherlands. These businesses, all
of which are represented by the Lansec brand name, primarily distribute auto-
darkening welding helmets throughout Europe. The acquisition of Lansec
provides the Company with in-house European distribution for its auto-
darkening product line as well as an overseas infrastructure platform for the
Company's other welding safety products. Auto-darkening welding filter lenses,
welding helmets and other welding-related safety products accounted for 14%,
13% and 13% of total sales for 1997, 1996 and the period from August 17 to
December 31, 1995, respectively.
Face and Eye Protection Products. The Company produces both prescription and
non-prescription protective eyewear, goggles, face shields and visors. The
Company manufactures and sells a complete line of non-prescription safety
spectacles and goggles under the Jackson, Morsafe, American Allsafe Co. and
Aden brand names. Non-prescription protective spectacles, which are known
within the industry as "planos", protect an individual's eyes from flying
objects, sparks and chemical splashes in a multitude of industrial and
commercial settings. The Company has historically targeted goggle and plano
end-users in the construction, manufacturing and healthcare industries.
American Allsafe maintains the highest share of the U.S. industrial safety
goggle market. All of the Company's safety spectacles have been designed to
comply with ANSI Z-87.1989, which requires each spectacle to sustain the
impact of a one-quarter inch ball traveling at a velocity of 150 feet per
second and to resist melting at temperatures up to 400 degrees.
The Company's Aden Ophthalmic Product ("AOP") group produces prescription
protective eyewear used for similar purposes as planos, but which contain
prescription lenses. The frames are marketed under the AOP brand name to
optical wholesalers and retail chains. AOP is continually introducing new
frame series, including wire frames which are more fashionable than the
traditional plastic prescription safety spectacles.
The Company's line of face shields are designed to protect against heat,
liquid splashes and flying particles and are often worn in conjunction with
other protective equipment, such as plano eyewear. The Company's face shields
are marketed under the Jackson, Morsafe and American Allsafe Co. brand names.
The Company sells a broad line of head protection products for use in
construction and general industry under the Jackson, Morsafe and American
Allsafe Co. brand names. The product line includes "bump" caps, full-brim hats
and traditional hardhats, all with four or six point suspensions, ratchet
adjustments, and a wide selection of colors and custom imprintings.
Other. The Company produces other personal protection products which include
(i) safety warning products and (ii) hearing protection products.
The Company's line of safety warning products provide visual warnings
against hazards and help to prevent costly slip and fall and other accidents.
These products include cones, signs, barricades, fences, tape, lights, flags,
floor stands and banners.
The Company has the number one market share of hearing protection products
in the shooting sports, mass merchandisers and government markets. These
products include earmuffs, earplugs and electronic hearing protection products
and are marketed under the Team Silencio and American Allsafe Co. brand names.
35
<PAGE>
HIGHWAY SAFETY PRODUCTS GROUP
The Company sells over 1,100 different products including reflective glass
beads, cones, channelizers, pavement tape, flags, vests and roll-up signs,
barricades and high intensity lights. Primary customers for these products
include state and local municipalities, independent contract road stripers,
thermoplastic manufacturers, and highway contractor supply and rental
companies. The Company's highway safety products are designed to make both
driving and construction on highways safer by enhancing driving visibility and
marking construction sites.
Sales of the Company's highway safety products are driven by the amount of
state and federal expenditures on highway construction and maintenance as well
as the increase in regulations governing highway markings. The U.S. Federal
Highway Administration has estimated that one-third of the nation's highways
are in need of repair. As a result, management believes the U.S. highway
industry is poised to benefit from expected increases in infrastructure
spending. Federal highway funding since 1991 has been governed by ISTEA, which
provided $124 billion for highway programs to be funded over a six-year
period, initially ending in October 1997. The U.S. Senate and House of
Representatives approved a new joint public works bill, the Transportation
Equity Act for the 21st Century ("TEA-21"), on May 22, 1998. TEA-21 provides
for $173 billion in highway funding over the next six years, a 39.5% increase
over ISTEA.
Products. The Company currently offers a broad range of products to the
highway safety product market. Primary examples of these products include:
Glass Beads. The Company designs, manufactures and distributes industrial
reflective and glass beads which are used in applications which require
enhanced visibility. Glass bead products accounted for 18%, 25% and 23% of
total sales for 1997, 1996 and the period from August 17 to December 31, 1995,
respectively. Glass beads are used in highway striping, industrial cleaning
and polishing, airport runway striping, reflective sheeting, pavement tape,
and reflective tape applied to traffic cones, safety vests and clothing, and
traffic signs. Management believes that the Company is the second largest U.S.
manufacturer of traffic glass beads, with an estimated 23% share of the
traffic bead market.
Glass traffic beads are used for highway line substrates and pavement tape.
The beads are dropped onto freshly applied highway striping substrates (i.e.,
paint, epoxy and thermoplastics) which act as a binder leaving a portion of
the bead submerged and the remaining portion above the substrate. The exposed
portion of the bead gives the highway line its reflective attributes. Glass
traffic beads are sold according to state specifications which vary by
engineering preference, regional climate, type of striping substrate and bead
coatings. Management believes it is the only company capable of meeting these
specifications in all 50 U.S. states. The Company markets the majority of its
glass traffic beads under the well-recognized Flex-O-Lite trade name. The
Company also recently introduced Star-Brite beads which are chemically treated
using a coating that enhances buoyancy, adhesion and reflectivity, and is
moisture resistant. Glass traffic beads provide consistent recurring revenue
for the Company because the beads encounter significant wear and tear,
especially in regions with snow.
The Company markets glass traffic beads to the federal government, state
governments, and over 260 local and municipal government agencies in North
America. The Company also markets glass traffic beads to over 119 independent
highway line stripers who are contracted by state, local and provincial
governments for highway line painting.
Low index glass beads are also used as an impact agent for specialized
industrial cleaning and finishing applications. Glass beads provide a high
quality alternative to other materials such as sand, due to their spherical
characteristics. The beads are typically sprayed from a pressurized device to
remove scale, polish and debur metal surfaces, and peel metal surfaces to
relieve stress. Glass is environmentally safe and capable of cleaning surfaces
without altering the strength or composition of the underlying material. End-
users of industrial glass beads include major industries such as automotive
manufacturers and engine rebuilders, aircraft engine manufacturers and
rebuilders, tool and die manufacturers, and the U.S. military and its
subcontractors. Management estimates that Flex-O-Lite has a 33% market share
in the U.S. industrial glass bead market.
The Company is the only North American manufacturer which sells high index
glass beads with both 1.9x and 2.1x reflectivity ratings. The 1.9x beads are
used in the manufacture of reflective tape, pavement tape,
36
<PAGE>
aviation runway striping lines, license plate reflective systems, reflective
collars for traffic cones and reflective clothing. The 2.lx index beads are
used exclusively in the manufacture of reflective sheeting. The Company has
developed unique manufacturing capabilities that have resulted in lower
production costs and consistently high quality levels. Major customers of high
index beads include operators of airports both civilian and domestic, Avery
International, which uses 2.lx index beads in its reflective sheeting
products, and Minnesota Mining and Manufacturing Corporation ("3M"), which
uses 1.9x beads for its pavement tape product.
Cones. The Company believes it is the largest manufacturer of traffic cones
in the United States. Cones manufactured by the Company range in size from 4"
to 36" in height and have varying weights of up to 10 pounds. Cones are
available in various colors and may be purchased with reflective collars
applied to enhance night visibility and with a weighted bottom to prevent
"creeping" in high speed traffic areas. The Company also has the capability to
stencil or screen customer names and labels on to cones. An innovative product
in this area is the "Sergeant Sidewalk" cone sold throughout the Toys-R-Us
chain of toy stores.
Pavement Tape. The Company is the largest manufacturer of foil-backed
temporary pavement tape in the U.S. market. Pavement tape is designed for
short-term highway construction projects and other industrial work zone
applications. Temporary tape is non-removable and is used on highways for both
the final asphalt overlay and on temporary road surfaces over which new
pavement will ultimately be applied. Removable tape is used on finished
highway sites on which the lines are moved to accommodate short term detours
and lane shifts. The Company's tape products are coated with yellow, white, or
orange paint to which the Company's glass beads are applied.
Flags, Vests and Roll-Up Signs. The Company manufactures a full line of
safety flags, vests and roll-up signs. Management believes the Company has the
number one position in the U.S. market for these products. Most vests and
flags are made from lightweight vinyl-coated nylon. Reflective tape is
typically applied to the front and back of the vest. End-users of vests and
flags include highway construction workers police and fire departments, and
medical emergency teams. Roll-up signs are made from reflective and non-
reflective vinyl and hung from aluminum sign stands providing a lightweight
alternative for temporary construction jobs, utility crews, etc. The signs
roll up and the stands collapse making storage and transport easy.
Resale Products. In addition to its manufactured products, the Company
purchases other safety-related products for resale to complement its
manufactured product lines. The Company markets several models of aluminum
sign stands, including spring action stands for use in high speed traffic
areas as well as several rigid models. The stands are designed to collapse for
easy storage and set up. The Company manufactures the vinyl sign panels which
attach to these stands. Other resale products include plastic barrier/safety
fencing and reflective sheeting. Made from durable polyethylene, plastic
fencing is both strong and lightweight, and generally is used on highway and
office building construction sites. The Company is one of two master
distributors of 3M reflective sheeting in the United States. The Company
markets several brands of the 3M sheeting products to the highway safety
markets for use on traffic cones, reflective barricades and other traffic zone
applications. Additionally, the Company distributes several hundred safety-
related products including flares, first aid kits, marking tape, plastic
barricades and hardhats, among others.
SALES AND DISTRIBUTION
Personal Safety Products. The Company distributes its personal safety
products domestically primarily through a network of wholesalers and
distributors. The Company's sales force directs its efforts at the distributor
and end-user levels to create an effective pull-through of product to the
market. The Company's in-house sales force is covered by an incentive bonus
plan while the Company's manufacturer representatives are compensated on a
varying commission structure. These salespeople and agents are supported by
regionally-based sales and technical specialists allowing the Company to
deliver high levels of customer service locally in its significant markets.
Internationally, the Company distributes its products primarily through
Lansec, which operates business divisions in Germany, France, the United
Kingdom and the Netherlands.
37
<PAGE>
Highway Safety Products. The Company distributes its highway safety products
through direct salespersons and catalogues. The Company's line of reflective
and industrial glass beads are sold by salespeople directly to state and local
municipalities, independent contract road stripers, thermoplastic
manufacturers, and highway contracted supply and rental companies. The
Company's other highway safety products are sold through a combined effort of
in-house sales personnel, manufactures representatives, a well-circulated
Company catalog and inclusion in various industrial supply catalogs.
MANUFACTURING
The Company uses a variety of manufacturing processes to produce products
for the personal and highway safety product industry. Products manufactured
from plastic, polycarbonate, polyvinylchloride ("PVC"), resins and similar raw
materials are produced using injection molding, compression molding, flow
molding and blow molding techniques. Such products include welding helmets,
hardhats, cones, channelizers, safety goggles and face shields.
Crystaloid possesses liquid crystal technology with which it produces liquid
crystal shutters used in Jackson's auto-darkening welding filter lenses.
Flex-O-Lite produces low index glass beads through a process by which cullet
or scrap glass is run through a pulverizer, screened and stored by size. The
ground cullet is then fed into the bottom of a gas burner, and as the cullet
rises it melts to form spheres, which are cooled and packed. High index glass
beads are produced with virgin raw materials, which are mixed in a hopper then
heated into molten glass. The molten glass is passed through a break-up burner
where it is formed into glass beads. The 1.9x beads are cooled and sorted, the
2.1x beads are passed through another burner which effectively polishes the
beads to result in the higher refraction.
Sewn products, including safety vests, flags and roll-up signs, are produced
through a fairly labor intensive process which involves stenciling, cutting
and sewing. While these products involve more labor, they consistently produce
high gross margins.
38
<PAGE>
FACILITIES
In addition to its executive offices in Chesterfield, Missouri, the Company
operates 15 major facilities in the United States, Canada and Europe with a
total area (including the executive offices) of approximately 714,000 square
feet, of which the Company currently owns approximately 489,000 square feet
and leases approximately 225,000 square feet. These facilities are as follows:
<TABLE>
<CAPTION>
USER/ OWNED/ LEASE
LOCATION SUBSIDIARY PRIMARY USE SQUARE FEET LEASED EXPIRATION
-------- ----------- ----------- ----------- ------ ----------
<S> <C> <C> <C> <C> <C>
Chesterfield, Missouri Corporate Corporate and Administration 58,030 Leased 9/14/02
Belmont, Michigan Jackson Manufacturing and Distribution 148,100 Owned --
Elwood, Indiana SMC Manufacturing and Distribution 60,076 Owned --
Fenton, Missouri SMC Manufacturing and Distribution 84,414 Leased 12/31/00
Fenton, Missouri Flex-O-Lite Manufacturing and Distribution 20,400 Leased 3/31/03
Muscatine, Iowa Flex-O-Lite Manufacturing and Distribution 31,903 Owned --
Paris, Texas Flex-O-Lite Manufacturing and Distribution 91,363 Owned --
Tonawonda, New York Allsafe Manufacturing and Distribution 100,000 Owned --
Sparks, Nevada Allsafe Manufacturing and Distribution 2 buildings Leased 12/31/99
20,000 each
Hudson, Ohio Crystaloid Manufacturing and Distribution 36,770 Owned --
St. Thomas, Ontario,
Canada Flex-O-Lite Manufacturing and Distribution 21,244 Owned --
Belmont, Ontario, Canada Flex-O-Lite Distribution 10,000 Leased Monthly
Alzenau, Germany Lansec Manufacturing and Distribution 5,895 Leased 10/31/02
Merignac, France Lansec Distribution 2,592 Leased 8/31/98
Ede, Netherlands Lansec Distribution 1,962 Leased Monthly
West Midlands, U.K. Lansec Distribution 950 Leased 7/31/99
Milan, Italy Lansec Sales office 540 Leased Monthly
</TABLE>
The Company's facilities are adequate for its current production
requirements. The Company expects that such facilities will remain adequate
for the foreseeable future; however, the Company may shift operations among
existing facilities in order to maximize production efficiency.
RAW MATERIALS AND SUPPLIERS
Raw materials used by the Company in the manufacture of its products are
purchased both domestically and internationally. The Company believes that its
supply sources are both well-established and reliable. Although the Company
has no long-term supply contracts, it has experienced no significant problems
in supplying its operations. Although the Company has ongoing relationships
with certain suppliers of raw materials, the Company believes that there are a
number of reliable vendors available and it is able to obtain competitive
pricing for raw materials. Raw material prices fluctuate over time depending
on supply, demand and other factors and increases in raw material prices may
have an impact on the Company's financial performance.
INTELLECTUAL PROPERTY
It is the Company's policy to protect its intellectual property through a
range of measures, including trademarks, patents and confidentiality
agreements. The Company owns and uses trademarks and brand names to identify
itself as a source of certain goods. The following brand names of certain
company products and product lines are registered in the United States:
Jackson, Morsafe, Flex-O-Lite, EQC, Aden, AOP, Contour Market, American
Allsafe Co., Team Silencio and Lamba. See "Risk Factors--Intellectual
Property."
Whenever possible, the Company's intellectual property rights are protected
through the filing of applications for and registrations of trademarks and
patents. In addition, the Company protects its trade secrets
39
<PAGE>
by requiring certain of its employees, consultants and other suppliers,
customers, agents and advisors to execute confidentiality agreements upon the
commencement of employment or other relationships with the Company. These
agreements provide that all confidential information developed by or made
known to the individual or entity during the course of the relationship with
the Company is to be kept confidential and not disclosed to third parties
except in certain circumstances. There can be no assurance, however, that
these agreements will provide meaningful protection for the Company's
proprietary information or adequate remedies in the event of the unauthorized
use or disclosure of such information.
No assurance can be given that others will not independently develop
substantially equivalent proprietary information and technologies, otherwise
gain access to the Company's trade secrets or disclose such technology or that
the Company can meaningfully protect its rights to unpatented trade secrets.
Further, there can be no assurance that infringement or invalidity claims will
not be asserted against the Company in the future. The costs of defending such
claims, or an unfavorable determination with respect to litigation based on
such claims, could have a material adverse effect on the Company's business
and financial condition.
The Company also relies upon unpatented trade secrets for the protection of
certain intellectual property rights.
ENVIRONMENTAL MATTERS
The Company is subject to Federal, state and local environmental laws,
regulations and ordinances that (i) govern activities or operations that may
have adverse environmental effects (such as emissions to air, discharges to
water, and the generation, handling, storage and disposal of solid and
hazardous wastes) or (ii) impose liability for the costs of clean-up or other
remediation of contaminated property, including damages from spills, disposals
or other releases of hazardous substances or wastes, in certain circumstances
without regard to fault. The Company's manufacturing operations routinely
involve the handling of chemicals and wastes, some of which are or may become
regulated as hazardous substances. The Company endeavors to maintain
compliance with applicable environmental laws, but from time to time the
Company's operations may result in noncompliance or liability for clean-up
pursuant to such laws. Based on information reviewed by and available to the
Company, the Company believes it is in compliance with applicable
environmental laws. The Company is spending approximately $2.0 million at its
Paris, Texas glass bead production facility to upgrade its air emission
controls and ensure continued compliance with clean air environmental
standards. The Company does not believe it will incur significant additional
costs in connection with any compliance or potential liability under
applicable environmental laws, and believes that any such costs will not have
a material adverse effect on its business or financial condition.
COMPETITION
The personal and highway safety products industries are highly competitive
industries with participants ranging in size from small companies focusing on
single types of safety products, to a few large multinational corporations
which manufacture and supply many types of safety products. The Company's main
competitors vary by region and product. The Company believes that participants
in the personal and highway safety products industries compete primarily on
the basis of price, product characteristics (such as functional performance,
design and style), brand name recognition and service. The Company enjoys
certain economies of scale which are not available to smaller competitors.
Nonetheless, other large competitors may enjoy similar economies of scale and
may possess greater financial or other resources than the Company. In
addition, to maintain its market position, the Company must be competitive in
the area of brand image, distribution, design, style, customer service,
quality and price. See "Risk Factors--Competition."
GOVERNMENT REGULATION AND INDUSTRIAL STANDARDS
Government regulation mandating the use of personal safety equipment for
certain job classifications and work site environments is the most significant
factor in the creation of demand for personal safety equipment.
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<PAGE>
OSHA generally regulates the workplace environments in which personal safety
equipment must be worn and specifies the standards which such equipment must
meet. The Company believes it has complied in all material respects with the
regulations and standards of these agencies, and any non-material non-
compliance with such regulations and standards in the past have not had a
material adverse effect on its business.
The primary users of the Company's personal safety products are industrial
workers in the United States. As a result, decreases in general employment
levels of industrial workers may have an adverse effect on the Company's
sales. The Company's sales may also be adversely affected by changes in safety
regulations covering industrial workers in the United States and in the level
of enforcement of such regulations. Changes in regulations could reduce the
need for and the utility of certain products manufactured by the Company.
The United States and Canadian regulatory agencies each mandate that the
Company's products meet performance standards established by private groups,
such as the American National Standards Institute ("ANSI") and the Canadian
Standards Association ("CSA"), respectively. The Company's eyewear products
are subject to the latest series of applicable standards, which currently
include ANSI Industrial Standard Z87.1-1989 and CSA Z94.3-1992. These
standards require that protective eyewear be tested for optical performance,
high velocity impact, high mass impact and other integral product performance
features. The Company maintains and operates on-site testing labs at
facilities which are equipped to perform necessary tests.
LEGAL PROCEEDINGS
From time to time, the Company is involved in litigation incidental to its
business. The Company is not aware of any pending or threatened legal
proceeding which would reasonably be expected to have a material adverse
effect on the Company's results of operations or financial condition.
EMPLOYEES
As of March 31, 1998, the Company had approximately 1,000 employees.
Approximately 113 employees are represented by various unions pursuant to
collective bargaining agreements, one of which will expire, at the option of
either party, at the end of 1998. The Company has not experienced any labor
problems resulting in a work stoppage, and believes it maintains good
relations with its employees.
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<PAGE>
MANAGEMENT
DIRECTORS AND OFFICERS
The following sets forth the names and ages of the Company's directors and
certain officers and the positions they hold or will hold following the
consummation of the Offering:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH COMPANY
---- --- ---------------------
<S> <C> <C>
Robert H. Elkin......... 52 Director, Chairman, President and Chief Executive Officer
Christopher T. Paule.... 34 Vice President, Chief Financial Officer and Secretary
Mark R. Hefty........... 47 President, Jackson Division
Allan A. Huning......... 60 President, Flex-O-Lite
John W. Jordan II....... 50 Director
David W. Zalaznick...... 44 Director
A. Richard Caputo, Jr... 32 Director and Vice President
Jonathan F. Boucher..... 41 Director
</TABLE>
Set forth below is a brief description of the business experience of each
director and certain officers of the Company. The term of office for each
director will last until the next annual shareholder's meeting. Each officer,
other than Messrs. Elkin, Paule, Hefty and Huning, serves at the pleasure of
the Company's Board of Directors with no set term of office. See "--
Employment/Non-Interference Agreements".
Robert H. Elkin. Mr. Elkin has served as the Company's Chairman, President
and Chief Executive Officer and as a Director since August 1995. Mr. Elkin was
appointed President and Chief Executive Officer of the predecessor to the
Company in March 1994. From September 1987 to March 1996, Mr. Elkin served as
President and Chief Operating Officer of Clarke Industries (a division of
Thermadyne Industries, Inc. ("Thermadyne")).
Christopher T. Paule. Mr. Paule has served as the Company's Vice President,
Chief Financial Officer and Secretary since August 1995. Mr. Paule was
appointed Vice President-Finance of the predecessor to the Company in January
1994. From 1988 to 1994, he served as Controller at Coyne Cylinder Company in
Huntsville, Alabama (a division of Thermadyne), Controller of the Cutting and
Welding segment of Thermadyne and various other financial and operating
positions.
Mark R. Hefty. Mr. Hefty has served as the President and Chief Operating
Officer of Jackson since 1997. From 1996 to 1997, Mr. Hefty was President and
Chief Executive Officer of Clarke Industries. He also served in several other
marketing and sales positions at Clarke Industries beginning in 1981.
Allan A. Huning. Mr. Huning has served as President of Flex-O-Lite since
1991. Mr. Huning joined Flex-O-Lite in 1969, became Regional Sales Manager in
1972, General Sales Manager in 1974, Director of Operations in 1980, Vice
President of Operations in 1986, and was named President in January 1991.
John W. Jordan II. Mr. Jordan has served as a Director of the Company since
August 1995. Mr. Jordan is a managing partner of The Jordan Company, a private
merchant banking firm, which he founded in 1982. Mr. Jordan is also a director
of Jordan Industries, Inc., Jordan Telecommunication Products, Inc., American
Safety Razor Company, AmeriKing, Inc., Carmike Cinemas, Inc., Rockshox, Inc.,
GFSI Holdings, Inc., GFSI, Inc., Motors and Gears, Inc. and Apparel Ventures,
Inc., as well as other privately held companies.
David W. Zalaznick. Mr. Zalaznick has served as a Director of the Company
since August 1995. Mr. Zalaznick is a managing partner of The Jordan Company,
which he co-founded with Mr. Jordan in 1982. Mr. Zalaznick is also a director
of Jordan Industries, Inc., Jordan Telecommunication Products, Inc., Carmike
Cinemas, Inc., AmeriKing, Inc., American Safety Razor Company, Marisa
Christina, Inc., Great American Cookie Company, GFSI Holdings, Inc., GFSI,
Inc. Motors and Gears, Inc. and Apparel Ventures, Inc., as well as other
privately held companies.
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<PAGE>
A. Richard Caputo, Jr. Mr. Caputo has served as a Director of the Company
since August 1995. Mr. Caputo has been a partner of The Jordan Company since
1990. Mr. Caputo is also a director of AmeriKing, Inc., GFSI Holdings, Inc.
and GFSI, Inc., as well as other privately held companies.
Jonathan F. Boucher. Mr. Boucher has served as a Director of the Company
since August 1995. Mr. Boucher has been a partner of The Jordan Company since
1983. Mr. Boucher is also a director of Jordan Industries, Inc., Jordan
Telecommunication Products, Inc., Motors and Gears, Inc. and American Safety
Razor Company, as well as other privately held companies.
EXECUTIVE COMPENSATION
The following table sets forth information concerning the aggregate
compensation paid and accrued to the Company's top five executive officers for
services rendered to the Company during each of the three most recent fiscal
years. The executive officers include Robert H. Elkin, Chief Executive
Officer, Christopher T. Paule, Chief Financial Officer, Allan A. Huning,
President, Flex-O-Lite, Jack L. Bortle, Vice President of Sales and Marketing,
and John L. Garavaglia III, Vice President of Operations.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL
COMPENSATION
FISCAL --------------- ALL OTHER
POSITION YEAR SALARY BONUS COMPENSATION (1)
- -------- ------ ------- ------- ----------------
<S> <C> <C> <C> <C>
Robert H. Elkin......................... 1997 347,591 222,507 20,195
Chief Executive Officer 1996 338,755 136,000 20,195
1995 321,904 429,042 20,060
Christopher T. Paule.................... 1997 126,363 83,151 6,326
Chief Financial Officer 1996 118,993 59,000 6,000
1995 100,493 119,343 6,000
Allan A. Huning......................... 1997 139,970 70,570 12,084
President, Flex-O-Lite 1996 136,075 10,000 13,626
1995 129,375 64,699 14,311
Jack L. Bortle.......................... 1997 119,902 41,151 6,000
Vice President 1996 114,955 10,000 6,000
1995 108,490 71,953 6,000
John L. Garavaglia III (2).............. 1997 113,537 37,359 6,326
Vice President 1996 30,438 5,500 1,500
1995 -- -- --
</TABLE>
- --------
(1) Other annual compensation consists of car allowance, defined contribution
payments paid by the Company.
(2) John Garavaglia employment date of September 9, 1996.
EMPLOYMENT/NON-INTERFERENCE AGREEMENTS
Elkin Employment Agreement. Mr. Elkin has an employment and non-interference
agreement with the Company which provides for Mr. Elkin's employment as
Chairman, Chief Executive Officer and President of the Company. The initial
term of the employment agreement terminates on August 15, 2000, at which time
the term will be automatically extended for successive one-year periods until
either party gives notice of its intention to not renew 180 days prior to the
end of the then current term. The employment agreement can also be terminated
at any time by the Company. His base salary (which is increased annually based
on a CPI formula) is $360,000 for 1998, and he may be awarded a bonus, at the
sole discretion of the Board, of up to 65% of his annual salary, which amounts
are inclusive of any compensation, fees, salary, bonuses or other payments to
Mr. Elkin by any of the subsidiaries of affiliates of the Company or
affiliates of The Jordan Company. In connection with the Offering, the Company
and Mr. Elkin have agreed to amend this employment agreement. The amended
agreement will provide for a base salary of $414,000 with a discretionary
bonus of up to 75% of Mr. Elkin's annual salary. Under the employment
agreement, if Mr. Elkin's employment is terminated for
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<PAGE>
reasons other than voluntary termination, cause, disability or death, he will
be paid a severance payment of varying amounts, depending on the reason for
termination, up to the full amount of his compensation through the term of the
agreement. In addition, Mr. Elkin is entitled to receive an amount in respect
of his vested equity ownership in the Company equal to such vested equity
percentage multiplied by the product of 6.0 times the Company's EBITDA for the
immediately preceding fiscal year (net of indebtedness and transaction
expenses) in the event he is terminated by the Company other than for Cause
(as defined in his employment agreement). If Mr. Elkin's employment is
terminated voluntarily or for reasons of Cause, no severance payment is made.
Under the terms of the employment agreement, Mr. Elkin may not compete with
the Company in the same market for 24 months following the termination of his
employment.
Paule Employment Agreement. Mr. Paule has an employment and non-interference
agreement with the Company which provides for Mr. Paule's employment as Chief
Financial Officer of the Company. The initial term of the employment agreement
terminates on August 15, 2000, at which time the term will be automatically
extended for successive one-year periods until either party gives notice of
its intention to not renew 180 days prior to the end of the then current term.
The employment agreement can also be terminated at any time by the Company.
His base salary (which is increased annually based on a CPI formula) is
$153,000 for 1998, and he may be awarded a bonus, at the sole discretion of
the Board, of up to 50% of his annual salary, which amounts are inclusive of
any compensation, fees, salary, bonuses or other payments to Mr. Paule by any
of the subsidiaries or affiliates of the Company or affiliates of The Jordan
Company. In connection with the Offering, the Company and Mr. Paule have
agreed to amend this employment agreement. The amended agreement will provide
for a base salary of $176,000 with a discretionary bonus of up to 60% of Mr.
Paule's annual salary. Under the employment agreement, if Mr. Paule's
employment is terminated for reasons other than voluntary termination, cause,
disability or death, he will be paid a severance payment of varying amounts,
depending on the reason for termination, up to the full amount of his
compensation through the term of the agreement. In addition, Mr. Paule is
entitled to receive an amount in respect of his vested equity ownership in the
Company equal to such vested equity percentage multiplied by the product of
6.0 times the Company's EBITDA for the immediately preceding fiscal year (net
of indebtedness and transaction expenses) in the event he is terminated by the
Company other than for Cause (as defined in his employment agreement). If Mr.
Paule's employment is terminated voluntarily or for reasons of Cause, no
severance payment is made. Under the terms of the agreement, Mr. Paule may not
compete with the Company in the same market for 24 months following the
termination of his employment.
Hefty Employment Agreement. Mr. Hefty has an employment and non-interference
agreement with the Company which provides for Mr. Hefty's employment as
President and Chief Operating Officer of the Company. The initial term of the
employment agreement terminates on April 22, 2001, at which time the term will
be automatically extended for successive one-year periods until either party
gives notice of its intention to not renew 180 days prior to the end of the
then current term. The employment agreement can also be terminated at any time
by the Company. His base salary (which is increased annually based on a CPI
formula) is $175,000 for 1998, and he may be awarded a bonus, at the sole
discretion of the Board, of up to 65% of his annual salary, which amounts are
inclusive of any compensation, fees, salary, bonuses or other payments to Mr.
Hefty by any of the subsidiaries or affiliates of the Company or affiliates of
The Jordan Company. Under the employment agreement, if Mr. Hefty's employment
is terminated for reasons other than voluntary termination, cause, disability
or death, he will be paid a severance payment of varying amounts, depending on
the reason for termination, up to the full amount of his compensation through
the term of the agreement. If Mr. Hefty's employment is terminated voluntarily
or for reasons of Cause, no severance payment is made. Under the terms of the
agreement, Mr. Hefty may not compete with the Company in the same market for
24 months following the termination of his employment.
Huning Employment Agreement. Mr. Huning has an employment and non-
interference agreement with Flex-O-Lite which provides for Mr. Huning's
employment as President of Flex-O-Lite. The initial term of the
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<PAGE>
employment agreement terminates on August 15, 2000, at which time the term
will be automatically extended for successive one-year periods until either
party gives notice of its intention to not renew 180 days prior to the end of
the then current term. The employment agreement can also be terminated at any
time by the Company. His base salary (which is increased annually based on a
CPI formula) is $142,578 for 1998, and he may be awarded a bonus, at the sole
discretion of the Board, of up to 50% of his annual salary, which amounts are
inclusive of any compensation, fees, salary, bonuses or other payments to Mr.
Huning by any of the subsidiaries or affiliates of Flex-O-Lite or affiliates
of The Jordan Company. Under the employment agreement, if Mr. Huning's
employment is terminated for reasons other than voluntary termination, cause,
disability or death, he will be paid a severance payment of varying amounts,
depending on the reason for termination, up to the full amount of his
compensation through the term of the employment agreement. If Mr. Huning's
employment is terminated voluntarily or for reasons of Cause, no severance
payment is made. Under the terms of the employment agreement, Mr. Huning may
not compete with Flex-O-Lite in the same market for 24 months following the
termination of his employment.
INCENTIVE COMPENSATION PLAN
The Company has adopted incentive compensation plans for its key management
employees, which provide for annual cash bonuses payable if certain EBITDA,
cash flow and individual performance targets are met.
SAR AGREEMENTS
Upon the closing of the Offering and the Acquisitions, the Company will
enter into stock appreciation right agreements ("SAR Agreements") with Messrs.
Elkin, Paule and Hefty providing for an aggregate payment of up to 3.0% of the
Company's equity value upon a sale of the Company above a specified threshold.
The initial term of the SAR Agreements is ten years, at which time the term
will be automatically extended for one-year periods. The rights of Messrs.
Paule and Hefty under the SAR Agreements vest ratably over the three-year
period following the Closing.
STOCK OPTION PLAN
The Company has adopted a stock option plan (the "Option Plan") in order to
provide incentives to certain key officers, managers and employees through
ownership of the Company's Common Stock. The shares of Common Stock to be sold
or transferred pursuant to the exercise of options granted under the Option
Plan shall be authorized shares of Common Stock of the Company, and may be
newly issued shares and treasury shares. As of March 31, 1998, options have
been granted for 3,198.04 shares of the Class C Common Stock of the Company.
These shares vest over a five-year period, and as of March 31, 1998, 849.18
shares were vested. In addition, up to 639.59 shares will vest in 1998 and
1999, up to 639.65 shares will vest in 2000, up to 215.00 shares will vest in
2001 and up to 215.03 shares will vest in 2002.
45
<PAGE>
PRINCIPAL STOCKHOLDERS
The table below sets forth certain information, as of March 31, 1998 and
following the Offering, regarding beneficial ownership of the common stock of
the Company held by: (i) each director of the Company who beneficially owns
common stock, (ii) each executive officer of the Company named in the table
below "Management--Executive Compensation--Summary Compensation Table" who
beneficially owns common stock, (iii) all directors and executive officers of
the Company as a group and (iv) each person known by the Company to own
beneficially more than 5% of its common stock. The Company believes that each
individual or entity named has sole investment and voting power with respect
to shares of common stock indicated as beneficially owned by them, except as
otherwise noted. See "Certain Transactions."
<TABLE>
<CAPTION>
AMOUNT OF BENEFICIAL OWNERSHIP(1)
---------------------------------
NUMBER OF PERCENTAGE
SHARES OWNED
--------- -----------------
<S> <C> <C>
DIRECTORS AND EXECUTIVE OFFICERS:
John W. Jordan II (2)(3)............. 4,631 9.8%
David W. Zalaznick (3)............... 4,631 9.5
Robert H. Elkin (4).................. 4,393 9.2
Jonathan F. Boucher (3).............. 3,970 8.4
Christopher T. Paule (5)............. 1,485 3.1
A. Richard Caputo, Jr. (3)........... 1,453 3.1
Allan A. Huning (6).................. 888 1.9
Jack L. Bortle (7)................... 754 1.6
John L. Garavaglia III (8)........... 250 *
All directors and executive officers
as a group (11 persons)
(2)(3)(4)(5)(6)(7)(8)............... 22,800 47.6%
OTHER PRINCIPAL STOCKHOLDERS:
Massachusetts Mutual Life Insurance
Company (9)......................... 13,168 22.7%
JZ Equity Partners PLC (10).......... 12,352 21.6
Leucadia Investors, Inc. (11)........ 7,263 15.4
Northwestern Mutual Life Insurance
Company (12)........................ 8,231 15.3
Safety Partners, L.P. (13)........... 3,448 7.3
John R. Lowden (3)................... 2,905 6.2
Adam E. Max (3)...................... 2,905 6.2
</TABLE>
- --------
(1) Calculated pursuant to Rule 13d-3(d) under the Exchange Act. Under Rule
13d-3(d), shares not outstanding which are subject to options, warrants,
rights or conversion privileges exercisable within 60 days are deemed
outstanding for the purpose of calculating the number and percentage
beneficially owned by such person, but not deemed outstanding for the
purpose of calculating the percentage beneficially owned by each other
person listed. As of March 31, 1998, there were 48,526 shares of common
stock of the Company issued and outstanding.
(2) All shares are held by the John W. Jordan II Revocable Trust, of which Mr.
Jordan is the trustee.
(3) Each of Messrs. Jordan, Zalaznick, Boucher, Lowden, Max and Caputo are
affiliated with The Jordan Company, whose address is 767 Fifth Avenue, New
York, New York 10153.
(4) Includes immediately exercisable options to purchase 605 shares of common
stock. Mr. Elkin was also granted SARs in connection with the Offering.
See "Management--SAR Agreements." Mr. Elkin's address is 2997 Clarkson
Road, Chesterfield, Missouri 63017.
(5) Includes immediately exercisable options to purchase 210 shares of common
stock. Mr. Paule was also granted SARs in connection with the Offering.
See "Management--SAR Agreements." Mr. Paule's address is 2997 Clarkson
Road, Chesterfield, Missouri 63017.
(6) Includes immediately exercisable options to purchase 14 shares of common
stock. Mr. Huning's address is 2997 Clarkson Road, Chesterfield, Missouri
63017.
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<PAGE>
(7) Includes immediately exercisable options to purchase 4 shares of common
stock. Mr. Bortle's address is 2997 Clarkson Road, Chesterfield, Missouri
63017.
(8) Mr. Garavaglia's address is 2997 Clarkson Road, Chesterfield, Missouri
63017.
(9) Includes 432 shares of common stock and immediately exercisable warrants
to purchase 1988 shares of common stock held by MassMutual Corporate Value
Partners Limited, 217 shares of common stock and immediately exercisable
warrants to purchase 999 shares of common stock held by MassMutual
Participation Investors and 434 shares of common stock and immediately
exercisable warrants to purchase 1999 shares of common stock held by
MassMutual Corporate Investors, each of which are affiliates of
Massachusetts Mutual Life Insurance Company, and 1,267 shares of common
stock and immediately exercisable warrants to purchase 5,832 shares of
common stock held by Massachusetts Mutual Life Insurance Company. The
principal address of Massachusetts Mutual Life Insurance Company is 1295
State Street, Springfield, Massachusetts 01111.
(10) Includes immediately exercisable warrants to purchase 10,142 shares of
common stock. JZ Equity Partners PLC is a publicly traded U.K. investment
trust advised by an affiliate of The Jordan Company. See "Certain
Transactions." The principal address of JZ Equity Partners PLC is c/o
Jordan/Zalaznick Capital Company, 767 Fifth Avenue, New York, New York
10153.
(11) The principal address of Leucadia Investors, Inc. is 315 Park Avenue
South, New York, New York 10010.
(12) Includes immediately exercisable warrants to purchase 6,762 shares of
common stock. The principal address of Northwestern Mutual Life Insurance
Company is 720 East Wisconsin Avenue, 18th Floor, Milwaukee, Wisconsin
53203.
(13) Safety Partners, L.P. is an affiliate of Jefferies & Company, Inc., one
of the Initial Purchasers. See "Plan of Distribution." The beneficial
owners of Safety Partners, L.P. include certain directors of Jefferies &
Company, Inc. The principal address of Safety Partners, L.P. is 11100
Santa Monica Blvd., 10th Floor, Los Angeles, California 90025.
STOCKHOLDERS AGREEMENT
The Stockholders Agreement provides for certain rights and obligations among
the Company and the Current Holders including with respect to the election of
directors, restrictions on transfer, co-sale rights and registration rights.
Pursuant to the Stockholders Agreement, the Current Holders have agreed to
vote their shares for the election of at least four members of the board of
directors designated by affiliates of The Jordan Company, and JZ Equity
Partners PLC (the "Jordan Investors") and one director designated by
management stockholders (the "Management Investors").
The Current Holders may only transfer shares of Common Stock in accordance
with the Stockholders Agreement. The Company and the Current Holders have a
right of first offer to purchase all or any portion of any shares of Common
Stock to be transferred by any Current Holder, subject to certain limited
exceptions, on the same terms put forth for such transfer by the selling
holder. The Stockholders Agreement provides for preferences on the rights of
first offer such that the Management Investors have the first right to
purchase shares sold by any other Management investor and the Jordan Investors
have the first right to purchase shares sold by any other Jordan Investor.
Pursuant to the Stockholders Agreement, Current Holders other than the
Jordan Investors and the Management Investors (the "Institutional Investors")
have been granted demand and incidental registration rights by the Company.
All other Current Holders have been granted incidental registration rights.
The Company is required to bear all registration expenses in connection with
each demand and incidental registration and has agreed to indemnify the
holders of demand and incidental registration rights against, and provide
contribution with respect to, certain liabilities under the Securities Act in
connection with the demand and incidental registrations.
47
<PAGE>
DESCRIPTION OF CERTAIN INDEBTEDNESS
CREDIT AGREEMENT
On April 22, 1998, the Company entered into a $125,000,000 Credit Agreement
with BankBoston, NA, as agent, and Mercantile Bank National Association, as
co-agent, that is comprised of a $30,000,000 revolving working capital
facility and a $95,000,000 acquisition facility. The Revolver provides that up
to $5,000,000 of such facility may be used for the issuance of letters of
credit and lender guaranties. The Credit Agreement also contains several
financial covenants, which require the Company to maintain certain financial
ratios and restrict the Company's ability to incur indebtedness and pay
dividends. The commitment fee on the unused portion of the Revolver is 1/2%
per annum, payable quarterly.
The Credit Agreement is guaranteed by the Company's Domestic Subsidiaries
and is secured by a perfected first priority security interest in all of the
assets of each domestic subsidiary, the pledge of 100% of the capital stock of
each Domestic Subsidiary and the pledge of up to a maximum of 66% of the
capital stock of each direct foreign subsidiary.
Mandatory principal payments on the acquisition facility are due in
quarterly installments beginning on June 30, 2001, with the final installment
due on April 22, 2004.
The borrowings under the Credit Agreement bear interest at the option of the
Company, at a rate per annum equal to (i) the Base Rate (as defined in the
Credit Agreement) plus .75%; or (ii) the LIBOR Rate (as defined in the Credit
Agreement) plus 2.25% for the Revolver and the Acquisition loan. For each of
the quarters following September 30, 1998, the factor added to either the Base
Rate or the LIBOR Rate will be adjusted based on the ratio of the Company's
Total Debt to EBITDA (as defined by the Credit Agreement).
The Credit Agreement contains three financial covenants that must be
maintained by the Company. The first covenant is a ratio which measures the
relationship between EBITDA and Consolidated Total Interest Expense (as
defined in the Credit Agreement), including interest expense with respect to
the Notes. The second covenant is a Leverage Ratio (as defined in the Credit
Agreement), which measures the relationship between Total Funded Indebtedness
(as defined in the Credit Agreement), including the Notes, to EBITDA. The
final covenant is a ratio which measures the relationship between Consolidated
Operating Cash Flow (as defined in the Credit Agreement), to total debt
service, which itself is a sum of Consolidated Total Interest Expense and the
Company's debt service (i.e required payments of principal) with respect to
the Company's Indebtedness (as defined in the Credit Agreement), including the
Notes. The Company will be in default of its Leverage Ratio financial covenant
if it exceeds the prescribed maximum ratio at the end of any fiscal quarter.
With respect to the other two financial covenants, the Company will be in
default if it falls below the prescribed minimum ratios for a period of four
consecutive fiscal quarters. The Company is currently in compliance with all
of the financial covenants contained in the Credit Agreement.
48
<PAGE>
CERTAIN TRANSACTIONS
The Jordan Company. In connection with its acquisition by the Management
Investors and the Jordan Investors in August 1995, the Company entered into an
agreement (the "TJC Management Agreement") with The Jordan Company Management
Corporation ("TJMC"), an affiliate of The Jordan Company. Under the TJC
Management Agreement, the Company retains TJMC to render services to the
Company, its financial and business affairs, its relationships with its
lenders and stockholders, and the operation and expansion of its business. The
TJC Management Agreement will expire in 2005, but is automatically renewed for
successive one-year terms, unless either party provides written notice of
termination 60 days prior to the scheduled renewal date. In connection with
the Offering, the Company and TJMC have agreed to amend the TJC Management
Agreement. The TJC Management Agreement, as amended, will provide an annual
consulting fee payable on a quarterly basis equal to at least $600,000 but in
no event greater than 2.5% of EBITDA (as defined in the TJC Management
Agreement). In addition, the TJC Management Agreement provides for payment to
TJMC of (i) an investment banking and sponsorship fee of up to 2% of the
purchase price of certain acquisitions or sales involving the Company and (ii)
a financial consulting fee of up to 1% of any debt, equity or other financing
arranged by the Company with the assistance of TJMC. A fee in the amount of
$1.65 million will be payable to TJMC upon consummation of the Offering. Such
fees are subject to board of directors approval. The Company believes that the
terms of the TJC Management Agreement are comparable to the terms that it
would obtain from disinterested third parties for comparable services.
Pursuant to the terms of the Indenture, payment of fees to TJMC pursuant to
the TJC Management Agreement is not permitted in the event of a payment or
financial covenant default with respect to the Notes. See "Description of
Notes--Certain Covenants."
Employee Stockholder Loans. In 1995, the Company made loans to certain
employees, including Messrs. Elkin, Paule and Huning, to be used for the
purchase of the Company's stock. The loan to Mr. Elkin had an original
principal amount of $165,553 and is the only loan with a principal amount in
excess of $60,000. As of March 31, 1998 there was $343,000 outstanding on all
stockholder loans, including $165,553 outstanding on the loan to Mr. Elkin.
Each of the loans bears interest at a rate of 7% per annum and, as of March
31, 1998, payments on all of the loans by the employee stockholders were
current.
Directors' Indemnification. The Company has entered into indemnification
agreements with each member of the Board of Directors whereby the Company has
agreed, subject to certain exceptions, to indemnify and hold harmless each
director from liabilities incurred as a result of such person's status as a
director of the Company.
Ownership of the Company's Preferred Stock. Holders of the Company's
Preferred Stock, which will be redeemed in connection with the Offering,
include affiliates of MCIT, a publicly traded UK investment trust which is
advised by an affiliate of The Jordan Company. As of December 31, 1997, these
affiliates held, in the aggregate, 29.4% of the outstanding Preferred Stock.
See "Principal Stockholders."
Employment/Non-Interference Agreements. In connection with the Offering, the
Company will amend the terms of the Employment Agreements with certain
executive officers and enter into SAR Agreements with such officers. See
"Management--Employment/Non-Interference Agreements" and "--SAR Agreements."
Repurchase of Common Equity. In connection with the Offering, the Company
intends to repurchase from one of the Institutional Investors common stock and
warrants representing approximately 9.5% of the Company's common stock on a
fully diluted basis for $4.15 million.
49
<PAGE>
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
The Exchange Offer is being made by the Company to satisfy its obligations
pursuant to the Registration Rights Agreement, which requires the Company to
use its best efforts to effect the Exchange Offer. See "--Registration
Rights."
The Company is making the Exchange Offer pursuant to the Registration
Statement of which this Prospectus is a part in reliance upon the position of
the staff of the Commission set forth in certain no-action letters addressed
to other parties in other transactions. However, the Company has not sought
its own no-action letter and there can be no assurance that the staff of the
Commission would make a similar determination with respect to the Exchange
Offer as in such other circumstances. Based on these interpretations by the
staff of the Commission, the New Notes issued pursuant to the Exchange Offer
may be offered for resale, resold and otherwise transferred by holders thereof
(other than (i) any such holder that is an "affiliate" of the Company within
the meaning of Rule 405 under the Securities Act, (ii) an Initial Purchaser
who acquired the Old Notes directly from the Company solely in order to resell
pursuant to Rule 144A of the Securities Act or any other available exemption
under the Securities Act, or (iii) a broker-dealer who acquired the Old Notes
as a result of market making or other trading activities) without compliance
with the registration and prospectus delivery provisions of the Securities Act
provided that such New Notes are acquired in the ordinary course of such
holders' business and such holders have no arrangement with any person to
participate in the distribution (within the meaning of the Securities Act) of
such New Notes. By tendering, each Holder which is not a broker dealer will
represent to the Company that, among other things, the person receiving the
New Notes, whether or not such person is the Holder, (i) will acquire the New
Notes in the ordinary course of such person's business, (ii) has no
arrangement or understanding with any person to participate in a distribution
of the New Notes and (iii) is not engaged in and does not intend to engage in
a distribution of the New Notes. If any Holder or any such other person has an
arrangement or understanding with any person to participate in a distribution
of such New Notes, is engaged in or intends to engage in a distribution of
such New Notes, is an "affiliate," as defined under Rule 405 of the Securities
Act, of the Company, or acquired the Old Notes as a result of market making or
other trading activities, then such Holder or any such other person (i) can
not rely on the applicable interpretations of the staff of the Commission and
(ii) must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with a secondary resale transaction, unless
such sale is made pursuant to an exemption from such requirements.
Holders of Old Notes not tendered will not have any further registration
rights and the Old Notes not exchanged will continue to be subject to certain
restrictions on transfer. Accordingly, the liquidity of the markets for the
Old Notes could be adversely affected.
NEITHER THE BOARD OF DIRECTORS OF THE COMPANY NOR THE COMPANY MAKES ANY
RECOMMENDATION TO HOLDERS OF OLD NOTES AS TO WHETHER TO TENDER OR REFRAIN FROM
TENDERING ALL OR ANY PORTION OF THEIR OLD NOTES PURSUANT TO THE EXCHANGE
OFFER. IN ADDITION, NO ONE HAS BEEN AUTHORIZED TO MAKE ANY SUCH
RECOMMENDATION. HOLDERS OF OLD NOTES MUST MAKE THEIR OWN DECISION WHETHER TO
TENDER PURSUANT TO THE EXCHANGE OFFER AND, IF SO, THE AGGREGATE AMOUNT OF OLD
NOTES TO TENDER AFTER READING THIS PROSPECTUS AND THE LETTER OF TRANSMITTAL
AND CONSULTING THEIR ADVISERS, IF ANY, BASED ON THEIR OWN FINANCIAL POSITION
AND REQUIREMENTS.
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
In connection with the issuance of the Old Notes, the Company entered into
the Registration Rights Agreement with the Initial Purchasers of the Old
Notes.
Holders of New Notes (other than as set forth below) are not entitled to any
registration rights with respect to the New Notes. Pursuant to the
Registration Rights Agreement, Holders of Old Notes are entitled to certain
registration rights. Under the Registration Rights Agreement, the Company has
agreed, for the benefit of the Holders of the Old Notes, that it will, at its
cost, (i) within 90 days after the date of the original issue of the Old
50
<PAGE>
Notes, file the Registration Statement with the Commission and (ii) within 150
days after the date of original issuance of the Old Notes, use its best
efforts to cause such Registration Statement to be declared effective under
the Securities Act. The Registration Statement of which this Prospectus is a
part constitutes the Registration Statement. If (i) the Company is not
permitted to consummate the Exchange Offer because the Exchange Offer is not
permitted by applicable law or Commission policy or (ii) any Holder of
Transfer Restricted Securities (as defined) notifies the Company within the
specified time period that (A) due to a change in law or policy it is not
entitled to participate in the Exchange Offer, (B) due to a change in law or
policy it may not resell the New Notes acquired by it in the Exchange Offer to
the public without delivering a prospectus and the prospectus contained in the
Registration Statement is not appropriate or available for such resales by
such holder or (C) it is a broker-dealer and acquired the Notes directly from
the Company or an affiliate of the Company, the Company will file with the
Commission a Shelf Registration Statement to cover resales of the Transfer
Restricted Securities by the Holders thereof who satisfy certain conditions
relating to the provision of information in connection with the Shelf
Registration Statement. The Company will use its best efforts to cause the
applicable registration statement to be declared effective as promptly as
possible by the Commission. For purposes of the foregoing, "Transfer
Restricted Securities" means each Note, until (i) the date of which such
Transfer Restricted Security has been exchanged by a person other than a
broker-dealer for a New Note in the Exchange Offer, (ii) following the
exchange by a broker-dealer in the Exchange Offer of a Transfer Restricted
Security for a New Note, the date on which such New Note is sold to a
purchaser who receives from such broker-dealer on or prior to the date of such
sale a copy of the prospectus contained in the Registration Statement, (iii)
the date on which such security has been effectively registered under the
Securities Act and disposed of in accordance with the Shelf Registration
Statement or (iv) the date on which such security is distributed pursuant to
Rule 144 under the Act.
The Registration Rights Agreement also provides that, (i) unless the
Exchange Offer would not be permitted by applicable law or Commission policy,
the Company will commence the Exchange Offer and use its best efforts to issue
on or prior to 60 business days after the date on which the Registration
Statement was declared effective by the Commission, New Securities in exchange
for all Transfer Restricted Securities tendered prior thereto in the Exchange
Offer and (ii) if obligated to file the Shelf Registration Statement, the
Company will file the Shelf Registration Statement with the Commission on or
prior to 90 days after such filing obligation arises and use its best efforts
to cause the Shelf Registration to be declared effective by the Commission on
or prior to 150 days after such obligation arises. The Company shall use its
best efforts to keep such Shelf Registration Statement continuously effective,
supplemented and amended until the third anniversary of the Closing Date or
such shorter period that will terminate when all the Notes covered by the
Shelf Registration Statement have been sold pursuant to the Shelf Registration
Statement. If (a) the Company fails to file any of the registration statements
required by the Registration Rights Agreement on or before the date specified
for such filing, (b) any of such registration statements are not declared
effective by the Commission on or prior to the date specified for such
effectiveness (the "Effectiveness Target Date"), (c) the Company fails to
consummate the Exchange Offer within 30 business days of the Effectiveness
Target Date with respect to the Registration Statement, or (d) the Shelf
Registration Statement or the Registration Statement is declared effective but
thereafter, subject to certain exceptions, ceases to be effective or usable in
connection with resales of Transfer Restricted Securities during the periods
specified in the Registration Rights Agreement (each such event referred to in
clauses (a) through (d) above a "Registration Default"), then the Company will
pay Liquidated Damages to each Holder of Transfer Restricted Securities, with
respect to the first 90-day period immediately following the occurrence of
such Registration Default in an amount equal to $.05 per week for each $1,000
principal amount of Notes held by such Holder. The amount of the Liquidated
Damages will increase by an additional $.05 per week with respect to each
subsequent 90-day period until all Registration Defaults have been cured, up
to a maximum amount of Liquidated Damages of $.40 per week for each $1,000
principal amount of Notes, as applicable. Following the cure of all
Registration Defaults, the accrual of Liquidated Damages will cease.
Holders of Transfer Restricted Securities will be required to deliver
information to be used in connection with the Shelf Registration Statement and
to provide comments on the Shelf Registration Statement within the time
periods set forth in the Registration Rights Agreement in order to have their
Transfer Restricted Securities included in the Shelf Registration Statement
and benefit from the provisions regarding Liquidated Damages set forth above.
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The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified
in its entirety by reference to, all the provisions of the Registration Rights
Agreement, a copy of which is filed as an exhibit to the Registration
Statement of which this Prospectus constitutes a part.
TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING OLD SECURITIES
Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal (which together constitute the
Exchange Offer), the Company will accept for exchange Old Notes which are
properly tendered on or prior to the Expiration Date and not withdrawn as
permitted below. As used herein, the term "Expiration Date" means 5:00 p.m.,
New York City time, on , 1998; provided, however, that if the Company, in
its sole discretion, has extended the period of time for which the Exchange
Offer is open, the term "Expiration Date" means the latest time and date to
which the Exchange Offer is extended; provided further that in no event will
the Exchange Offer be extended beyond , 1998. The Company may extend the
Exchange Offer at any time and from time to time by giving oral or written
notice to the Exchange Agent and by timely public announcement. Without
limiting the manner in which the Company may choose to make any public
announcement and subject to applicable law, the Company shall have no
obligation to publish, advertise or otherwise communicate any such public
announcement other than by issuing a release to an appropriate news agency.
During any extension of the Exchange Offer, all Old Notes previously tendered
pursuant to the Exchange Offer will remain subject to the Exchange Offer. The
Company intends to conduct the Exchange Offer in accordance with the
applicable requirements of the Exchange Act and the rules and regulations
thereunder.
As of the date of this Prospectus, $115,000,000 aggregate principal amount
of the Old Notes is outstanding. This Prospectus, together with the Letter of
Transmittal, is first being sent on or about , 1998, to all Holders of Old
Notes known to the Company. The Company's obligation to accept Old Notes for
exchange pursuant to the Exchange Offer is subject to certain conditions as
set forth under "--Certain Conditions to the Exchange Offer" below.
The terms of the New Notes and the Old Notes are identical in all material
respects, except for certain transfer restrictions and registration rights
relating to the Old Notes and rights to receive Liquidated Damages. See "--
Registration Rights; Liquidated Damages." The Old Notes were, and the New
Notes will be, issued under the Indenture and all such Notes are entitled to
the benefits of the Indenture.
Old Notes tendered in the Exchange Offer must be in denominations of
principal amount of $1,000 and any integral multiple thereof. Any Old Notes
not accepted for exchange for any reason will be returned without expense to
the tendering Holder thereof as promptly as practicable after the expiration
or termination of the Exchange Offer.
The Company expressly reserves the right to amend or terminate the Exchange
Offer, and not to accept for exchange any Old Notes not theretofore accepted
for exchange, upon the occurrence of any of the conditions of the Exchange
Offer specified below under "--Certain Conditions to the Exchange Offer". The
Company will give oral or written notice of any extension, amendment,
nonacceptance or termination to the Holders of the Old Notes as promptly as
practicable. Any amendment to the Exchange Offer will not limit the right of
Holders to withdraw tendered Old Notes prior to the Expiration Date. See "--
Withdrawal Rights."
PROCEDURES FOR TENDERING OLD NOTES
The tender to the Company of Old Notes by a Holder thereof as set forth
below and the acceptance thereof by the Company will constitute a binding
agreement between the tendering Holder and the Company upon the terms and
subject to the conditions set forth in this Prospectus and in the accompanying
Letter of Transmittal. Except as set forth below, a Holder who wishes to
tender Old Notes for exchange pursuant to the Exchange Offer must transmit a
properly completed and duly executed Letter of Transmittal, including all
other documents required by such Letter of Transmittal, to State Street Bank
and Trust Company (the "Exchange Agent") at one of the addresses set forth
below under "Exchange Agent" on or prior to the Expiration Date. In addition,
either (i) certificates for such Old Notes must be received by the Exchange
Agent along, with the Letter of Transmittal,
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or (ii) a timely confirmation of a book-entry transfer (a "Book-Entry
Confirmation") of such Old Notes, if such procedure is available, into the
Exchange Agent's account at The Depository Trust Company (the "Book-Entry
Transfer Facility") pursuant to the procedure for book-entry transfer
described below, must be received by the Exchange Agent prior to the
Expiration Date, or (iii) the Holder must comply with the guaranteed delivery
procedures described below. THE METHOD OF DELIVERY OF OLD NOTES, LETTERS OF
TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF
THE HOLDERS. IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED
MAIL, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, BE USED IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY. NO LETTERS OF
TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE COMPANY.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed unless the Old Notes surrendered for exchange
pursuant thereto are tendered (i) by a registered Holder of the Old Notes who
has not completed the box entitled "Special Issuance Instructions" or "Special
Delivery Instructions" on the Letter of Transmittal or (ii) for the account of
an Eligible Institution (as defined below). In the event that signatures on a
Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantees must be by a firm which is a member
of a registered national securities exchange or a member of the National
Association of Securities Dealers, Inc. or by a commercial bank or trust
company having an office or correspondent in the United States (collectively,
"Eligible Institutions"). If Old Notes are registered in the name of a person
other than signer of the Letter of Transmittal, the Old Notes surrendered for
exchange must be endorsed by, or be accompanied by a written instrument or
instruments of transfer or exchange, in satisfactory form as determined by the
Company in its sole discretion, duly executed by the registered Holder with
the signature thereon guaranteed by an Eligible Institution.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Old Notes tendered for exchange will be determined
by the Company in its sole discretion, which determination shall be final and
binding. The Company reserves the absolute right to reject any and all tenders
of any particular Old Notes not properly tendered or to not accept any
particular Old Notes which acceptance might, in the judgment of the Company or
its counsel, be unlawful. The Company also reserves the absolute right to
waive any defects or irregularities or conditions of the Exchange Offer as to
any particular Old Notes either before or after the Expiration Date (including
the right to waive the ineligibility of any Holder who seeks to tender Old
Notes in the Exchange Offer). The interpretation of the terms and conditions
of the Exchange Offer as to any particular Old Notes either before or after
the Expiration Date (including the Letter of Transmittal and the instructions
thereto) by the Company shall be final and binding on all parties. Unless
waived, any defects or irregularities in connection with tenders of Old Notes
for exchange must be cured within such reasonable period of time as the
Company shall determine. Neither the Company, the Exchange Agent nor any other
person shall be under any duty to give notification of any defect or
irregularity with respect to any tender of Old Notes for exchange, nor shall
any of them incur any liability for failure to give such notification. The
Exchange Agent intends to use reasonable efforts to give notification of such
defects and irregularities.
If the Letter of Transmittal is signed by a person or persons other than the
registered Holder or Holders of Old Notes, such Old Notes must be endorsed or
accompanied by appropriate powers of attorney, in either case signed exactly
as the name or names of the registered Holder or Holders that appear on the
Old Notes.
If the Letter of Transmittal or any Old Notes or powers of attorney are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporation or others acting in a fiduciary or representatives
capacity, such persons should so indicate when signing, and, unless waived by
the Company, proper evidence satisfactory to the Company of their authority to
so act must be submitted.
By tendering, each Holder will represent to the Company that, among other
things, the New Notes acquired pursuant to the Exchange Offer are being
obtained in the ordinary course of business of the person receiving such New
Notes, whether or not such person is the Holder and such person has no
arrangement with any person to participate in the distribution of the New
Notes. If any Holder or any such other person is an "affiliate," as defined
under Rule 405 of the Securities Act, of the Company, is engaged in or intends
to engage in or has an arrangement or understanding with any person to
participate in a distribution of such New Notes to be acquired
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pursuant to the Exchange Offer, such Holder or any such other person (i) could
not rely on the applicable interpretations of the staff of the Commission and
(ii) must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any resale transaction. Each broker-
dealer that receives New Notes for its own account pursuant to the Exchange
Offer must acknowledge that it will deliver a prospectus in connection with
any resale of such New Notes. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the
Securities Act.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
the Company will accept, promptly after the Expiration Date, all Old Notes
properly tendered and will issue the New Notes promptly after acceptance of
the Old Notes. See "--Certain Conditions to the Exchange Offer." For purposes
of the Exchange Offer, the Company shall be deemed to have accepted properly
tendered Old Notes for exchange when, as and if the Company has given oral or
written notice thereof to the Exchange Agent, with written confirmation of any
oral notice to be given promptly thereafter.
For each Old Note accepted for exchange, the Holder of such Old Note will
receive a New Note having a principal amount equal to that of the surrendered
Old Note. Accordingly, registered Holders of New Notes on the relevant record
date for the first interest payment date following the consummation of the
Exchange Offer will receive interest accruing from the most recent date to
which interest has been paid on the Old Notes, or, if no interest has been
paid on the Old Notes, from April 22, 1998. Old Notes accepted for exchange
will cease to accrue interest from and after the date of consummation of the
Exchange Offer. Holders of Old Notes whose Old Notes are accepted for exchange
will not receive any payment in respect of accrued interest on such Old Notes
otherwise payable on any interest payment date the record date for which
occurs on or after consummation of the Exchange Offer.
In all cases, issuance of New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of (i) certificates for such Old Notes or a timely Book-
Entry Confirmation of such Old Notes into the Exchange Agent's account at the
Book-Entry Transfer Facility, (ii) a properly completed and duly executed
Letter of Transmittal and (iii) all other required documents. If any tendered
Old Notes are not accepted for any reason set forth in the terms and
conditions of the Exchange Offer, or if Old Notes are submitted for a greater
amount than the Holder desires to exchange, such unaccepted or nonexchanged
Old Notes will be returned without expense to the tendering Holder thereof
(or, in the case of Old Notes tendered by book-entry transfer into the
Exchange Agent's account at the Book-Entry Transfer Facility pursuant to the
book-entry procedures described below, such nonexchanged Old Notes will be
credited to an account maintained with such Book-Entry Transfer Facility)
designated by the tendering Holder as promptly as practicable after the
expiration or termination of the Exchange Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Old Notes at the Book-Entry Transfer Facility for purposes of the
Exchange Offer within two business days after the date of this Prospectus, and
any financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of Old Notes by causing the
Book-Entry Transfer Facility to transfer such Old Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility in accordance with such
Book-Entry Transfer Facility's procedures for transfer. However, although
delivery of Old Notes may be effected through book-entry transfer at the Book-
Entry Transfer Facility, the Letter of Transmittal or facsimile thereof, with
any required signature guarantees and any other required documents, must, in
any case, be transmitted to and received by the Exchange Agent at one of the
addresses set forth below under "--Exchange Agent" on or prior to the
Expiration Date or the guaranteed delivery procedures described below must be
complied with.
GUARANTEED DELIVERY PROCEDURES
If a registered Holder of the Old Notes desires to tender such Old Notes and
the Old Notes are not immediately available, or time will not permit such
Holder's Old Notes or other required documents to reach the Exchange Agent
before the Expiration Date, or the procedure for book-entry transfer cannot be
completed on a
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timely basis, a tender may be effected if (i) the tender is made through an
Eligible Institution, (ii) prior to the Expiration Date, the Exchange Agent
has received from such Eligible Institution a properly completed and duly
executed Letter of Transmittal (or a facsimile thereof) and Notice of
Guaranteed Delivery, substantially in the form of the corresponding exhibit to
the Registration Statement of which this Prospectus constitutes a part (by
telegram, telex, facsimile transmission, mail or hand delivery), setting forth
the name and address of the Holder of Old Notes and the amount of Old Notes
tendered, stating that the tender is being made thereby and guaranteeing that
within three New York Stock Exchange ("NYSE") trading days after the date of
execution of the Notice of Guaranteed Delivery, the certificates for all
physically tendered Old Notes, in proper form for transfer, or a Book-Entry
Confirmation, as the case may be, and any other documents required by the
Letter of Transmittal will be deposited by the Eligible Institution with the
Exchange Agent, and (iii) the certificates for all physically tendered Old
Notes, in proper form for transfer, or a Book-Entry Confirmation, as the case
may be, and all other documents required by the Letter of Transmittal, are
received by the Exchange Agent within three NYSE trading days after the date
of execution of the Notice of Guaranteed Delivery.
WITHDRAWAL RIGHTS
Tenders of Old Notes may be withdrawn at any time prior to the Expiration
Date.
For a withdrawal to be effective, a written notice of withdrawal must be
received by the Exchange Agent at one of the addresses set forth below under
"Exchange Agent." Any such notice of withdrawal must specify the name of the
person having tendered the Old Notes to be withdrawn, identify the Old Notes
to be withdrawn (including the amount of such Old Notes), and (where
certificates for Old Notes have been transmitted) specify the name in which
such Old Notes are registered, if different from that of the withdrawing
Holder. If certificates for Old Notes have been delivered or otherwise
identified to the Exchange Agent, then, prior to the release of such
certificates the withdrawing Holder must also submit the serial numbers of the
particular certificates to be withdrawn and a signed notice of withdrawal with
signatures guaranteed by an Eligible Institution unless such Holder is an
Eligible Institution. If Old Notes have been tendered pursuant to the
procedure for book-entry transfer described above, any notice of withdrawal
must specify the name and number of the account at the Book- Entry Transfer
Facility to be credited with the withdrawn Old Notes and otherwise comply with
the procedures of such facility. All questions as to the validity, form and
eligibility (including time of receipt) of such notices will be determined by
the Company, whose determination shall be final and binding on all parties.
Any Old Notes so withdrawn will be deemed not to have been validly tendered
for exchange for purposes of the Exchange Offer. Any Old Notes which have been
tendered for exchange but which are not exchanged for any reason will be
returned to the Holder thereof without cost to such Holder (or, in the case of
Old Notes tendered by book-entry transfer into the Exchange Agent's account at
the Book-Entry Transfer Facility pursuant to the book-entry transfer
procedures described above, such Old Notes will be credited to an account with
such Book-Entry Transfer Facility specified by the Holder) as soon as
practicable after withdrawal, rejection of tender or termination of the
Exchange Offer. Properly withdrawn Old Notes may be retendered by following
one of the procedures described under "--Procedures for Tendering Old Notes"
above at any time on or prior to the Expiration Date.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, the Company shall
not be required to accept for exchange, or to issue New Notes in exchange for,
any Old Notes and may terminate or amend the Exchange Offer, if at any time
before the acceptance of such Old Notes for exchange or the exchange of the
New Notes for such Old Notes, any of the following events shall occur:
(a) there shall be threatened, instituted or pending any action or
proceeding before, or any injunction, order or decree shall have been
issued by, any court or governmental agency or other governmental
regulatory or administrative agency or commission, (i) seeking to restrain
or prohibit the making or consummation of the Exchange Offer or any other
transaction contemplated by the Exchange Offer, or assessing or seeking any
damages as a result thereof, or (ii) resulting in a material delay in the
ability of the Company to accept for exchange or exchange some or all of
the Old Notes pursuant to the Exchange Offer;
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or any statute, rule, regulation, order or injunction shall be sought,
proposed, introduced, enacted, promulgated or deemed applicable to the
Exchange Offer or any of the transactions contemplated by the Exchange
Offer by any government or governmental authority, domestic or foreign, or
any action shall have been taken, proposed or threatened, by any
government, governmental authority, agency or court, domestic or foreign,
that in the sole judgment of the Company might directly or indirectly
result in any of the consequences referred to in clauses (i) or (ii) above
or, in the sole judgment of the Company, might result in the holders of New
Notes having obligations with respect to resales and transfers of New Notes
which are greater than those described in the interpretation of the
Commission referred to on the cover page of this Prospectus, or would
otherwise make it inadvisable to proceed with the Exchange Offer; or
(b) there shall have occurred (i) any general suspension of or general
limitation on prices for, or trading in, securities on any national
securities exchange or in the over-the-counter market, (ii) any limitation
by any governmental agency or authority which may adversely affect the
ability of the Company to complete the transactions contemplated by the
Exchange Offer, (iii) a declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States or any
limitation by any governmental agency or authority which adversely affects
the extension of credit or (iv) a commencement of a war, armed hostilities
or other similar international calamity directly or indirectly involving
the United States, or, in the case of any of the foregoing existing at the
time of the commencement of the Exchange Offer, a material acceleration or
worsening thereof; or
(c) any change (or any development involving a prospective change) shall
have occurred or be threatened in the business, properties, assets,
liabilities, financial condition, operations, results of operations or
prospects of the Company and its subsidiaries taken as a whole that, in the
sole judgment of the Company, is or may be adverse to the Company, or the
Company shall have become aware of facts that, in the sole judgment of the
Company, have or may have adverse significance with respect to the value of
the Old Notes or the New Notes.
Holders of Old Notes will have registration rights and the right to
Liquidated Damages as described under "--Registration Rights; Liquidated
Damages" if the Company fails to consummate the Exchange Offer.
To the Company's knowledge as of the date of this Prospectus none of the
foregoing events has occurred.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to any
such condition or may be waived by the Company in whole or in part at any time
and from time to time in its reasonable discretion. The failure by the Company
at any time to exercise any of the foregoing rights shall not be deemed a
waiver of any such right and each such right shall be deemed an ongoing right
which may be asserted at any time and from time to time. In the event the
Company asserts or waives a condition to the Exchange Offer which constitutes
a material change to the terms of the Exchange Offer, the Company will
disclose such change in a manner reasonably calculated to inform prospective
investors of such change, and will extend the period of the Exchange Offer by
five business days.
In addition, the Company will not accept for exchange any Old Notes
tendered, and no New Notes will be issued in exchange for any such Old Notes,
if at such time any stop order shall be threatened or in effect with respect
to the Registration Statement of which this Prospectus constitutes a part or
the qualification of the Indenture under the Trust Indenture Act of 1939.
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EXCHANGE AGENT
State Street Bank and Trust Company has been appointed as the Exchange Agent
for the Exchange Offer. All executed Letters of Transmittal and Notices of
Guaranteed Delivery should be directed to the Exchange Agent at the addresses
set forth below. Questions and requests for assistance, requests for
additional copies of this Prospectus or of the Letter of Transmittal and
requests for Notices of Guaranteed Delivery should be directed to the Exchange
Agent addressed as follows:
Deliver to: State Street Bank and Trust Company, Exchange Agent:
By Registered or Certified By Overnight Courier
Mail: Telephone Number or Hand:
State Street Bank and Trust (617) 664-5587
Company
P.O. Box 778 By Facsimile for State Street Bank
Boston, MA 02102-0078 Eligible Institutions: and Trust Company
Attn: Kellie Mullen (617) 664-5290 Two International
Place
Boston, MA 02110
Attn: Kellie Mullen
DELIVERY OF A LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH
ABOVE DOES NOT CONSTITUTE A VALID DELIVERY OF SUCH LETTER OF TRANSMITTAL.
FEES AND EXPENSES
The Company will not make any payment to brokers, dealers or others
soliciting acceptances of the Exchange Offer.
The Company will, however, pay the Exchange Agent reasonable and customary
fees for its services and will reimburse it for reasonable out-of-pocket
expenses in connection therewith. The Company will also pay brokerage houses
and other custodians, nominees and fiduciaries the reasonable out-of-pocket
expenses incurred by them in forwarding copies of this Prospectus and related
documents to the beneficial owners of Old Notes, and in handling tenders for
their customers. The expenses to be incurred in connection with the Exchange
Offer, including the fees and expenses of the Exchange Agent and printing,
accounting, registration, and legal fees, will be paid by Company and are
estimated to be approximately $60,000.
TRANSFER TAXES
Holders who tender their Old Notes for exchange will not be obligated to pay
any transfer taxes in connection therewith, except that holders who instruct
the Company to register New Notes in the name of, or request that Old Notes
not tendered or not accepted in the Exchange Offer be returned to, a person
other than the registered tendering holder will be responsible for the payment
of any applicable transfer tax thereon.
APPRAISAL RIGHTS
HOLDERS OF OLD NOTES WILL NOT HAVE DISSENTERS' RIGHTS OR APPRAISAL RIGHTS IN
CONNECTION WITH THE EXCHANGE OFFER.
REGULATORY MATTERS
The Company is not aware of any governmental or regulatory approvals that
are required in order to consummate the Exchange Offer.
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CONSEQUENCES OF NOT EXCHANGING OLD NOTES
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon as a
consequence of the issuance of the Old Notes pursuant to exemptions from, or
in transactions not subject to, the registration requirements of the
Securities Act and applicable state securities laws. In general, the Old Notes
may not be offered or sold, unless registered under the Securities Act, except
pursuant to an exemption from, or in a transaction not subject to, the
Securities Act and applicable state securities laws. The Company does not
currently anticipate that it will register Old Notes under the Securities Act.
Based upon no-action letters issued by the staff of the Commission to third
parties, the Company believes New Notes issued pursuant to the Exchange Offer
in exchange for Old Notes may be offered for resale, resold or otherwise
transferred by a Holder thereof (other than any (i) Holder which is an
"affiliate" of the Issuer within the meaning of Rule 405 under the Securities
Act, (ii) an Initial Purchaser who acquired the Old Notes directly form the
Company solely in order to resell pursuant to Rule 144A of the Securities Act
or any other available exemption under the Securities Act, or (iii) a broker-
dealer who acquired the old Notes as a result of market making or other
trading activities) without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that such New Notes are
acquired in the ordinary course of such Holder's business and such Holder has
no arrangement with any person to participate in the distribution of such New
Notes. However, the Company has not sought its own no-action letter and there
can be no assurance that the staff of the Commission would make a similar
determination with respect to the Exchange Offer as in such other
circumstances. Each Holder, other than a broker-dealer, must acknowledge that
it is not engaged in, and does not intend to engage in, a distribution of New
Notes, and has no arrangement or understanding to participate in a
distribution of New Notes. If any Holder is an affiliate of the Company, is
engaged in or intends to engage in or has any arrangement or understanding
with respect to the distribution of the New Notes to be acquired pursuant to
the Exchange Offer, such Holder (i) could not rely on the relevant
determinations of the staff of the Commission and (ii) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any secondary resale transaction. Each broker-dealer that
receives New Notes for its own account in exchange for Old Notes must
acknowledge that such Old Notes were acquired by such broker-dealer as a
result of market-making activities or other trading activities and that it
will deliver a prospectus in connection with any resale of such New Notes. See
"Plan of Distribution." In addition, to comply with the securities laws of
certain jurisdictions, if applicable, the New Notes may not be offered or sold
unless they have been registered or qualified for sale in such jurisdiction or
an exemption from registration or qualification is available and is complied
with. The Company has agreed to register or qualify the sale of the New Notes
in such jurisdictions only in limited circumstances and subject to certain
conditions.
ACCOUNTING TREATMENT
The exchange of the New Notes for the Old Notes will have no impact on the
Company's accounting records on the date of the exchange. Accordingly, no gain
or loss for accounting purposes will be recognized. Expenses of the Exchange
Offer and expenses related to the Old Notes will be amortized, pro rata, over
the term of the New Notes.
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DESCRIPTION OF NOTES
GENERAL
The Notes will be issued pursuant to the Indenture between the Company and
State Street Bank and Trust Company, as trustee (the "Trustee"), in a private
transaction that is not subject to the registration requirements of the
Securities Act. See "Notice to Investors." The terms of the Notes include
those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act of 1939, as amended (the "Trust Indenture
Act"), as in effect on the date of original issuance of the Notes. The Notes
are subject to all such terms, and holders of the Notes are referred to the
Indenture and the Trust Indenture Act for a statement thereof. The following
summary of all of the material provisions of the Indenture is qualified by
reference to the complete text of the Indenture, including the definitions
therein of certain terms used below. The definitions of certain terms used in
the following summary are set forth below under "Certain Definitions."
The Notes will be general unsecured obligations of the Company, will be
subordinated in right of payment to all existing and future Senior
Indebtedness of the Company, including indebtedness under the New Credit
Facility, and will rank senior in right of payment to any future subordinated
indebtedness of the Company. The Notes will be unconditionally guaranteed on a
senior subordinated basis by the Guarantors. The Note Guarantees will be
general unsecured obligations of the Guarantors, will be subordinated in right
of payment to all existing and future Senior Indebtedness of the Guarantors,
including indebtedness under the New Credit Facility, and will rank senior in
right of payment to any future subordinated indebtedness of the Guarantors. On
December 31, 1997, on a pro forma basis, after giving effect to the
Acquisitions and the Offering, the aggregate principal amount of Senior
Indebtedness of the Company and the Guarantors would have been approximately
$72.7 million. The Indenture will permit the Company and its subsidiaries to
incur additional indebtedness, including Senior Indebtedness, subject to
certain limitations. See "Risk Factors," "--Certain Covenants" and
"Description of Certain Indebtedness."
As of the date of the Indenture, all of the Company's Subsidiaries will be
Restricted Subsidiaries. However, under certain circumstances, the Company
will be able to designate each of its existing Subsidiaries, Subsidiaries
formed by the Company or Subsidiaries acquired by the Company after the
original issuance of the Notes as Non-Restricted Subsidiaries. Non-Restricted
Subsidiaries will not be subject to many of the restrictive covenants set
forth in the Indenture.
The Notes will be limited to $115,000,000 in aggregate principal amount and
will mature on April 15, 2005. The Notes will bear interest at the rate set
forth on the front cover of this Offering Circular. Interest on the Notes is
payable semi-annually in cash in arrears on April 15 and October 15 in each
year, commencing October 15, 1998, to holders of record of Notes at the close
of business on the April 1 or October 1 immediately preceding such interest
payment date. Interest on the Notes will accrue from the most recent date to
which interest has been paid or, if no interest has been paid, from the date
of original issuance. Interest will be computed on the basis of a 360-day year
of twelve 30-day months. The Notes will be issued in denominations of $1,000
and integral multiples thereof.
Principal of, premium, if any, and interest and Liquidated Damages, if any,
on the Notes will be payable, and the Notes may be presented for registration
of transfer or exchange, at the office of the Paying Agent and Registrar in
New York, New York. Holders of Notes must surrender their Notes to the Paying
Agent to collect principal payments, and the Company may pay principal and
interest and Liquidating Damages, if any, by check and may mail checks to a
holder's registered address; provided that all payments with respect to Global
Notes and Certificated Notes, the holders of which have given wire transfer
instructions to the Company, will be required to be made by wire transfer of
immediately available funds to the accounts specified by the holders thereof.
The Registrar may require payment of a sum sufficient to cover any transfer
tax or similar governmental charge payable in connection with certain
transfers or exchanges. See "--Transfer and Exchange." The Trustee will
initially act as Paying Agent and Registrar. The Company may change the Paying
Agent or Registrar without prior notice to holders of Notes, and the Company
or any of its Subsidiaries may act as Paying Agent or Registrar.
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<PAGE>
SUBORDINATION
The payment of principal of, premium, and interest and Liquidated Damages,
if any, on the Notes will be subordinated in right of payment, as set forth in
the Indenture, to the prior payment in full in cash of all Senior
Indebtedness, whether outstanding on the date of the Indenture or thereafter
incurred.
Upon any distribution to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property, an
assignment for the benefit of creditors or any marshaling of the Company's
assets and liabilities, the holders of Senior Indebtedness will be entitled to
receive payment in full in cash of all Obligations due in respect of such
Senior Indebtedness (including interest after the commencement of any such
proceeding at the rate specified in the applicable Senior Indebtedness whether
or not a claim therefor is allowed in such proceeding) before the Holders of
Notes will be entitled to receive any payment with respect to the Notes, and
until all Obligations with respect to Senior Indebtedness are paid in full in
cash, any distribution to which the Holders of Notes would be entitled shall
be made to the holders of Senior Indebtedness (except that Holders of Notes
may receive and retain Permitted Junior Securities and payments made from the
trust described under "--Legal Defeasance and Covenant Defeasance").
The Company also may not make any payment upon or in respect of the Notes
(except in Permitted Junior Securities or from the trust described under "--
Legal Defeasance and Covenant Defeasance") or acquire any of the Notes
(including repurchases of the Notes at the option of the holders upon a Change
of Control) or on account of the redemption provisions of the Notes or on
account of any other obligations under the Notes or the Indenture if (a) a
default in the payment of the principal of, premium, if any, or interest on
Designated Senior Indebtedness occurs and is continuing beyond any applicable
period of grace or (b) any other default occurs and is continuing with respect
to Designated Senior Indebtedness that permits holders of the Designated
Senior Indebtedness as to which such default relates to accelerate its
maturity and, as to this clause (b), the Trustee receives a written notice
(with a copy to the Company) of such default (a "Payment Blockage Notice")
from the Company or the holders of any Designated Senior Indebtedness.
Payments on the Notes may and shall be resumed (a) in the case of a payment
default, upon the date on which such default is cured or waived in writing and
(b) in case of a nonpayment default, the earlier of the date on which such
nonpayment default is cured or waived in writing or 179 days after the date on
which the applicable Payment Blockage Notice is received by the Trustee,
unless the maturity of any Designated Senior Indebtedness has been
accelerated. No new period of payment blockage may be commenced unless and
until 360 days have elapsed since the date of receipt by the Trustee of the
immediately prior Payment Blockage Notice. No nonpayment default that existed
or was continuing on the date of delivery of any Payment Blockage Notice to
the Trustee shall be, or be made, the basis for a subsequent Payment Blockage
Notice, unless such default shall have been cured or waived for a period of
not less than 90 consecutive days (it being understood that any subsequent
action, or any breach of any covenant for a period commencing after the date
of receipt by the Trustee of such Payment Blockage Notice, that, in either
case, would give rise to such a default pursuant to any provisions under which
a default previously existed or was continuing shall constitute a new default
for this purpose).
The Indenture will further require that the Company promptly notify holders
of Senior Indebtedness if payment of the Notes is accelerated because of an
Event of Default. See "Events of Default and Remedies." As a result of the
subordination provisions described above, in the event of a liquidation or
insolvency, Holders of Notes may recover less ratably than creditors of the
Company who are holders of Senior Indebtedness.
NOTE GUARANTEES
The Company's payment obligations under the Notes will be jointly and
severally guaranteed (the "Note Guarantees") by the Guarantors. The Note
Guarantee of each Guarantor will be subordinated to the prior payment in full
of all Senior Indebtedness of such Guarantor (including such Guarantor's
guarantee of the Credit Agreement) to the same extent that the Notes are
subordinated to Senior Indebtedness of the Company. The obligations of each
Guarantor under its Note Guarantee will be limited so as not to constitute a
fraudulent conveyance under applicable law.
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The Indenture will provide that no Guarantor may consolidate with or merge
with or into (whether or not such Guarantor is the surviving Person), another
corporation, Person or entity whether or not affiliated with such Guarantor
unless: (i) subject to the provisions of the following paragraph, the Person
formed by or surviving any such consolidation or merger (if other than such
Guarantor) assumes all the obligations of such Guarantor pursuant to a
supplemental indenture in form and substance reasonably satisfactory to the
Trustee, under the Notes, the Indenture and the Registration Rights Agreement;
(ii) immediately after giving effect to such transaction, no Default or Event
of Default exists; (iii) such Guarantor, or any Person formed by or surviving
any such consolidation or merger, would have Consolidated Net Worth
(immediately after giving effect to such transaction) equal to or greater than
the Consolidated Net Worth of such Guarantor immediately preceding such
transaction; and (iv) the Company would be permitted by virtue of the
Company's pro forma Cash Flow Coverage Ratio, immediately after giving effect
to such transaction, to incur at least $1.00 of additional Indebtedness
pursuant to the Cash Flow Coverage Ratio test set forth in the "Limitation on
Incurrence of Indebtedness" covenant. The requirements of clauses (iii) and
(iv) of this paragraph will not apply in the case of a consolidation with or
merger with or into the Company or another Guarantor.
The Indenture will provide that, in the event of a sale or other disposition
of all of the assets of any Guarantor, by way of merger, consolidation or
otherwise, or a sale or other disposition of all of the capital stock of any
Guarantor, such Guarantor (in the event of a sale or other disposition, by way
of such a merger, consolidation or otherwise, of all of the capital stock of
such Guarantor) or the corporation acquiring the property (in the event of a
sale or other disposition of all of the assets of such Guarantor) will be
released and relieved of any obligations under its Note Guarantee; provided
that the Net Proceeds of such sale or other disposition are applied in
accordance with the applicable provisions of the Indenture. See "Mandatory
Offers to Purchase Notes."
REDEMPTION OF NOTES
Optional Redemption. The Notes may not be redeemed at the option of the
Company prior to April 15, 2001, other than out of the net proceeds of one or
more Equity Offerings as and to the extent described below. During the 12-
month period beginning on April 15 of the years indicated below, the Notes
will be redeemable, at the option of the Company, in whole or in part, on at
least 30 but not more than 60 days' notice to each holder of Notes to be
redeemed, at the redemption prices in cash (expressed as percentages of the
principal amount) set forth below, plus any accrued and unpaid interest and
Liquidated Damages, if any, to the redemption date:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2001.............................. 104.750%
2002.............................. 103.167%
2003.............................. 101.583%
2004 and thereafter............... 100.000%
</TABLE>
Notwithstanding the foregoing, prior to April 15, 2001, the Company may (but
shall not have the obligation to) redeem up to one-third of the aggregate
principal amount of Notes ever issued under the Indenture at a redemption
price in cash of 109.50% of the principal amount thereof, plus accrued and
unpaid interest and Liquidated Damages, if any, to the redemption date, with
the net proceeds of one or more Equity Offerings; provided that at least two-
thirds of the aggregate principal amount of Notes ever issued under the
Indenture remains outstanding immediately after the occurrence of any such
redemption; and provided further that any such redemption shall occur within
60 days of the date of the closing of any such Equity Offering. The
restrictions on optional redemptions contained in the Indenture do not limit
the Company's right to separately make open market, privately negotiated or
other purchases of Notes from time to time.
Mandatory Redemption. Except as set forth below under "--Mandatory Offers to
Purchase Notes--Change of Control" and "--Asset Sales," the Company is not
required to make any mandatory redemption, purchase or sinking fund payments
with respect to the Notes.
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MANDATORY OFFERS TO PURCHASE NOTES
Change of Control. Upon the occurrence of a Change of Control (such date
being the "Change of Control Trigger Date"), each holder of Notes shall have
the right to require the Company to purchase all or any part (equal to $1,000
or an integral multiple thereof) of such holder's Notes pursuant to an Offer
(as defined herein) at a purchase price in cash equal to 101% of the aggregate
principal amount thereof, plus any accrued and unpaid interest and Liquidated
Damages, if any, to the date of purchase. The Company shall furnish to the
Trustee, at least two Business Days before notice of an Offer is mailed to all
holders of Notes pursuant to the procedures described below under "--
Procedures for Offers," notice that the Offer is being made. Transactions
constituting a Change of Control are not limited to hostile takeover
transactions not approved by the current management of the Company. Except as
described under "--Change of Control," the Indenture does not contain
provisions that permit the holders of Notes to require the Company to purchase
or redeem the Notes in the event of a takeover, recapitalization or similar
restructuring, including an issuer recapitalization or similar transaction
with management.
The Company expects that prepayment of the Notes following a Change of
Control would, and the exercise by holders of Notes of the right to require
the Company to purchase Notes would, constitute a default under the Credit
Agreement or other indebtedness of the Company. The Indenture will provide
that, prior to the mailing of the notice referred to below, but in any event
within 30 days following any Change of Control Trigger Date, the Company
covenants to (i) repay in full and terminate all commitments under
Indebtedness under the Credit Agreement and all other Senior Indebtedness the
terms of which require repayment upon a Change of Control or offer to repay in
full and terminate all commitments under all Indebtedness under the Credit
Agreement and all other such Senior Indebtedness and to repay the Indebtedness
owed to each lender which has accepted such offer or (ii) obtain the requisite
consents under the Credit Agreement and all such other Senior Indebtedness to
permit the repurchase of the Notes as provided below. The Company shall first
comply with the covenant in the immediately preceding sentence before it shall
be required to repurchase Notes pursuant to the provisions described below.
The Company's failure to comply with this covenant shall constitute an Event
of Default described in clause (c) and not in clause (b) under "--Events of
Default" below. In the event a Change of Control occurs, the Company will
likely be required to refinance the Indebtedness outstanding under the Credit
Agreement and the Notes. If there is a Change of Control, any Indebtedness
under the Credit Agreement could be accelerated. There is no limitation in the
Indenture which prohibits the Company from using the proceeds from the
offering of the Notes to finance mandatory purchases of Notes upon a Change of
Control. Moreover, there can be no assurance that sufficient funds will be
available at the time of any Change of Control to repay Senior Indebtedness
and make any required repurchases of the Notes given the Company's high
leverage. The financing of the purchases of Notes could additionally result in
a default under the Credit Agreement or other indebtedness of the Company. The
occurrence of a Change of Control may also have an adverse impact on the
ability of the Company to obtain additional financing in the future. The
ability of holders of Notes to require that the Company purchase Notes upon a
Change of Control may deter persons from effecting a takeover of the Company.
Except as described above with respect to a Change of Control, the Indenture
does not contain provisions that permit the holders of Notes to require that
the Company purchase or redeem the Notes in the event of a takeover,
recapitalization or similar restructuring. See "Risk Factors."
Asset Sales. The Indenture provides that the Company may not, and may not
permit any Restricted Subsidiary to, directly or indirectly, consummate an
Asset Sale (including the sale of any of the Capital Stock of any Restricted
Subsidiary) providing for Net Proceeds in excess of $5,000,000 unless at least
75% of the Net Proceeds from such Asset Sale are applied (in any manner
otherwise permitted by the Indenture) to one or more of the following purposes
in such combination as the Company shall elect: (a) an investment in another
asset or business in the same line of business as, or a line of business
similar to that of, the line of business of the Company and its Restricted
Subsidiaries at the time of the Asset Sale; provided that such investment
occurs on or prior to the 365th day following the date of such Asset Sale (the
"Asset Sale Disposition Date"); (b) to reimburse the Company or its
Subsidiaries for expenditures made, and costs incurred, to repair, rebuild,
replace or restore property subject to loss, damage or taking to the extent
that the Net Proceeds consist of insurance proceeds received on account of
such loss, damage or taking; (c) the purchase, redemption or other prepayment
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or repayment of outstanding Senior Indebtedness of the Company or Indebtedness
of the Company's Restricted Subsidiaries on or prior to the 365th day
following the Asset Sale Disposition Date; or (d) an Offer expiring on or
prior to the Purchase Date (as defined herein). The Indenture also provides
that the Company may not, and may not permit any Restricted Subsidiary to,
directly or indirectly, consummate an Asset Sale unless at least 75% of the
consideration thereof received by the Company or such Restricted Subsidiary is
in the form of cash, cash equivalents or marketable securities; provided that,
solely for purposes of calculating such 75% of the consideration, the amount
of (x) any liabilities (as shown on the Company's or such Restricted
Subsidiary's most recent balance sheet or in the notes thereto, excluding
contingent liabilities and trade payables) of the Company or any Restricted
Subsidiary (other than liabilities that are by their terms subordinated to the
Notes) that are assumed by the transferee of any such assets and (y) any notes
or other obligations received by the Company or any such Restricted Subsidiary
from such transferee that are promptly, but in no event more than 30 days
after receipt, converted by the Company or such Restricted Subsidiary into
cash (to the extent of the cash received), shall be deemed to be cash and cash
equivalents for purposes of this provision. Any Net Proceeds from any Asset
Sale that are not applied or invested as provided in the first sentence of
this paragraph shall constitute "Excess Proceeds."
When the aggregate amount of Excess Proceeds exceeds $10,000,000 (such date
being an "Asset Sale Trigger Date"), the Company shall make an Offer to all
holders of Notes to purchase the maximum principal amount of the Notes then
outstanding that may be purchased out of Excess Proceeds, at an offer price in
cash equal to 100% of principal amount thereof, plus any accrued and unpaid
interest and Liquidated Damages, if any, to the Purchase Date, in accordance
with the procedures set forth in the Indenture. Notwithstanding the foregoing,
to the extent that any or all of the Net Proceeds of an Asset Sale is
prohibited or delayed by applicable local law from being repatriated to the
United States, the portion of such Net Proceeds so affected will not be
required to be applied as described in this or the preceding paragraph, but
may be retained for so long, but only for so long, as the applicable local law
prohibits repatriation to the United States.
To the extent that any Excess Proceeds remain after completion of an Offer,
the Company may use such remaining amount for general corporate purposes. If
the aggregate principal amount of Notes surrendered by holders thereof exceeds
the amount of Excess Proceeds, the Trustee shall select the Notes to be
purchased on a pro rata basis. Upon completion of an Asset Sale Offer, the
amount of Excess Proceeds shall be reset at zero.
Although the Credit Agreement will permit dividends from the Company's
Subsidiaries to the Company for the purpose of paying interest on the Notes,
dividends for other purposes, such as repurchases of Notes by the Company upon
an Asset Sale, will not be permitted under the terms of the Credit Agreement.
Accordingly, the Company would need to seek the consent of its lenders under
the Credit Agreement in order to repurchase Notes with the Net Proceeds of an
Asset Sale. See "Risk Factors."
Procedures for Offers. Within 30 days following any Change of Control
Trigger Date or Asset Sale Trigger Date, subject to the provisions of the
Indenture, the Company shall mail a notice to each holder of Notes at such
holder's registered address a notice stating: (a) that an offer (an "Offer")
is being made pursuant to a Change of Control or an Asset Sale Trigger Date,
as the case may be, the length of time the Offer shall remain open and the
maximum principal amount of Notes that will be accepted for payment pursuant
to such Offer; (b) the purchase price, the amount of accrued and unpaid
interest and Liquidated Damages, if any, as of the purchase date, and the
purchase date (which shall be no earlier than 30 days and no later than 40
days from the date such notice is mailed (the "Purchase Date")); and (c) such
other information required by the Indenture and applicable law and
regulations.
On the Purchase Date for any Offer, the Company will, to the extent required
by the Indenture and such Offer, (1) in the case of an Offer resulting from a
Change of Control, accept for payment all Notes or portions thereof tendered
pursuant to such Offer and, in the case of an Offer resulting from an Asset
Sale Trigger Date, accept for payment the maximum principal amount of Notes or
portions thereof tendered pursuant to such Offer that can be purchased out of
Excess Proceeds, (2) deposit with the Paying Agent the aggregate purchase
price of all Notes or portions thereof accepted for payment and any accrued
and unpaid interest and Liquidated Damages,
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if any, on such Notes as of the Purchase Date, and (3) deliver or cause to be
delivered to the Trustee all Notes tendered pursuant to the Offer. The Paying
Agent shall promptly mail to each holder of Notes or portions thereof accepted
for payment an amount equal to the purchase price for such Notes plus any
accrued and unpaid interest and Liquidated Damages, if any, thereon, and the
Trustee shall promptly authenticate and mail (or cause to be transferred by
book-entry) to such holder of Notes accepted for payment in part a new Note
equal in principal amount to any unpurchased portion of the Notes and any Note
not accepted for payment in whole or in part shall be promptly returned to the
holder thereof. The Company will publicly announce the results of the Offer on
or as soon as practicable after the Purchase Date.
The Company will comply with any tender offer rules under the Exchange Act
which may then be applicable, including Rule 14e-1, in connection with an
offer required to be made by the Company to repurchase the Notes as a result
of a Change of Control or an Asset Sale Trigger Date. To the extent that the
provisions of any securities laws or regulations conflict with provisions of
the Indenture, the Company shall comply with the applicable securities laws
and regulations and shall not be deemed to have breached its obligations under
the Indenture by virtue thereof.
Selection and Notice. In the event of a redemption or purchase of less than
all of the Notes, the Notes to be redeemed or purchased will be chosen by the
Trustee pro rata, by lot or by any other method that the Trustee considers
fair and appropriate and, if the Notes are listed on any securities exchange,
by a method that complies with the requirements of such exchange; provided
that, if less than all of a holder's Notes are to be redeemed or accepted for
payment, only principal amounts of $1,000 or multiples thereof may be selected
for redemption or accepted for payment. On and after any redemption or
purchase date, interest and Liquidated Damages, if any, shall cease to accrue
on the Notes or portions thereof called for redemption or accepted for
payment. Notice of any redemption or offer to purchase will be mailed at least
30 days but not more than 60 days before the redemption or purchase date to
each holder of Notes to be redeemed or purchased at such holder's registered
address.
CERTAIN COVENANTS
The Indenture contains, among other things, the following covenants:
Limitation on Restricted Payments. The Indenture provides that the Company
will not, and will not permit any Restricted Subsidiary to, directly or
indirectly, (i) declare or pay any dividend or make any distribution on
account of the Company's or such Restricted Subsidiary's Capital Stock or
other Equity Interests (other than dividends or distributions payable in
Capital Stock or other Equity Interests (other than Disqualified Stock) of the
Company or a Restricted Subsidiary and dividends or distributions payable by a
Restricted Subsidiary to another Restricted Subsidiary or to the Company);
(ii) purchase, redeem or otherwise acquire or retire for value any Capital
Stock or other Equity Interests of the Company or any of its Restricted
Subsidiaries (other than any such Equity Interests purchased from the Company
or any Restricted Subsidiary for fair market value (as determined by the Board
of Directors in good faith)); (iii) voluntarily prepay any Subordinated
Indebtedness of the Company, whether any such Subordinated Indebtedness is
outstanding on, or issued after, the date of original issuance of the Notes
except as specifically permitted by the covenants of the Indenture as
described herein; or (iv) make any Restricted Investment (all such dividends,
distributions, purchases, redemptions, acquisitions, retirements, prepayments
and Restricted Investments being collectively referred to as "Restricted
Payments"), if, at the time of such Restricted Payment:
(a) a Default or Event of Default shall have occurred and be continuing
or shall occur as a consequence thereof; or
(b)immediately after such Restricted Payment and after giving effect
thereto on a Pro Forma Basis, the Company shall not be able to issue $1.00
of additional Indebtedness pursuant to the first sentence of the
"Limitation on Incurrence of Indebtedness" covenant; or
(c)such Restricted Payment, together with the aggregate of all other
Restricted Payments made after the date of original issuance of the Notes,
without duplication, exceeds the sum of: (1) 50% of the aggregate
Consolidated Net Income (including, for this purpose, gains from Asset
Sales and, to the extent not included
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in Consolidated Net Income, any gain from a sale or disposition of a
Restricted Investment) of the Company (or, in case such aggregate is a
loss, 100% of such loss) for the period (taken as one accounting period)
from the beginning of the first fiscal quarter commencing immediately after
the date of original issuance of the Notes and ended as of the Company's
most recently ended fiscal quarter at the time of such Restricted Payment;
plus (2) 100% of the aggregate net cash proceeds and the fair market value
of any property or securities (as determined by the Board of Directors in
good faith) received by the Company from the issue or sale of Capital Stock
or other Equity Interests of the Company subsequent to the date of original
issuance of the Notes (other than (x) Capital Stock or other Equity
Interests issued or sold to a Restricted Subsidiary and (y) the issuance or
sale of Disqualified Stock); plus (3) $5,000,000; plus (4) the amount by
which the principal amount of and any accrued interest on either (A) Senior
Indebtedness of the Company or (B) any Indebtedness of any Restricted
Subsidiary is reduced on the Company's consolidated balance sheet upon the
conversion or exchange other than by a Restricted Subsidiary subsequent to
the date of original issuance of the Notes of any Indebtedness of the
Company or any Restricted Subsidiary (not held by the Company or any
Restricted Subsidiary) for Capital Stock or other Equity Interests (other
than Disqualified Stock) of the Company (less the amount of any cash, or
the fair market value of any other property or securities (as determined by
the Board of Directors in good faith), distributed by the Company or any
Restricted Subsidiary (to persons other than the Company or any other
Restricted Subsidiary) upon such conversion or exchange); plus (5) if any
Non-Restricted Subsidiary is redesignated as a Restricted Subsidiary, the
value of the Restricted Payment that would result if such Subsidiary were
redesignated as a Non-Restricted Subsidiary at such time, as determined in
accordance with the second sentence of the "Designation of Restricted and
Non-Restricted Subsidiaries" covenant; provided that for purposes of this
clause (5), the value of any redesignated Non-Restricted Subsidiary shall
be reduced by the amount that any such redesignation replenishes or
increases the amount of Restricted Investments permitted to be made
pursuant to clause (ii) of the next sentence.
Notwithstanding the foregoing, the Indenture shall not prohibit as
Restricted Payments:
(i)the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration, such payment would
comply with all covenants of such Indenture (including, but not limited to,
the "Limitation on Restricted Payments" covenant);
(ii)making Restricted Investments at any time, and from time to time, in
an aggregate outstanding amount of $15,000,000 after the date of original
issuance of the Notes (it being understood that if any Restricted
Investment after the date of original issuance of the Notes pursuant to
this clause (ii) is sold, transferred or otherwise conveyed to any person
other than the Company or a Restricted Subsidiary, the portion of the net
cash proceeds or fair market value of securities or properties paid or
transferred to the Company and its Restricted Subsidiaries in connection
with such sale, transfer or conveyance that relates or corresponds to the
repayment or return of the original cost of such a Restricted Investment
will replenish or increase the amount of Restricted Investments permitted
to be made pursuant to this clause (ii), so that up to $15,000,000 of
Restricted Investments may be outstanding under this clause (ii) at any
given time); provided that, without otherwise limiting this clause (ii),
any Restricted Investment in a Subsidiary made pursuant to this clause (ii)
is made for fair market value (as determined by the Board of Directors in
good faith);
(iii)the repurchase, redemption, retirement or acquisition of the
Company's stock from the executives, management, employees or consultants
of the Company or its Subsidiaries pursuant to the terms of any
subscription, stockholder or other agreement or plan, up to an aggregate
amount not to exceed $5,000,000;
(iv)any loans, advances, distributions or payments from the Company to
its Restricted Subsidiaries, or any loans, advances, distributions or
payments by a Restricted Subsidiary to the Company or to another Restricted
Subsidiary, in each case pursuant to intercompany Indebtedness,
intercompany management agreements and other intercompany agreements and
obligations;
(v)the purchase, redemption, retirement or other acquisition of the Notes
pursuant to the "--Change of Control" or "--Asset Sales" provisions of the
Indenture;
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(vi)the payment of (a) consulting, financial and investment banking fees
under the TJC Management Agreement, provided, that no Default or Event of
Default shall have occurred and be continuing or shall occur as a
consequence thereof, and the Company's Obligations to pay such fees under
the TJC Management Agreement shall be subordinated expressly to the
Company's Obligations in respect of the Notes, and (b) indemnities,
expenses and other amounts under the TJC Management Agreement;
(vii)the redemption, repurchase, retirement or other acquisition of any
Capital Stock or other Equity Interests of the Company or any Restricted
Subsidiary in exchange for, or out of the proceeds of, the substantially
concurrent sale (other than to a Subsidiary of the Company) of other
Capital Stock or other Equity Interests of the Company (other than any
Disqualified Stock) or the redemption, repurchase, retirement or other
acquisition of any Capital Stock or other Equity Interests of any
Restricted Subsidiary in exchange for, or out of the proceeds of, the
substantially concurrent sale (other than to the Company or a Subsidiary of
the Company) of other Capital Stock or other Equity Interests of such
Restricted Subsidiary; provided that, in each case, any net cash proceeds
that are utilized for any such redemption, repurchase, retirement or other
acquisition, and any Net Income resulting therefrom, shall be excluded from
clauses (c)(1) and (c)(2) of the preceding paragraph;
(viii)the defeasance, redemption or repurchase of pari passu or
Subordinated Indebtedness with the net cash proceeds from an issuance of
permitted Refinancing Indebtedness or the substantially concurrent sale
(other than to a Subsidiary of the Company) of Capital Stock or other
Equity Interests of the Company (other than Disqualified Stock); provided
that any net cash proceeds that are utilized for any such defeasance,
redemption or repurchase, and any Net Income resulting therefrom, shall be
excluded from clauses (c)(1) and (c)(2) of the preceding paragraph;
(ix)Restricted Investments made or received in connection with the sale,
transfer or disposition of any business, properties or assets of the
Company or any Restricted Subsidiary, provided that, if such sale, transfer
or disposition constitutes an Asset Sale, the Company complies with the
"Asset Sale" provisions of the Indenture;
(x)any Restricted Investment constituting securities or instruments of a
person issued in exchange for trade or other claims against such person in
connection with a financial reorganization or restructuring of such person;
(xi)payments in connection with the application of the net proceeds of
the Offering as described under "Use of Proceeds";
(xii)payments of fees, expenses and indemnities to the directors of the
Company and its Restricted Subsidiaries;
(xiii)payments in respect of the Crystaloid Holdback; and
(xiv)payments with respect to the SAR Agreements.
Limitation on Incurrence of Indebtedness. The Indenture provides that the
Company will not, and will not permit any Restricted Subsidiary to, issue any
Indebtedness (other than the Indebtedness represented by the Notes) unless the
Company's Cash Flow Coverage Ratio for its four full fiscal quarters next
preceding the date such additional Indebtedness is issued would have been at
least 2.0 to 1 determined on a Pro Forma Basis (including, for this purpose,
any other Indebtedness incurred since the end of the applicable four quarter
period) as if such additional Indebtedness and any other Indebtedness issued
since the end of such four quarter period had been issued at the beginning of
such four-quarter period.
The foregoing limitations will not apply to the issuance of:
(i)Indebtedness of the Company and/or its Restricted Subsidiaries under
the Credit Agreement in an aggregate principal amount outstanding on any
such date of issuance not exceeding $135,000,000; provided that the
aggregate principal amount of Indebtedness outstanding under this clause
(i) together with the aggregate principal amount of Indebtedness
outstanding under clause (iii) below shall not exceed $135,000,000 in
aggregate principal amount at any one time outstanding;
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(ii)Indebtedness of the Company and its Restricted Subsidiaries in
connection with capital leases, sale and leaseback transactions, purchase
money obligations, capital expenditures or similar financing transactions
relating to: (A) their properties, assets and rights as of the date of
original issuance of the Notes up to $5,000,000 in aggregate principal
amount at any one time outstanding, or (B) their properties, assets and
rights acquired after the date of original issuance of the Notes, provided
that the aggregate principal amount of such Indebtedness under this clause
(ii)(B) does not exceed 100% of the cost of such properties, assets and
rights;
(iii)additional Indebtedness of the Company and its Restricted
Subsidiaries in an aggregate principal amount up to $25,000,000 (all or any
portion of which may be issued as additional Indebtedness under the Credit
Agreement); provided that the aggregate principal amount of Indebtedness
outstanding under this clause (iii) together with the aggregate principal
amount of Indebtedness outstanding under clause (i) above shall not exceed
$135,000,000 in aggregate principal amount at any one time outstanding; and
(iv)Other Permitted Indebtedness.
Notwithstanding the foregoing, no Restricted Subsidiary shall under any
circumstances issue a guarantee of any Indebtedness of the Company except for
guarantees issued by Restricted Subsidiaries pursuant to the "Limitation on
Guarantees of Company Indebtedness by Restricted Subsidiaries" covenant,
provided that the foregoing will not limit or restrict guarantees issued by
Restricted Subsidiaries in respect of Indebtedness of other Restricted
Subsidiaries.
For purposes of determining compliance with this covenant, in the event that
an item of Indebtedness meets the criteria of more than one of the categories
described in clauses (i) through (iv) above or is entitled to be incurred
pursuant to the first paragraph of this covenant, the Company shall, in its
sole discretion, classify such item of Indebtedness in any manner that
complies with this covenant and such item of Indebtedness will be treated as
having been incurred pursuant to only one of such clauses or pursuant to the
first paragraph hereof. Accrual of interest, accretion or amortization of
original issue discount will not be deemed to be an incurrence of Indebtedness
for purposes of this covenant.
No Senior Subordinated Debt. The Indenture provides that (i) the Company
will not incur, create, issue, assume, guarantee or otherwise become liable
for any Indebtedness that is subordinate or junior in right of payment to any
Senior Indebtedness and senior in any respect in right of payment to the
Notes, and (ii) no Guarantor will incur, create, issue, assume, guarantee or
otherwise become liable for any Indebtedness that is subordinate or junior in
right of payment to any Senior Indebtedness and senior in any respect in right
of payment to the Note Guarantees.
Limitation on Liens. The Indenture provides that the Company shall not, and
shall not permit any of its Restricted Subsidiaries to, directly or
indirectly, create, incur, assume or suffer to exist any Lien (other than
Permitted Liens) upon any property or asset now owned or hereafter acquired by
them, or any income or profits therefrom, or assign or convey any right to
receive income therefrom; provided that, in addition to creating Permitted
Liens on its properties or assets, the Company and any of its Restricted
Subsidiaries may create any Lien upon any of their properties or assets
(including, but not limited to, any Capital Stock of its Subsidiaries) if the
Notes are equally and ratably secured until such time as such obligations are
no longer secured by a Lien; and provided further that, in any case involving
a Lien securing Subordinated Indebtedness of the Company, such Lien is
subordinated to the Lien securing the Notes to the same extent that such
Subordinated Indebtedness is subordinated to the Notes.
Limitation on Dividends and Other Payment Restrictions Affecting Restricted
Subsidiaries. The Indenture provides that the Company will not, and will not
permit any of its Restricted Subsidiaries to, directly or indirectly, create
or otherwise cause or suffer to exist or become effective, any encumbrance or
restriction on the ability of any Restricted Subsidiary to: (a) pay dividends
or make any other distributions on its Capital Stock or any other interest or
participation in, or measured by, its profits, owned by the Company or any
Restricted
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Subsidiary, or pay any Indebtedness owed to, the Company or any Restricted
Subsidiary, (b) make loans or advances to the Company, or (c) transfer any of
its properties or assets to the Company, except for such encumbrances or
restrictions existing under or by reason of:
(i)applicable law;
(ii)Indebtedness permitted (A) under the first sentence of the first
paragraph of the "Limitation on Incurrence of Indebtedness" covenant, (B)
under clauses (i) and (iii) of the second paragraph of the "Limitation on
Incurrence of Indebtedness" covenant and clauses (i), (v), (vi), (vii),
(ix), (x) and (xi) of the definition of Other Permitted Indebtedness, or
(C) by agreements and transactions permitted under the "Limitation on
Restricted Payments" covenant;
(iii)customary provisions restricting subletting or assignment of any
lease or license of the Company or any Restricted Subsidiary;
(iv)customary provisions of any franchise, distribution or similar
agreement;
(v)any instrument governing Indebtedness or any other encumbrance or
restriction of a person acquired by the Company or any Restricted
Subsidiary at the time of such acquisition, which encumbrance or
restriction is not applicable to any person, or the properties or assets of
any person, other than the person, or the property or assets of the person,
so acquired;
(vi)Indebtedness or other agreements existing on the date of original
issuance of the Notes;
(vii)any Refinancing Indebtedness permitted under the "Limitation on
Incurrence of Indebtedness" covenant and clauses (i), (v), (vi), (vii),
(ix), (x) and (xi) of the definition of Other Permitted Indebtedness;
provided that the encumbrances and restrictions created in connection with
such Refinancing Indebtedness are no more restrictive in any material
respect with regard to the interests of the holders of Notes than the
encumbrances and restrictions in the refinanced Indebtedness;
(viii)any restrictions, with respect to a Restricted Subsidiary, imposed
pursuant to an agreement that has been entered into for the sale or
disposition of the stock, business, assets or properties of such Restricted
Subsidiary;
(ix)the terms of any Indebtedness of the Company incurred in connection
with the "Limitation on Incurrence of Indebtedness" covenant, provided that
the terms of such Indebtedness constitute no greater encumbrance or
restriction on the ability of any Restricted Subsidiary to pay dividends or
make distributions, make loans or advances or transfer properties or assets
than is otherwise permitted by this covenant; and
(x)the terms of purchase money obligations, but only to the extent such
purchase money obligations restrict or prohibit the transfer of the
property so acquired.
Nothing contained in this covenant shall prevent the Company from entering
into any agreement or instrument providing for the incurrence of Permitted
Liens or restricting the sale or other disposition of property or assets of
the Company or any of its Restricted Subsidiaries that are subject to
Permitted Liens.
Limitation on Transactions With Affiliates. The Indenture provides that
neither the Company nor any of its Restricted Subsidiaries may make any loan,
advance, guarantee or capital contribution to, or for the benefit of, or sell,
lease, transfer or dispose of any properties or assets to, or for the benefit
of, or purchase or lease any property or assets from, or enter into any or
amend any contract, agreement or understanding with, or for the benefit of, an
Affiliate (each such transaction or series of related transactions that are
part of a common plan are referred to as an "Affiliate Transaction"), except
in good faith and on terms that are no less favorable to the Company or the
relevant Restricted Subsidiary than those that would have been obtained in a
comparable transaction on an arm's length basis from an unrelated person.
The Indenture further provides that the Company will not, and will not
permit any Restricted Subsidiary to, engage in any Affiliate Transaction
involving aggregate payments or other transfers by the Company and its
Restricted Subsidiaries in excess of $5,000,000 (including cash and non-cash
payments and benefits valued at
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their fair market value by the Board of Directors of the Company in good
faith) unless the Company delivers to the Trustee:
(i)a resolution of the Board of Directors of the Company stating that the
Board of Directors (including a majority of the disinterested directors, if
any) has, in good faith, determined that such Affiliate Transaction
complies with the provisions of the Indenture; and
(ii)(A) with respect to any Affiliate Transaction involving the
incurrence of Indebtedness, a written opinion of a nationally recognized
investment banking or accounting firm experienced in the review of similar
types of transactions, (B) with respect to any Affiliate Transaction
involving the transfer of real property, fixed assets or equipment, either
directly or by a transfer of 50% or more of the Capital Stock of a
Restricted Subsidiary which holds any such real property, fixed assets or
equipment, a written appraisal from a nationally recognized appraiser,
experienced in the review of similar types of transactions or (C) with
respect to any Affiliate Transaction not otherwise described in (A) and (B)
above, a written certification from a nationally recognized professional or
firm experienced in evaluating similar types of transactions, in each case,
stating that the terms of such transaction are fair to the Company or such
Restricted Subsidiary, as the case may be, from a financial point of view.
Notwithstanding the foregoing, this Affiliate Transactions covenant will not
apply to:
(i)transactions between the Company and any Restricted Subsidiary or
between Restricted Subsidiaries;
(ii)any other payments or transactions permitted pursuant to the
"Limitation on Restricted Payments" covenant;
(iii)(A) payments and transactions pursuant to employment agreements
between officers of the Company and its Restricted Subsidiaries and the
Company and its Restricted Subsidiaries and (B) reasonable compensation
paid to officers, employees or consultants of the Company or any Restricted
Subsidiary as determined in good faith by the Company's Board of Directors
or executives; and
(iv)payments and transactions in connection with the Offering and the
application of the net proceeds therefrom as described under "Use of
Proceeds."
Limitation on Guarantees of Company Indebtedness by Restricted
Subsidiaries. The Company will not permit any Restricted Subsidiary, directly
or indirectly, to guarantee any Indebtedness of the Company other than the
Notes (the "Other Company Indebtedness") unless (A) such Restricted Subsidiary
contemporaneously executes and delivers a supplemental indenture to the
Indenture providing for a guarantee of payment of the Notes then outstanding
by such Restricted Subsidiary to the same extent as the guarantee of payment
(the "Other Company Indebtedness Guarantee") of the Other Company Indebtedness
(including waiver of subrogation, if any) and (B) if the Other Company
Indebtedness guaranteed by such Restricted Subsidiary is (1) Senior
Indebtedness, the guarantee for the Notes shall be subordinated in right of
payment to the Other Company Indebtedness Guarantee to the same extent as the
Notes are subordinated to Senior Indebtedness of the Company and (2)
Subordinated Indebtedness, the guarantee for the Notes shall be senior in
right of payment to the Other Company Indebtedness Guarantee; provided that
the foregoing will not (i) limit or restrict guarantees issued by Restricted
Subsidiaries in respect of Indebtedness of other Restricted Subsidiaries or
(ii) apply to guarantees of Indebtedness under the Credit Agreement.
Each guarantee of the Notes created by a Restricted Subsidiary pursuant to
the provisions described in the foregoing paragraph shall be in form and
substance satisfactory to the Trustee and shall provide, among other things,
that it will be automatically and unconditionally released and discharged upon
(i) any sale, exchange or transfer permitted by the Indenture of (a) all of
the Company's Capital Stock in such Restricted Subsidiary or (b) the sale of
all or substantially all of the assets of the Restricted Subsidiary and upon
the application of the Net Proceeds from such sale in accordance with the
requirements of the "Asset Sales" provisions described herein or (ii) the
release or discharge of the Other Company Indebtedness Guarantee that resulted
in the creation
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of such guarantee of the Notes, except a discharge or release by or as a
result of direct payment under such Other Company Indebtedness Guarantee.
Designation of Restricted and Non-Restricted Subsidiaries. The Indenture
provides that, subject to the exceptions described below, from and after the
date of original issuance of the Notes, the Company may designate any existing
or newly formed or acquired Subsidiary as a Non-Restricted Subsidiary;
provided that (i) either (A) the Subsidiary to be so designated has total
assets of $1,000,000 or less or (B) immediately before and after giving effect
to such designation on a Pro Forma Basis: (1) the Company could incur $1.00 of
additional Indebtedness pursuant to the first sentence of the "Limitation on
Incurrence of Indebtedness" covenant determined on a Pro Forma Basis, and (2)
no Default or Event of Default shall have occurred and be continuing, and (ii)
all transactions between the Subsidiary to be so designated and its Affiliates
remaining in effect are permitted pursuant to the "Limitation on Transactions
with Affiliates" covenant. Any Investment made by the Company or any
Restricted Subsidiary which is redesignated from a Restricted Subsidiary to a
Non-Restricted Subsidiary shall thereafter be considered as having been a
Restricted Payment (to the extent not previously included as a Restricted
Payment) made on the day such Subsidiary is designated a Non-Restricted
Subsidiary in the amount of the greater of (i) the fair market value (as
determined by the Board of Directors of the Company in good faith) of the
Equity Interests of such Subsidiary held by the Company and its Restricted
Subsidiaries on such date, and (ii) the amount of the Investments determined
in accordance with GAAP made by the Company and any of its Restricted
Subsidiaries in such Subsidiary.
A Non-Restricted Subsidiary may be redesignated as a Restricted Subsidiary.
The Company may not, and may not permit any Restricted Subsidiary to, take any
action or enter into any transaction or series of transactions that would
result in a Person becoming a Restricted Subsidiary (whether through an
acquisition, the redesignation of a Non-Restricted Subsidiary or otherwise,
but not including through the creation of a new Restricted Subsidiary) unless,
immediately before and after giving effect to such action, transaction or
series of transactions on a Pro Forma Basis, (a) the Company could incur at
least $1.00 of additional Indebtedness pursuant to the first sentence of
"Limitation on Incurrence of Indebtedness" and (b) no Default or Event of
Default shall have occurred and be continuing.
The designation of a Subsidiary as a Restricted Subsidiary or the removal of
such designation is required to be made by a resolution adopted by a majority
of the Board of Directors of the Company stating that the Board of Directors
has made such designation in accordance with the Indenture, and the Company is
required to deliver to the Trustee such resolution together with an Officers'
Certificate certifying that the designation complies with the Indenture. Such
designation will be effective as of the date specified in the applicable
resolution, which may not be before the date the applicable Officers'
Certificate is delivered to the Trustee.
Additional Note Guarantees. The Indenture will provide that, if any
Restricted Subsidiary of the Company that is a Domestic Subsidiary guarantees
any Indebtedness under the Credit Agreement, then such Restricted Subsidiary
shall become a Guarantor and execute a Supplemental Indenture and deliver an
Opinion of Counsel, in accordance with the terms of the Indenture.
MERGER OR CONSOLIDATION
The Indenture provides that the Company shall not consolidate or merge with
or into, or sell, convey or otherwise dispose of all or substantially all of
its assets to, any person (any such consolidation, merger or sale being a
"Disposition") unless: (a) the successor corporation of such Disposition or
the corporation to which such Disposition shall have been made is a
corporation organized or existing under the laws of the United States, any
state thereof or the District of Columbia; (b) the successor corporation of
such Disposition or the corporation to which such Disposition shall have been
made expressly assumes the Obligations of the Company, pursuant to a
supplemental indenture in a form reasonably satisfactory to the Trustee, under
the Indenture and the Notes; (c) immediately after such Disposition, no
Default or Event of Default shall exist; and (d) the corporation formed by or
surviving any such Disposition, or the corporation to which such Disposition
shall have been made, shall (i) have Consolidated Net Worth (immediately after
the Disposition but prior to giving any pro forma effect to
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purchase accounting adjustments or Restructuring Charges resulting from the
Disposition) equal to or greater than the Consolidated Net Worth of the
Company immediately preceding the Disposition, (ii) be permitted immediately
after the Disposition by the terms of the Indenture to issue at least $1.00 of
additional Indebtedness determined on a Pro Forma Basis, and (iii) have a Cash
Flow Coverage Ratio, for the four fiscal quarters immediately preceding the
applicable Disposition, and determined on a Pro Forma Basis, equal to or
greater than the actual Cash Flow Coverage Ratio of the Company for such four
quarter period. The limitations in the Indenture on the Company's ability to
make a Disposition described in this paragraph do not restrict the Company's
ability to sell less than all or substantially all of its assets, such sales
being governed by the "Asset Sales" provisions of the Indenture as described
herein. The Indenture provides that the Company shall not lease all or
substantially all of its assets to any person.
Prior to the consummation of any proposed Disposition, the Company shall
deliver to the Trustee an Officers' Certificate to the foregoing effect and an
opinion of counsel stating that the proposed Disposition and such supplemental
indenture comply with the Indenture.
PROVISION OF FINANCIAL INFORMATION TO HOLDERS OF NOTES
So long as the Notes are outstanding, whether or not the Company is subject
to the reporting requirements of Section 13 or 15(d) of the Exchange Act, the
Company and the Guarantors shall submit for filing with the Commission (unless
the Commission will not accept such filing) the annual reports, quarterly
reports and other documents relating to the Company and its Restricted
Subsidiaries that the Company would have been required to file with the
Commission pursuant to Section 13 or 15(d) if the Company were subject to such
reporting requirements. The Company and the Guarantors will also provide to
all holders of Notes and file with the Trustee copies of such annual reports,
quarterly reports and other documents required to be furnished to stockholders
generally under the Exchange Act. In addition, the Company and the Guarantors
have agreed that, for so long as any Notes remain outstanding, they will
furnish to the Holders and to securities analysts employed by the Initial
Purchasers and prospective investors, upon their request, the information
required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that an Event of Default is: (a) a default for 30
days in payment of interest or Liquidated Damages, if any, on the Notes
(whether or not prohibited by the subordination provisions of the Indenture);
(b) a default in payment when due of principal or premium, if any, with
respect to the Notes (whether or not prohibited by the subordination
provisions of the Indenture); (c) the failure of the Company to comply with
any of its other agreements or covenants in, or provisions of, such Indenture
or the Notes outstanding under such Indenture and the Default continues for
the period, if applicable, and after the notice specified in the next
paragraph; (d) a default by the Company or any Restricted Subsidiary under any
mortgage, indenture or instrument under which there may be issued or by which
there may be secured or evidenced any Indebtedness for money borrowed by the
Company or any Restricted Subsidiary (or the payment of which is guaranteed by
the Company or any Restricted Subsidiary), whether such Indebtedness or
guarantee now exists or shall be created hereafter, if (1) either (A) such
default results from the failure to pay principal of or interest on any such
Indebtedness at or after the final maturity thereof (after giving effect to
any extensions thereof) and such default continues for 30 days beyond any
applicable grace period, or (B) as a result of such default the maturity of
such Indebtedness has been accelerated prior to its expressed maturity, and
(2) the principal amount of such Indebtedness, together with the principal
amount of any other such Indebtedness in default for failure to pay principal
or interest thereon at final maturity, or, because of the acceleration of the
maturity thereof, aggregates in excess of $10,000,000; (e) a failure by the
Company or any Restricted Subsidiary to pay final judgments (not covered by
insurance) aggregating in excess of $5,000,000 which judgments a court of
competent jurisdiction does not rescind, annul or stay within 45 days after
their entry and the Default or an Event of Default continues for such period
and after the notice specified in the next paragraph; (f) certain events of
bankruptcy or insolvency involving the Company or any Significant Subsidiary
and (g) except as permitted by the Indenture, any Note Guarantee shall be held
in any judicial proceeding to be unenforceable or invalid or shall cease for
any reason to
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be in full force and effect or any Guarantor, or any Person acting of behalf
of any Guarantor, shall deny or disaffirm its obligations under its Note
Guarantee. In the case of any Event of Default pursuant to clause (a) or (b)
above occurring by reason of any willful action (or inactions) taken (or not
taken) by or on behalf of the Company with the intention of avoiding payment
of the premium that the Company would have to pay pursuant to a redemption of
Notes as described under "--Redemption of Notes--Optional Redemption," an
equivalent premium shall also become and be immediately, due and payable to
the extent permitted by law.
A Default or Event of Default under clause (c) (other than an Event of
Default arising under the "Merger or Consolidation" covenant which shall be an
Event of Default with the notice but without the passage of time specified in
this paragraph) is not an Event of Default under the Indenture until the
Trustee or the holders of at least 25% in principal amount of the Notes then
outstanding notify the Company of the Default and the Company does not cure
the Default within 30 days after receipt of the notice. A Default or Event of
Default under clause (f) of the preceding paragraph will result in the Notes
automatically becoming due and payable without further action or notice.
Upon the occurrence of an Event of Default, the Trustee or the holders of at
least 25% in principal amount of the then outstanding Notes may declare all
Notes to be due and payable by notice in writing to the Company and the
Trustee specifying the respective Event of Default and that it is a "notice of
acceleration" (the "Acceleration Notice") and the same shall become
immediately due and payable or, if there are any amounts outstanding under the
Credit Agreement, shall become immediately due and payable upon the first to
occur of an acceleration under the Credit Agreement and five business days
after receipt by the Company and the Representative under the Credit Agreement
of such Acceleration Notice, but only if such Event of Default is continuing.
The holders of a majority in principal amount of the Notes then outstanding
under the Indenture, by notice to the Trustee, may rescind any declaration of
acceleration of such Notes and its consequences (if the rescission would not
conflict with any judgment or decree) if all existing Events of Default (other
than the nonpayment of principal of or interest on such Notes that shall have
become due by such declaration) shall have been cured or waived. Subject to
certain limitations, holders of a majority in principal amount of the Notes
then outstanding under the Indenture may direct the Trustee in its exercise of
any trust or power. Holders of the Notes may not enforce the Indenture, except
as provided therein. The Trustee may withhold from holders of Notes notice of
any continuing Default or Event of Default (except a Default or an Event of
Default in payment of principal, premium, if any, or interest or Liquidated
Damages, if any) if the Trustee determines that withholding notice is in their
interest.
The holders of a majority in aggregate principal amount of the Notes then
outstanding may on behalf of all holders of such Notes waive any existing
Default or Event of Default under the Indenture and its consequences, except a
continuing Default in the payment of the principal of, or premium, if any, or
interest or Liquidated Damages, if any, on, such Notes, which may only be
waived with the consent of each holder of the Notes affected.
Upon any payment or distribution of assets of the Company and its
subsidiaries in a liquidation, dissolution, reorganization or similar
proceeding, including a Default under clause (f) above involving certain
events of bankruptcy or insolvency of the Company or a Significant Subsidiary,
there may not be sufficient assets remaining to satisfy the claims of any
Holders of Notes given the subordination of the Notes to Senior Indebtedness
and the obligations of the Subsidiaries of the Company.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and upon an officer of the Company
becoming aware of any Default or Event of Default, a statement specifying such
Default or Event of Default.
NO PERSONAL LIABILITY OF OFFICERS, DIRECTORS, EMPLOYEES, STOCKHOLDERS AND
SUBSIDIARIES
No officer, employee, director, stockholder or Subsidiary of the Company
shall have any liability for any Obligations of the Company under the Notes or
the Indenture, or for any claim based on, in respect of, or by reason of, such
Obligations or the creation of any such Obligation, except, in the case of a
Subsidiary, for an
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express guarantee or an express creation of any Lien by such Subsidiary of the
Company's Obligations under the Notes issued in accordance with the Indenture.
Each holder of the Notes by accepting a Note waives and releases all such
liability, and such waiver and release is part of the consideration for
issuance of the Notes. The foregoing waiver may not be effective to waive
liabilities under the Federal securities laws and the Commission is of the
view that such a waiver is against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company at any time may terminate all its and the Guarantors'
obligations under the Notes, the Note Guarantees and the Indenture ("legal
defeasance option"), except for certain obligations (including those with
respect to the defeasance trust (as defined herein) and obligations to
register the transfer or exchange of the Notes, to replace mutilated,
destroyed, lost or stolen Notes and to maintain a registrar and paying agent
in respect of the Notes). The Company at any time may terminate (1) its
obligations under the "Change of Control" and "Asset Sales" provisions
described herein and the covenants described under "Certain Covenants" and
certain other covenants in the Indenture, (2) the operation of clauses (c),
(d), (e) and (f) contained in the first paragraph of the "Events of Default
and Remedies" provisions described herein and (3) the limitations contained in
clauses (c) and (d) under the "Merger or Consolidation" provisions described
herein (collectively, a "covenant defeasance option").
The Company may exercise its legal defeasance option notwithstanding its
prior exercise of its covenant defeasance option. If the Company exercises its
legal defeasance option, payment of the Notes may not be accelerated because
of an Event of Default with respect thereto. If the Company exercises its
covenant defeasance option, payment of the Notes shall not be accelerated
because of an Event of Default specified in clauses (c), (d), (e) or (f) in
the first paragraph under the "Events of Default and Remedies" provisions
described herein or because of the Company's failure to comply with clauses
(c) and (d) under the "Merger or Consolidation" provisions described herein.
To exercise either defeasance option with respect to the Notes outstanding,
the Company must irrevocably deposit in trust (the "defeasance trust") with
the Trustee money or U.S. Government Obligations (as defined in the Indenture)
for the payment of principal of, premium, if any, and unpaid interest and
Liquidated Damages, if any, on the Notes then outstanding to redemption or
maturity, as the case may be, and must comply with certain other conditions,
including the passage of 91 days and the delivery to the Trustee of an opinion
of counsel to the effect that holders of such Notes will not recognize income,
gain or loss for federal income tax purposes as a result of such deposit and
defeasance and will be subject to federal income tax on the same amount and in
the same manner and at the same times as would have been the case if such
deposit and defeasance had not occurred (and, in the case of legal defeasance
only, such opinion of counsel must be based on a ruling of the Internal
Revenue Service or other change in applicable federal income tax law).
TRANSFER AND EXCHANGE
Holders of Notes may transfer or exchange their Notes in accordance with the
Indenture, but the Registrar may require a holder, among other things, to
furnish appropriate endorsements and transfer documents, and to pay any taxes
and fees required by law or permitted by the Indenture, in connection with any
such transfer or exchange. Neither the Company nor the Registrar is required
to issue, register the transfer of, or exchange (i) any Note selected for
redemption or tendered pursuant to an Offer, or (ii) any Note during the
period between (a) the date the Trustee receives notice of a redemption from
the Company and the date the Notes to be redeemed are selected by the Trustee
or (b) a record date and the next succeeding interest payment date. The
registered holder of a Note will be treated as its owner for all purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Subject to certain exceptions, the Indenture may be amended or supplemented
with the consent of the holders of at least a majority in principal amount of
the Notes then outstanding under such Indenture, and any existing Default or
Event of Default (other than a payment default) or compliance with any
provision may be
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waived with the consent of the holders of a majority in principal amount of
the Notes then outstanding under the Indenture. Without the consent of any
holder of Notes, the Company and the Trustee may amend or supplement the
Indenture or the Notes to cure any ambiguity, defect or inconsistency, to
provide for uncertificated Notes in addition to or in place of certificated
Notes, to provide for the assumption by a successor corporation of the
Company's obligations to the holders of Notes in the case of a Disposition, to
comply with the Trust Indenture Act, or to make any change that does not
materially adversely affect the legal rights of any holder of Notes.
Without the consent of each holder of Notes affected, the Company may not
(i) reduce the principal amount of Notes whose holders must consent to an
amendment to the Indenture or a waiver under the Indenture; (ii) reduce the
rate of or change the interest payment time of the Notes, or alter the
redemption provisions with respect thereto (other than the provisions relating
to the covenants described above under the caption "--Mandatory Offers to
Purchase Notes--Change of Control" and "--Asset Sales") or the price at which
the Company is required to offer to purchase the Notes; (iii) reduce the
principal of or change the fixed maturity of the Notes; (iv) make the Notes
payable in money other than stated in the Notes; (v) make any change in the
provisions concerning waiver of Defaults or Events of Default by holders of
the Notes, or rights of holders of the Notes to receive payment of principal
or interest; or (vi) waive any default in the payment of principal of,
premium, if any, or unpaid interest on, or Liquidated Damages, if any, with
respect to the Notes. In addition, any amendment to the provisions of Article
10 of the Indenture (which relate to subordination) will require the consent
of the Holders of at least 75% in aggregate principal amount of the Notes then
outstanding if such amendment would adversely affect the rights of Holders of
Notes.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee, if
it becomes a creditor of the Company, to obtain payment of claims in certain
cases, or to realize on certain property received in respect of any such claim
as security or otherwise. The Trustee will be permitted to engage in other
transactions; however, if it acquires any conflicting interest (as defined in
the Trust Indenture Act) it must eliminate such conflict or resign.
The holders of a majority in principal amount of the Notes then outstanding
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that if an Event of Default occurs
(and has not been cured), the Trustee will be required, in the exercise of its
power, to use the degree of care and skill of a prudent person in similar
circumstances in the conduct of its own affairs. Subject to the provisions of
the Indenture, the Trustee will be under no obligation to exercise any of its
rights or powers under the Indenture at the request of any of the holders of
the Notes, unless such holders shall have offered to the Trustee security and
indemnity satisfactory to it.
BOOK-ENTRY, DELIVERY AND FORM
The Notes sold to QIBs initially will be in the form of one or more
registered global Notes without interest coupons (collectively, the "Rule 144A
Global Notes"). Upon issuance, the Rule 144A Global Notes will be deposited
with the Trustee, as custodian for DTC, in New York, New York, and registered
in the name of DTC or its nominee, in each case for credit to the accounts of
DTC's Direct and Indirect Participants (as defined). The Notes being offered
and sold in offshore transactions in reliance on Regulation S, if any,
initially will be in the form of one or more temporary, registered, global
book-entry Notes without interest coupons (the "Regulation S Temporary Global
Notes"). The Regulation S Temporary Global Notes will be deposited with the
Trustee, as custodian for DTC, in New York, New York, and registered in the
name of a nominee of DTC (a "Nominee") for credit to the accounts of Indirect
Participants at the Euroclear and CEDEL. During the 40-day period commencing
on the day after the later of the offering date and the original date of
original issuance of the Notes (the "40-Day Restricted Period"), beneficial
interests in the Regulation S Temporary Global Note may be held only through
Euroclear or CEDEL, and, pursuant to DTC's procedures, Indirect Participants
that hold a beneficial interest in the Regulation S Temporary Global Note will
not be able to transfer such interest to a person that takes delivery thereof
in the form of an interest in the Rule 144A Global Notes. Within a reasonable
time after the expiration of the 40-Day Restricted Period, the Regulation S
Temporary Global Notes will be exchanged for
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one or more permanent global Notes (the "Regulation S Permanent Global Notes"
and, collectively with the Regulation S Temporary Global Notes, the
"Regulation S Global Notes") upon delivery to DTC of certification of
compliance with the transfer restrictions applicable to the Notes and pursuant
to Regulation S as provided in the Indenture. After the 40-Day Restricted
Period, (i) beneficial interests in the Regulation S Permanent Global Notes
may be transferred to a person that takes delivery in the form of an interest
in the Rule 144A Global Notes and (ii) beneficial interests in the Rule 144A
Global Notes may be transferred to a person that takes delivery in the form of
an interest in the Regulation S Permanent Global Notes; provided, in each
case, that the certification requirements described below are complied with.
See "--Transfers of Interests in One Global Note for Interests in Another
Global Note." All registered global Notes are referred to herein collectively
"Global Notes."
Notes sold to Accredited Investors that agree to comply with the transfer
restrictions and other conditions described herein will be represented
initially by definitive Notes in registered certificated form without interest
coupons ("Certificated Notes").
Beneficial interests in all Global Notes and all Certificated Notes, if any,
will be subject to certain restrictions on transfer and will bear a
restrictive legend as described under "Notice to Investors." In addition,
transfer of beneficial interests in any Global Notes will be subject to the
applicable rules and procedures of DTC and its Direct or Indirect Participants
(including, if applicable, those of Euroclear and CEDEL), which may change
from time to time.
The Global Notes may be transferred, in whole and not in part, only to
another nominee of DTC or to a successor of DTC or its nominee in certain
limited circumstances. Beneficial interests in the Global Notes may be
exchanged for Notes in certificated form in certain limited circumstances. See
"--Transfer of Interests in Global Notes for Certificated Notes."
Initially, the Trustee will act as Paying Agent and Registrar. The Notes may
be presented for registration of transfer and exchange at the offices of the
Registrar.
DEPOSITARY PROCEDURES
DTC has advised the Company that DTC is a limited-purpose trust company
created to hold securities for its participating organizations (collectively,
the "Direct Participants") and to facilitate the clearance and
settlement of transactions in those securities between Direct Participants
through electronic book-entry changes in accounts of Participants. The Direct
Participants include securities brokers and dealers (including the Initial
Purchaser), banks, trust companies, clearing corporations and certain other
organizations, including Euroclear and Cedel. Access to DTC's system is also
available to other entities that clear through or maintain a direct or
indirect, custodial relationship with a Direct Participant (collectively, the
"Indirect Participants"). DTC may hold securities beneficially owned by other
persons only through the Direct Participants or Indirect Participants and such
other persons' ownership interest and transfer of ownership interest will be
recorded only on the records of the Direct Participant and/or Indirect
Participant, and not on the records maintained by DTC.
DTC has also advised the Company that, pursuant to DTC's procedures, (i)
upon deposit of the Global Notes, DTC will credit the accounts of the Direct
Participants designated by the Initial Purchasers with portions of the
principal amount of the Global Notes allocated by the Initial Purchasers to
such Direct Participants, and (ii) DTC will maintain records of the ownership
interests of such Direct Participants in the Global Notes and the transfer of
ownership interests by and between Direct Participants. DTC will not maintain
records of the ownership interests of, or the transfer of ownership interests
by and between, Indirect Participants or other owners of beneficial interests
in the Global Notes. Direct Participants and Indirect Participants must
maintain their own records of the ownership interests of, and the transfer of
ownership interests by and between, Indirect Participants and other owners of
beneficial interests in the Global Notes.
Investors in the Rule 144A Global Notes may hold their interests therein
directly through DTC if they are Direct Participants in DTC or indirectly
through organizations that are Direct Participants in DTC. Investors in
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the Regulation S Temporary Global Notes must initially hold their interests
therein directly through Euroclear or CEDEL or indirectly through
organizations that are participants in Euroclear or CEDEL. After the
expiration of the 40-Day Restricted Period (but not earlier), investors may
also hold interests in the Regulation S Permanent Global Notes through
organizations other than Euroclear and CEDEL that are Direct Participants in
the DTC system. Morgan Guaranty Trust Company of New York, Brussels office, is
the operator and depository of Euroclear, and Citibank, N.A. is the operator
and depository of CEDEL (each, a "Nominee" of Euroclear and CEDEL,
respectively). Therefore, they will each be recorded on DTC's records as the
holders of all ownership interests held by them on behalf of Euroclear and
CEDEL, respectively. Euroclear and CEDEL will maintain on their records the
ownership interests of, and transfers of ownership interests by and between,
their own customer's securities accounts. DTC will not maintain records of the
ownership interests of, or the transfer of ownership interests by and between,
customers of Euroclear or CEDEL. All ownership interests in any Global Notes,
including those of customers' securities accounts held through Euroclear or
CEDEL, may be subject to the procedures and requirements of DTC. Those
interests held through Euroclear or CEDEL may also be subject to the
procedures and requirements of such systems.
The laws of some states require that certain persons take physical delivery
in definitive, certificated form of securities that they own. This may limit
or curtail the ability to transfer beneficial interests in a Global Note to
such persons. Because DTC can act only on behalf of Direct Participants, which
in turn act on behalf of Indirect Participants and others, the ability of a
person having a beneficial interest in a Global Note to pledge such interest
to persons or entities that are not Direct Participants in DTC, or to
otherwise take actions in respect of such interests, may be affected by the
lack of physical certificates evidencing such interests. For certain other
restrictions on the transferability of the Notes, see "--Regulation S
Temporary and Regulation S Permanent Global Notes" and "--Transfers of
Interests in Global Notes for Certificated Notes."
EXCEPT AS DESCRIBED IN "--TRANSFERS OF INTERESTS IN GLOBAL NOTES FOR
CERTIFICATED NOTES," OWNERS OF BENEFICIAL INTERESTS IN THE GLOBAL NOTES WILL
NOT HAVE NOTES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL DELIVERY
OF NOTES IN CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE REGISTERED OWNERS
OR HOLDERS THEREOF UNDER THE INDENTURE FOR ANY PURPOSE.
Under the terms of the Indenture, the Company and the Trustee will treat the
persons in whose names the Notes are registered (including Notes represented
by Global Notes) as the owners thereof for the purpose of
receiving payments and for any and all other purposes whatsoever. Payments in
respect of the principal, premium, Liquidated Damages, if any, and interest on
Global Notes registered in the name of DTC or its nominee will be payable by
the Trustee to DTC or its nominee as the registered holder under the
Indenture. Consequently, neither the Company, the Trustee nor any agent of the
Company or the Trustee has or will have any responsibility or liability for
(i) any aspect of DTC's records or any Direct Participant's or Indirect
Participant's records relating to or payments made on account of beneficial
ownership interests in the Global Notes or for maintaining, supervising or
reviewing any of DTC's records or any Direct Participant's or Indirect
Participant's records relating to the beneficial ownership interests in any
Global Note or (ii) any other matter relating to the actions and practices of
DTC or any of its Direct Participants or Indirect Participants.
DTC has advised the Company that its current payment practice (for payments
of principal, interest and the like) with respect to securities such as the
Notes is to credit the accounts of the relevant Direct Participants with such
payment on the payment date in amounts proportionate to such Direct
Participant's respective ownership interests in the Global Notes as shown on
DTC's records. Payments by Direct Participants and Indirect Participants to
the beneficial owners of the Notes will be governed by standing instructions
and customary practices between them and will not be the responsibility of
DTC, the Trustee or the Company. Neither the Company nor the Trustee will be
liable for any delay by DTC or its Direct Participants or Indirect
Participants in identifying the beneficial owners of the Notes, and the
Company and the Trustee may conclusively rely on and will be protected in
relying on instructions from DTC or its nominee as the registered owner of the
Notes for all purposes.
Except for trades involving only Euroclear or CEDEL participants, interests
in the Global Notes are expected to be eligible to trade in DTC's Same-Day
Funds Settlement System and, therefore, transfers between
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Direct Participants in DTC will be effected in accordance with DTC's
procedures, and will be settled in immediately available funds. Transfers
between Indirect Participants (other than Indirect Participants who hold an
interest in the Notes through Euroclear or CEDEL) who hold an interest through
a Direct Participant will be effected in accordance with the procedures of
such Direct Participant but generally will settle in immediately available
funds. Transfers between and among Indirect Participants who hold interests in
the Notes through Euroclear and CEDEL will be effected in the ordinary way in
accordance with their respective rules and operating procedures.
Subject to compliance with the transfer restrictions applicable to the Notes
described herein, cross-market transfers between Direct Participants in DTC,
on the one hand, and Indirect Participants who hold interests in the Notes
through Euroclear or CEDEL, on the other hand, will be effected by Euroclear
or CEDEL's respective Nominee through DTC in accordance with DTC's rules on
behalf of Euroclear or CEDEL; however, delivery of instructions relating to
cross-market transactions must be made directly to Euroclear or CEDEL, as the
case may be, by the counterparty in accordance with the rules and procedures
of Euroclear or CEDEL, as the case may be, and within their established
deadlines (Brussels time for Euroclear and UK time for CEDEL). Indirect
Participants who hold interest in the Notes through Euroclear and CEDEL may
not deliver instructions directly to Euroclear's or CEDEL's Nominee. Euroclear
or CEDEL will, if the transaction meets its settlement requirements, deliver
instructions to its respective Nominee to deliver or receive interests on
Euroclear's or CEDEL's behalf in the relevant Global Note in DTC, and make or
receive payment in accordance with normal procedures for same-day fund
settlement applicable to DTC.
Because of time zone differences, the securities account of an Indirect
Participant who holds an interest in the Notes through Euroclear or CEDEL
purchasing an interest in a Global Note from a Direct Participant in DTC will
be credited, and any such crediting will be reported to the relevant Euroclear
or CEDEL Direct Participant during the European business day immediately
following the settlement date of DTC in New York. Although recorded in DTC's
accounting records as of DTC's settlement date in New York, Euroclear and
CEDEL customers will not have access to the cash amount credited to their
accounts as a result of a sale of an interest in a Regulation S Permanent
Global Note to a DTC Participant until the European business day for Euroclear
or CEDEL immediately following DTC's settlement date.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of Notes only at the direction of one or more Direct
Participants to whose account interests in the Global Notes are credited and
only in respect of such portion of the aggregate principal amount of the Notes
as to which such Direct Participant or Direct Participants has or have given
direction. However, if there is an Event of Default under the Notes, DTC
reserves the right to exchange Global Notes (without the direction of one or
more of its Direct Participants) for Certificated Notes, and to distribute
such Certificated Notes to its Direct Participants. See "--Transfers of
Interests in Global Notes for Certificated Notes."
Although DTC, Euroclear and CEDEL have agreed to the foregoing procedures to
facilitate transfers of interests in the Regulation S Permanent Global Notes
and in the Rule 144A Global Notes among Direct Participants, Euroclear and
CEDEL, they are under no obligation to perform or to continue to perform such
procedures, and such procedures may be discontinued at any time. None of the
Company, the Initial Purchaser or the Trustee will have any responsibility for
the performance by DTC, Euroclear or CEDEL or their respective Direct and
Indirect Participants of their respective obligations under the rules and
procedures governing any of their operations.
The information in this section concerning DTC, Euroclear and CEDEL and
their book-entry systems has been obtained from sources that the Company
believes to be reliable, but the Company takes no responsibility for the
accuracy thereof.
REGULATION S TEMPORARY AND REGULATION S PERMANENT GLOBAL NOTES
An Indirect Participant who holds an interest in the Regulation S Temporary
Global Notes through Euroclear or CEDEL must provide Euroclear or CEDEL, as
the case may be, with a certificate in the form
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required by the Indenture certifying that such Indirect Participant is either
not a U.S. Person (as defined) or has purchased such interests in a
transaction that is exempt from the registration requirements under the
Securities Act, and Euroclear or CEDEL, as the case may be, must provide to
the Trustee (or the Paying Agent, if other than the Trustee) a certificate in
the form required by the Indenture prior to any exchange of such beneficial
interests for beneficial interests in Regulation S Permanent Global Notes.
"U.S. Person" means (i) any individual resident in the United States, (ii)
any partnership or corporation organized or incorporated under the laws of the
United States, (iii) any estate of which an executor or administrator is a
U.S. Person (other than an estate governed by foreign law and of which at
least one executor or administrator is a non-U.S. Person who has sole or
shared investment discretion with respect to its assets), (iv) any trust of
which any trustee is a U.S. Person (other than a trust of which at least one
trustee is a non-U.S. Person who has sole or shared investment discretion with
respect to its assets and no beneficiary of the trust (and no settler, if the
trust is revocable) is a U.S. Person), (v) any agency or branch of a foreign
entity located in the United States, (vi) any non-discretionary or similar
account (other than an estate or trust) held by a dealer or other fiduciary
for the benefit or account of a U.S. Person, (vii) any discretionary or
similar account (other than an estate or trust) held by a dealer or other
fiduciary organized, incorporated or (if an individual) resident in the United
States (other than such an account held for the benefit or account of a non-
U.S. Person), (viii) any partnership or corporation organized or incorporated
under the laws of a foreign jurisdiction and formed by a U.S. person
principally for the purpose of investing in securities not registered under
the Securities Act (unless it is organized or incorporated and owned, by
"accredited investors" within the meaning of Rule 501(a) under the Securities
Act who are not natural persons, estates or trusts); provided that the term
"U.S. Person" shall not include (A) a branch or agency of a U.S. Person that
is located and operating outside the United States for valid business purposes
as a locally regulated branch or agency engaged in the banking or insurance
business, (B) any employee benefit plan established and administered in
accordance with the law, customary practices and documentation of a foreign
country and (C) the international organizations set forth in Section 902(o)(7)
of Regulation S under the Securities Act and any other similar international
organizations, and their agencies, affiliates and pension plans.
TRANSFERS OF INTERESTS IN ONE GLOBAL NOTE FOR INTERESTS IN ANOTHER GLOBAL
NOTE
Prior to the expiration of the 40-Day Restricted Period, an Indirect
Participant who holds an interest in the Regulation S Temporary Global Note
through Euroclear or CEDEL will not be permitted to transfer its interest to a
U.S. Person who takes delivery in the form of an interest in Rule 144A Global
Notes. After the expiration of the 40-Day Restricted Period, an Indirect
Participant who holds an interest in Regulation S Permanent Global Notes will
be permitted to transfer its interest to a U.S. Person who takes delivery in
the form of an interest in Rule 144A Global Notes only upon receipt by the
Trustee of a written certification from the transferor to the effect that such
transfer is being made in accordance with the restrictions on transfer set
forth under "Notice to Investors" and set forth in the legend printed on the
Regulation S Permanent Global Notes.
Prior to the expiration of the 40-Day Restricted Period, a Direct or
Indirect Participant who holds an interest in the U.S. Global Note will not be
permitted to transfer its interests to any person that takes delivery thereof
in the form of an interest in the Regulation S Temporary Global Notes. After
the expiration of the 40-Day Restricted Period, a Direct or Indirect
Participant who holds an interest in Rule 144A Global Notes may transfer its
interests to a person who takes delivery in the form of an interest in
Regulation S Permanent Global Notes only upon receipt by the Trustee of a
written certification from the transferor to the effect that such transfer is
being made in accordance with Rule 904 of Regulation S.
Transfers involving an exchange of a beneficial interest in Regulation S
Global Notes for a beneficial interest in Rule 144A Global Notes or vice versa
will be effected by DTC by means of an instruction originated by the Trustee
through DTC Deposit/Withdraw at Custodian (DWAC) system. Accordingly, in
connection with such transfer, appropriate adjustments will be made to reflect
a decrease in the principal amount of the one Global Note and a corresponding
increase in the principal amount of the other Global Note, as applicable. Any
beneficial interest in the one Global Note that is transferred to a person who
takes delivery in the form of an interest in the
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other Global Note will, upon transfer, cease to be an interest in such first
Global Note and become an interest in such other Global Note and, accordingly,
will thereafter be subject to all transfer restrictions and other procedures
applicable to beneficial interests in such other Global Note for as long as it
remains such an interest.
TRANSFERS OF INTERESTS IN GLOBAL NOTES FOR CERTIFICATED NOTES
An entire Global Note may be exchanged for Certificated Notes if (i) DTC (x)
notifies the Company that it is unwilling or unable to continue as depositary
for the Global Notes and the Company thereupon fails to appoint a successor
depositary within 90 days or (y) has ceased to be a clearing agency registered
under the Exchange Act, (ii) the Company, at its option, notifies the Trustee
in writing that it elects to cause the issuance of Certificated Notes or (iii)
there shall have occurred and be continuing a Default or an Event of Default
with respect to the Notes. In any such case, the Company will notify the
Trustee in writing that, upon surrender by the Direct and Indirect
Participants of their interest in such Global Note, Certificated Notes will be
issued to each person that such Direct and Indirect Participants and DTC
identify as being the beneficial owner of the related Notes.
Beneficial interests in Global Notes held by any Direct or Indirect
Participant may be exchanged for Certificated Notes upon request to DTC, by
such Direct Participant (for itself or on behalf of an Indirect Participant),
but only upon at least 20 days' prior written notice given to the Trustee by
or on behalf of DTC in accordance with customary DTC procedures. Certificated
Notes delivered in exchange for any beneficial interest in any Global Note
will be registered in the names, and issued in any approved denominations,
requested by DTC on behalf of such Direct or Indirect Participants (in
accordance with DTC's customary procedures).
In all cases described herein, Certificated Notes will bear the restrictive
legend referred to in "Notice to Investors," unless the Company determines
otherwise in compliance with applicable law.
Neither the Company nor the Trustee will be liable for any delay by the
holder of the Global Notes or DTC in identifying the beneficial owners of
Notes, and the Company and the Trustee may conclusively rely on, and will be
protected in relying on, instructions from the holder of the Global Note or
DTC for all purposes.
TRANSFERS OF CERTIFICATED NOTES FOR INTERESTS IN GLOBAL NOTES
Certificated Notes may only be transferred if the transferor first delivers
to the Trustee a written certificate (and, in certain circumstances, an
opinion of counsel) confirming that, in connection with such transfer, it has
complied with the restrictions on transfer described under "Notice to
Investors."
SAME DAY SETTLEMENT AND PAYMENT
The Indenture will require that payments in respect of the Notes represented
by the Global Notes (including principal, premium, if any, interest and
Liquidated Damages, if any) be made by wire transfer of immediately available
funds to the accounts specified by the holder of such Global Note. With
respect to Certificated Notes, the Company will make all payments of
principal, premium, if any, interest and Liquidated Damages, if any, by wire
transfer of immediately available funds to the accounts specified by the
holders thereof or, if no such account is specified, by mailing a check to
each such holder's registered address. The Company expects that secondary
trading in the Certificated Notes will also be settled in immediately
available funds.
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
The Company, the Guarantors and the Initial Purchasers will enter into the
Registration Rights Agreement on or prior to the Closing Date. Pursuant to the
Registration Rights Agreement, the Company and the Guarantors will agree to
file with the Commission the Exchange Offer Registration Statement on the
appropriate form under the Securities Act with respect to the Exchange Notes.
Upon the effectiveness of the Exchange Offer Registration Statement, the
Company will offer to the Holders of Transfer Restricted Securities pursuant
to the Exchange Offer who are able to make certain representations the
opportunity to exchange their Transfer Restricted Securities for
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Exchange Notes. If (a) the Company and the Guarantors are not required to file
the Exchange Offer Registration Statement or permitted to consummate the
Exchange Offer because the Exchange Offer is not permitted by applicable law
or Commission policy or (b) any Holder of Transfer Restricted Securities
notifies the Company within the specified time period that (i) it is
prohibited by law or Commission policy from participating in the Exchange
Offer, (ii) it may not resell the Exchange Notes acquired by it in the
Exchange Offer to the public without delivering a prospectus and the
prospectus contained in the Exchange Offer Registration Statement is not
appropriate or available for such resales or (iii) it is a broker-dealer and
owns Notes acquired directly from the Company or an affiliate of the Company,
the Company and the Guarantors will file with the Commission a Shelf
Registration Statement to cover resales of the Notes by the Holders thereof
who satisfy certain conditions relating to the provision of information in
connection with the Shelf Registration Statement. The Company and the
Guarantors will use their reasonable best efforts to cause the applicable
registration statement to be declared effective as promptly as possible by the
Commission. For purposes of the foregoing, "Transfer Restricted Securities"
means each Note until (a) the date on which such Note has been exchanged by a
person other than a broker-dealer for an Exchange Note in the Exchange Offer,
(b) following the exchange by a broker-dealer in the Exchange Offer of a Note
for an Exchange Note, the date on which such Exchange Note is sold to a
purchaser who receives from such broker-dealer on or prior to the date of such
sale a copy of the prospectus contained in the Exchange Offer Registration
Statement, (c) the date on which such Note has been effectively registered
under the Securities Act and disposed of in accordance with the Shelf
Registration Statement or (d) the date on which such Note is distributed to
the public pursuant to Rule 144 under the Act.
The Registration Rights Agreement will provide that (a) the Company and the
Guarantors will file an Exchange Offer Registration Statement with the
Commission on or prior to 90 days after the Closing Date, (b) the Company and
the Guarantors will use their reasonable best efforts to have the Exchange
Offer Registration Statement declared effective by the Commission on or prior
to 150 days after the Closing Date, (c) unless the Exchange Offer would not be
permitted by applicable law or Commission policy, the Company will commence
the Exchange Offer and use its reasonable best efforts to issue on or prior to
60 business days after the date on which the Exchange Offer Registration
Statement was declared effective by the Commission, Exchange Notes in exchange
for all Notes tendered prior thereto in the Exchange Offer and (d) if
obligated to file the Shelf Registration Statement, the Company and the
Guarantors will use their reasonable best efforts to file the Shelf
Registration Statement with the Commission on or prior to 90 days after such
filing obligation arises and to cause the Shelf Registration to be declared
effective by the Commission on or prior to 150 days after such obligation
arises. If (a) the Company and the Guarantors fail to file any of the
Registration Statements required by the Registration Rights Agreement on or
before the date specified for such filing, (b) any of such Registration
Statements is not declared effective by the Commission on or prior to the date
specified for such effectiveness (the "Effectiveness Target Date"), (c) the
Company fails to consummate the Exchange Offer within 30 business days of the
Effectiveness Target Date with respect to the Exchange Offer Registration
Statement, or (d) the Shelf Registration Statement or the Exchange Offer
Registration Statement is declared effective but thereafter ceases to be
effective or usable in connection with resales of Transfer Restricted
Securities during the periods specified in the Registration Rights Agreement
(each such event referred to in clauses (a) through (d) above, a "Registration
Default"), then the Company and the Guarantors will pay Liquidated Damages to
each Holder of Notes, with respect to the first 90-day period immediately
following the occurrence of such Registration Default in an amount equal to
$.05 per week per $1,000 principal amount of Notes held by such Holder. The
amount of the Liquidated Damages, if any, will increase by an additional $.05
per week per $1,000 principal amount of Notes with respect to each subsequent
90-day period until all Registration Defaults have been cured, up to a maximum
amount of Liquidated Damages, if any, for all Registration Defaults of $.40
per week per $1,000 principal amount of Notes. All accrued Liquidated Damages,
if any, will be paid by the Company on each Damages Payment Date (as defined
in the Registration Rights Agreement) to the Global Note Holder by wire
transfer of immediately available funds or by federal funds check and to
Holders of Certificated Securities by wire transfer to the accounts specified
by them or by mailing checks to their registered addresses if no such accounts
have been specified. Following the cure of all Registration Defaults, the
accrual of Liquidated Damages, if any, will cease.
Holders of Notes will be required to make certain representations to the
Company and the Guarantors (as described in the Registration Rights Agreement)
in order to participate in the Exchange Offer and will be
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required to deliver certain information to be used in connection with the
Shelf Registration Statement and to provide comments on the Shelf Registration
Statement within the time periods set forth in the Registration Rights
Agreement in order to have their Notes included in the Shelf Registration
Statement and benefit from the provisions regarding Liquidated Damages set
forth above.
Payment of Liquidated Damages is the sole remedy available to the holders of
Notes in the event that the Company and the Guarantors do not comply with the
deadlines set forth in the Registration Rights Agreement with respect to the
conduct of the Exchange Offer or the registration of the Notes for resale
under a Shelf Registration Statement.
CERTAIN DEFINITIONS
Set forth below are certain of the defined terms used in the Indenture.
Reference is made to the Indenture for the definition of all other terms used
in the Indenture.
"Affiliate" means any of the following: (i) any person directly or
indirectly controlling or controlled by or under direct or indirect common
control with the Company; (ii) any spouse, immediate family member or other
relative who has the same principal residence as any person described in
clause (i) above; (iii) any trust in which any such persons described in
clause (i) or (ii) above has a beneficial interest; and (iv) any corporation
or other organization of which any such persons described above collectively
own 50% or more of the equity of such entity.
"Asset Sale" means the sale, lease, conveyance or other disposition by the
Company or a Restricted Subsidiary of assets or property whether owned on the
date of original issuance of the Notes or thereafter acquired, in a single
transaction or in a series of related transactions; provided that Asset Sales
will not include such sales, leases, conveyances or dispositions in connection
with (i) the sale or disposition of any Restricted Investment, (ii) any Equity
Offering by (a) the Company or (b) any Restricted Subsidiary if the proceeds
therefrom are used to make mandatory prepayments of Indebtedness under the
Credit Agreement or Indebtedness of the Restricted Subsidiaries or to redeem
Notes as described above in "Optional Redemption," (iii) the sale or lease of
equipment, inventory, accounts receivable or other assets in the ordinary
course of business, (iv) the surrender or waiver of contract rights or the
settlement, release or surrender of contract, tort or other claims of any
kind, (v) the grant of any license of patents, trademarks, registration
therefor and other similar intellectual property, (vi) a transfer of assets by
the Company or a Restricted Subsidiary to the Company or another Restricted
Subsidiary, (vii) the designation of a Restricted Subsidiary as a Non-
Restricted Subsidiary pursuant to the "Designation of Restricted and Non-
Restricted Subsidiaries" covenant, (viii) the sale, lease, conveyance or other
disposition of all or substantially all of the assets of the Company as
permitted under "Merger or Consolidation," (ix) the sale or disposition of
obsolete equipment or other obsolete assets, (x) Restricted Payments permitted
by the "Limitations on Restricted Payments" covenant, or (xi) the exchange of
assets for other non-cash assets that (a) are useful in the business of the
Company and its Restricted Subsidiaries and (b) have a fair market value at
least equal to the fair market value of the assets being exchanged (as
determined by the Board of Directors in good faith).
"Board of Directors" means the Company's board of directors or any
authorized committee of such board of directors.
"Capital Stock" means any and all shares, interests, participations or other
equivalents (however designated) of corporate stock, including any preferred
stock.
"Cash Flow Coverage Ratio" means, for any given period and person, the ratio
of (i) EBITDA, divided by (ii) the sum of Consolidated Interest Expense and
all dividend payments on any series of preferred stock of such person (except
dividends paid or payable in additional shares of Capital Stock (other than
Disqualified Stock) and except for accrued and unpaid dividends with respect
to preferred stock outstanding on the date of original issuance of the Notes),
in each case, without duplication; provided that, if any such calculation
includes any period during which an acquisition or sale of a person or the
incurrence or repayment of Indebtedness occurred, then such calculation for
such period shall be made on a Pro Forma Basis.
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"Change of Control" means the occurrence of each of the following: (i) any
"person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the
Exchange Act), excluding the Existing Stockholders, is or becomes the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange
Act, except that a person shall be deemed to have "beneficial ownership" of
all securities that such person has the right to acquire, whether such right
is exercisable immediately or only after the passage of time), directly or
indirectly, of more than 50% of the total Voting Stock of the Company; and
(ii) the Company consolidates with, or merges with or into, another person or
sells, assigns, conveys, transfers, leases or otherwise disposes of all or
substantially all of its assets to any person, or any person consolidates
with, or merges with or into, the Company, in any such event pursuant to a
transaction in which the outstanding Voting Stock of the Company is converted
into or exchanged for cash, securities or other property, other than any such
transaction where (A) the outstanding Voting Stock of the Company is converted
into or exchanged for (1) Voting Stock (other than Redeemable Capital Stock)
of the surviving or transferee corporation or (2) cash, securities and other
property in an amount which could be paid by the Company as a Restricted
Payment under the Indenture and (B) immediately after such transaction no
"person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the
Exchange Act), excluding the Existing Stockholders, is the "beneficial owner"
(as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a
person shall be deemed to have "beneficial ownership" of all securities that
such person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly, of
more than 50% of the total Voting Stock of the surviving or transferee
corporation; and (iii) during any consecutive two-year period, individuals who
at the beginning of such period constituted the Board of Directors of the
Company (together with any new directors whose election by such Board of
Directors or whose nomination for election by the stockholders of the Company
was approved by a vote of a majority of the directors then still in office who
are entitled to vote to elect such new director and were either directors at
the beginning of such period or persons whose election as directors or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors of the Company then in office.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the Company's assets. Although there is a developing body of case law
interpreting the phrase "substantially all," there is no precise established
definition of the phrase under applicable law. Accordingly, the ability of a
holder of Notes to require the Company to repurchase such Notes as a result of
a sale, lease, transfer, conveyance or other disposition of less than all of
the assets of the Company and its Subsidiaries to another person may be
uncertain.
"Commission" means the Securities and Exchange Commission.
"Consolidated Interest Expense" means, for any given period and person, the
aggregate of the interest expense in respect of all Indebtedness of such
person and its Restricted Subsidiaries for such period, on a consolidated
basis, determined in accordance with GAAP (including amortization of original
issue discount on any such Indebtedness, all non-cash interest payments, the
interest portion of any deferred payment obligation and the interest component
of capital lease obligations, but excluding amortization of deferred financing
fees if such amortization would otherwise be included in interest expense);
provided that, for the purpose of the Cash Flow Coverage Ratio, Consolidated
Interest Expense shall be calculated on a Pro Forma Basis; and provided
further that any premiums, fees and expenses (including the amortization
thereof) payable in connection with the Offering and the application of the
net proceeds therefrom or any other refinancing of Indebtedness will be
excluded.
"Consolidated Net Income" means, for any given period and person, the
aggregate of the Net Income of such person and its Restricted Subsidiaries for
such period, on a consolidated basis, determined in accordance with GAAP;
provided that: (i) the Net Income of any person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition
shall be excluded; and (ii) Consolidated Net Income of any person will not
include, without duplication, any deduction for (A) any increased amortization
or depreciation resulting from the write-up of assets pursuant to Accounting
Principles Board Opinion Nos. 16 and 17, as amended or supplemented from time
to time, (B) the amortization of all intangible assets (including amortization
attributable
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to inventory write-ups, goodwill, debt and financing costs, and Incentive
Arrangements), (C) any non-capitalized transaction costs incurred in
connection with actual or proposed financings, acquisitions or divestitures
(including, but not limited to, financing and refinancing fees), (D) any
extraordinary or nonrecurring charges relating to any premium or penalty paid,
write-off or deferred financing costs or other financial recapitalization
charges in connection with redeeming or retiring any Indebtedness prior to its
stated maturity, and (E) any Restructuring Charges; and provided further that
for purposes of determining the Cash Flow Coverage Ratio, Consolidated Net
Income shall be calculated on a Pro Forma Basis.
"Consolidated Net Worth" with respect to any person means, as of any date,
the consolidated equity of the common stockholders of such person (excluding
the cumulated foreign currency translation adjustment), all determined on a
consolidated basis in accordance with GAAP, but without any reduction in
respect of the payment of dividends on any series of such person's preferred
stock if such dividends are paid in additional shares of Capital Stock (other
than Disqualified Stock); provided that Consolidated Net Worth shall also
include, without duplication, (a) the amortization of all write-ups of
inventory, (b) the amortization of all intangible assets (including
amortization of goodwill, debt and financing costs, and Incentive
Arrangements), (c) any non-capitalized transaction costs incurred in
connection with actual or proposed financings, acquisitions or divestitures
(including, but not limited to, financing and refinancing fees), (d) any
increased amortization or depreciation resulting from the write-up of assets
pursuant to Accounting Principles Board Opinion Nos. 16 and 17, as amended and
supplemented from time to time, (e) any extraordinary or nonrecurring charges
or expenses relating to any premium or penalty paid, write-off or deferred
financing costs or other financial recapitalization charges incurred in
connection with redeeming or retiring any Indebtedness prior to its stated
maturity, (f) any Restructuring Charges, and (g) any extraordinary or non-
recurring charge arising out of the implementation of SFAS 106 or SFAS 109;
and provided further that Consolidated Net Worth shall be calculated on a Pro
Forma Basis.
"Credit Agreement" means the Credit Agreement, dated the Closing Date, among
the Company, certain of its Subsidiaries, the lenders party thereto and
BankBoston, N.A., as agent, together with all loan documents and instruments
thereunder (including, without limitation, any guarantee agreements and
security documents), in each case as such agreements may be amended, modified,
extended, restated, replaced, or (including any amendment and restatement
thereof), supplemented or otherwise modified from time to time, including any
agreement extending the maturity of, refinancing, replacing or otherwise
restructuring (including, without limitation, increasing the amount of
available borrowings thereunder, and all Obligations with respect thereto, in
each case, to the extent permitted by the "Limitation on Incurrence of
Indebtedness" covenant, or adding Subsidiaries of the Company as additional
borrowers or guarantors thereunder) all or any portion of the Indebtedness
under such agreement or any successor or replacement agreement and whether by
the same or any other agent, lender or group of lenders.
"Crystaloid Holdback" means an amount equal to $500,000 plus accrued
interest thereon, payable in accordance with the terms of the stock purchase
agreement, dated as of March 31, 1998, relating to the Crystaloid Acquisition.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Designated Senior Indebtedness" means (a) any Indebtedness outstanding
under the Credit Agreement and (b) any other Senior Indebtedness permitted
under the Indenture the principal amount of which is $25.0 million or more and
that has been designated by the Company and, for so long as the Credit
Agreement is in effect, the Representative in a written notice to the Trustee
as "Designated Senior Indebtedness."
"Disqualified Stock" means any Capital Stock that by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is
redeemable at the option of the holder thereof, in whole or in part on, or
prior to, the maturity date of the Notes.
"Domestic Subsidiary" of a Person means any direct or indirect Subsidiary of
such Person that is organized under the laws of any jurisdiction within the
United States, any district or territoriality thereof and The Commonwealth of
Puerto Rico.
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"EBITDA" means, for any given period and person, the sum of, without
duplication, Consolidated Net Income, plus (a) the portion of Net Income
attributable to the minority interests in its Restricted Subsidiaries, to the
extent not included in calculating Consolidated Net Income, plus (b) any
provision for taxes based on income or profits to the extent such income or
profits were included in computing Consolidated Net Income, plus
(c) Consolidated Interest Expense, to the extent deducted in computing
Consolidated Net Income, plus (d) the amortization of all intangible assets,
to the extent such amortization was deducted in computing Consolidated Net
Income (including, but not limited to, inventory write-ups, goodwill, debt and
financing costs, and Incentive Arrangements), plus (e) any non-capitalized
transaction costs incurred in connection with actual or proposed financings,
acquisitions or divestitures (including, but not limited to, financing and
refinancing fees, including those in connection with the Offering, to the
extent deducted in computing Consolidated Net Income), plus (f) all
depreciation and all other non-cash charges (including, without limitation,
those charges relating to purchase accounting adjustments and LIFO
adjustments), to the extent deducted in computing Consolidated Net Income,
plus (g) any interest income, to the extent such income was not included in
computing Consolidated Net Income, plus (h) all dividend payments on preferred
stock (whether or not paid in cash) to the extent deducted in computing
Consolidated Net Income, plus (i) any extraordinary or nonrecurring charge or
expense arising out of the implementation of SFAS 106 or SFAS 109 to the
extent deducted in computing Consolidated Net Income, plus (j) to the extent
not covered in clause (e) above, fees paid or payable in respect of the TJC
Management Agreement to the extent deducted in computing Consolidated Net
Income, plus (k) the net loss of any person, other than those of a Restricted
Subsidiary, to the extent deducted in computing Consolidated Net Income, plus
(l) net losses in respect of any discontinued operations as determined in
accordance with GAAP, to the extent deducted in computing Consolidated Net
Income plus (m) payments made in connection with SAR Agreements and grants of
stock options plus (n) the portion of Net Income attributable to the minority
interests in other persons to the extent received in cash by the Company or
its Restricted Subsidiaries.; provided that if any such calculation includes
any period during which an acquisition or sale of a person or the incurrence
or repayment of Indebtedness occurred, then such calculation for such period
shall be made on a Pro Forma Basis.
"Equity Interests" means Capital Stock or partnership interests or warrants,
options or other rights to acquire Capital Stock or partnership interests (but
excluding (i) any debt security that is convertible into, or exchangeable for,
Capital Stock or partnership interests, and (ii) any other Indebtedness or
Obligation); provided that Equity Interests will not include any Incentive
Arrangements or obligations or payments thereunder.
"Equity Offering" means a public or private offering by the Company for cash
of Capital Stock or other Equity Interests and all warrants, options or other
rights to acquire Capital Stock, other than (i) an offering of Disqualified
Stock or (ii) Incentive Arrangements or obligations or payments thereunder.
"Existing Stockholders" means (a) The Jordan Company and its affiliates, and
their respective principals, partners and employees, former employees, family
members of any of the foregoing and trusts for the benefit of any of the
foregoing, including, without limitation, MCIT PLC, Leucadia National
Corporation and Jordan Industries, Inc., and their respective Subsidiaries and
(b) the officers and directors of the Company on the date of original issuance
of the Notes and their respective affiliates and family members and trusts for
the benefit of any of the foregoing.
"GAAP" means generally accepted accounting principles, consistently applied,
as of the date of original issuance of the Notes. All financial and accounting
determinations and calculations under the Indenture will be made in accordance
with GAAP.
"Guarantors" means (i) each of the Domestic Subsidiaries of the Company on
the date of the Indenture and (ii) any other Subsidiary that executes a Note
Guarantee in accordance with the provisions of the Indenture, and their
respective successors and assigns.
"Hedging Obligations" means, with respect to any person, the Obligations of
such persons under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements, (ii) foreign exchange
contracts, currency swap agreements or similar agreements, and (iii) other
agreements or arrangements designed to protect such person against
fluctuations, or otherwise to establish financial hedges in respect of,
exchange rates, currency rates or interest rates.
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"Incentive Arrangements" means any earn-out agreements, stock appreciation
rights, "phantom" stock plans, employment agreements, non-competition
agreements, subscription and stockholders agreements and other incentive and
bonus plans and similar arrangements made in connection with acquisitions of
persons or businesses by the Company or the Restricted Subsidiaries or the
retention of executives, officers or employees by the Company or the
Restricted Subsidiaries.
"Indebtedness" means, with respect to any person, any indebtedness, whether
or not contingent, in respect of borrowed money or evidenced by bonds, notes,
debentures or similar instruments or letters of credit (or reimbursement
agreements in respect thereof) or representing the deferred and unpaid balance
of the purchase price of any property (including pursuant to capital leases),
except any such balance that constitutes an accrued expense or a trade
payable, and any Hedging Obligations, if and to the extent such indebtedness
(other than a Hedging Obligation) would appear as a liability upon a balance
sheet of such person prepared on a consolidated basis in accordance with GAAP,
and also includes, to the extent not otherwise included, the guarantee of
items that would be included within this definition; provided that
"Indebtedness" will not include any Incentive Arrangements or obligations or
payments thereunder.
"Insolvency or Liquidation Proceeding" means (i) any insolvency or
bankruptcy or similar case or proceeding, or any reorganization, receivership,
liquidation, dissolution or winding up of the Company, whether voluntary or
involuntary, or (ii) any assignment for the benefit of creditors or any other
marshalling of assets and liabilities of the Company.
"Investment" means any capital contribution to, or other debt or equity
investment in, any Person.
"issue" means create, issue, assume, guarantee, incur or otherwise become
directly or indirectly liable for any Indebtedness or Capital Stock, as
applicable; provided that any Indebtedness or Capital Stock of a person
existing at the time such person becomes a Restricted Subsidiary (whether by
merger, consolidation, acquisition or otherwise) shall be deemed to be issued
by such Restricted Subsidiary at the time it becomes a Restricted Subsidiary.
For this definition, the terms "issuing," "issuer," "issuance" and "issued"
have meanings correlative to the foregoing.
"Lien" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law (including
any conditional sale or other title retention agreement, any lease in the
nature thereof, any option or other agreement to sell and any filing of or
agreement to give any financing statement under the Uniform Commercial Code
(or equivalent statutes) of any jurisdiction).
"Net Income" means, with respect to any person, the net income (loss) of
such person, determined in accordance with GAAP, excluding, however, any gain
or loss, together with any related provision for taxes, realized in connection
with any Asset Sale (including, without limitation, dispositions pursuant to
sale and leaseback transactions).
"Net Proceeds" means, with respect to any Asset Sale, the aggregate amount
of cash proceeds (including any cash received by way of deferred payment
pursuant to a note receivable issued in connection with such Asset Sale, other
than the portion of such deferred payment constituting interest, and including
any amounts received as disbursements or withdrawals from any escrow or
similar account established in connection with any such Asset Sale, but, in
either such case, only as and when so received) received by the Company or any
of its Restricted Subsidiaries in respect of such Asset Sale, net of (i) the
cash expenses of such Asset Sale (including, without limitation, the payment
of principal of, and premium, if any, and interest on, Indebtedness required
to be paid as a result of such Asset Sale (other than the Notes) and legal,
accounting, management and advisory and investment banking fees and sales
commissions), (ii) taxes paid or payable as a result thereof, (iii) any
portion of cash proceeds that the Company determines in good faith should be
reserved for post-closing adjustments, it being understood and agreed that on
the day that all such post-closing adjustments have been determined, the
amount (if any) by which the reserved amount in respect of such Asset Sale
exceeds the actual post-closing
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adjustments payable by the Company or any of its Restricted Subsidiaries shall
constitute Net Proceeds on such date, (iv) any relocation expenses and
pension, severance and shutdown costs incurred as a result thereof, and (v)
any deduction or appropriate amounts to be provided by the Company or any of
its Restricted Subsidiaries as a reserve in accordance with GAAP against any
liabilities associated with the asset disposed of in such transaction and
retained by the Company or such Restricted Subsidiary after such sale or other
disposition thereof, including, without limitation, pension and other post-
employment benefit liabilities and liabilities related to environmental
matters or against any indemnification obligations associated with such
transaction.
"Non-Restricted Subsidiary" means any Subsidiary of the Company other than a
Restricted Subsidiary.
"Obligations" means, with respect to any Indebtedness, all principal,
interest (including post-petition interest thereon), premiums, penalties,
fees, indemnities, expenses (including legal fees and expenses), reimbursement
obligations (contingent or otherwise) and other liabilities payable to the
holder of such Indebtedness under the documentation governing such
Indebtedness, and any other claims of such holder arising in respect of such
Indebtedness.
"Other Permitted Indebtedness" means:
(i) Indebtedness of the Company and its Restricted Subsidiaries existing
as of the date of original issuance of the Notes and all related
Obligations as in effect on such date;
(ii) Indebtedness of the Company and its Restricted Subsidiaries in
respect of bankers acceptances and letters of credit (including,
without limitation, letters of credit in respect of workers'
compensation claims) issued in the ordinary course of business, or
other Indebtedness in respect of respect to reimbursement-type
obligations regarding workers' compensation claims;
(iii) Refinancing Indebtedness, provided that: (A) the principal amount
of such Refinancing Indebtedness shall not exceed the outstanding
principal amount of Indebtedness (including unused commitments)
extended, refinanced, renewed, replaced, substituted or refunded,
plus any amounts incurred to pay premiums, fees and expenses in
connection therewith; (B) the Refinancing Indebtedness shall have a
Weighted Average Life to Maturity equal to or greater than the
Weighted Average Life to Maturity of the Indebtedness being
extended, refinanced, renewed, replaced, substituted or refunded;
provided that this limitation in this clause (B) does not apply to
Refinancing Indebtedness of Senior Indebtedness; and (C) in the
case of Refinancing Indebtedness of Subordinated Indebtedness, such
Refinancing Indebtedness shall be subordinated to the Notes at
least to the same extent as the Subordinated Indebtedness being
extended, refinanced, renewed, replaced, substituted or refunded;
(iv) intercompany Indebtedness of and among the Company and its
Restricted Subsidiaries (excluding guarantees by Restricted
Subsidiaries of Indebtedness of the Company not issued in compliance
with the "Limitation on Guarantees of Company Indebtedness by
Restricted Subsidiaries" covenant);
(v) Indebtedness of the Company and its Restricted Subsidiaries incurred
in connection with making permitted Restricted Payments under
clauses (iii), (iv) (but only to the extent that such Indebtedness
is provided by the Company or a Restricted Subsidiary) or (x) of the
second sentence of the "Limitation on Restricted Payments" covenant;
provided that any Indebtedness incurred pursuant to this clause (v)
is expressly subordinated in right of payment to the Notes;
(vi) Indebtedness of any Non-Restricted Subsidiary created after the date
of original issuance of the Notes, provided that such Indebtedness
is nonrecourse to the Company and its Restricted Subsidiaries and
the Company and its Restricted Subsidiaries have no Obligations with
respect to such Indebtedness;
(vii) Indebtedness of the Company and its Restricted Subsidiaries under
Hedging Obligations;
(viii) Indebtedness of the Company and its Restricted Subsidiaries
arising from the honoring by a bank or other financial institution
of a check, draft or similar instrument inadvertently (except in
the case of daylight overdrafts, which will not be, and will not
be deemed to be, inadvertent) drawn against insufficient funds in
the ordinary course of business;
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(ix) Indebtedness of any person at the time it is acquired as a
Restricted Subsidiary, provided that such Indebtedness was not
issued by such person in connection with or in anticipation of such
acquisition;
(x) guarantees by Restricted Subsidiaries of Indebtedness of any
Restricted Subsidiary, if the Indebtedness so guaranteed is
permitted under the Indenture;
(xi) guarantees by a Restricted Subsidiary of Indebtedness of the
Company, if the Indebtedness so guaranteed is permitted under the
Indenture and, to the extent required by the "Limitation on
Guarantees of Company Indebtedness by Restricted Subsidiaries"
covenant, guarantees of the Notes by such Restricted Subsidiary;
(xii) guarantees by the Company of Indebtedness of any Restricted
Subsidiary, if the Indebtedness so guaranteed is permitted under
the Indenture;
(xiii) Indebtedness of the Company and its Restricted Subsidiaries in
connection with performance, surety, statutory, appeal or similar
bonds in the ordinary course of business;
(xiv) Indebtedness of the Company and its Restricted Subsidiaries in
connection with agreements providing for indemnification, purchase
price adjustments and similar obligations in connection with the
sale or disposition of any of their business, properties or assets;
and
(xv) Indebtedness of the Company represented by the Notes and
Indebtedness of the Guarantors represented by the Note Guarantees.
"Permitted Junior Securities" means Equity Interests in the Company or debt
securities of the Company that are subordinated to all Senior Indebtedness
(and any debt securities issued in exchange for Senior Indebtedness) to
substantially the same extent as, or to a greater extent than, the Notes are
subordinated to Senior Indebtedness.
"Permitted Liens" means:
(a) with respect to the Company and its Restricted Subsidiaries,
(1) Liens for taxes, assessments, governmental charges or claims which
are being contested in good faith by appropriate proceedings
promptly instituted and diligently conducted and if a reserve or
other appropriate provision, if any, as shall be required in
conformity with GAAP shall have been made therefor;
(2) statutory Liens of landlords and carriers', warehousemen's,
mechanics', suppliers', materialmen's, repairmen's or other like
Liens arising in the ordinary course of business and with respect to
amounts not yet delinquent or being contested in good faith by
appropriate proceedings, if a reserve or other appropriate
provision, if any, as shall be required in conformity with GAAP
shall have been made therefor;
(3) Liens incurred on deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance and
other types of social security;
(4) Liens incurred on deposits made to secure the performance of
tenders, bids, leases, statutory obligations, surety and appeal
bonds, government contracts, performance and return of money bonds
and other obligations of a like nature incurred in the ordinary
course of business (exclusive of obligations for the payment of
borrowed money);
(5) easements, rights-of-way, zoning or other restrictions, minor
defects or irregularities in title and other similar charges or
encumbrances not interfering in any material respect with the
business of the Company or any of its Restricted Subsidiaries
incurred in the ordinary course of business;
(6) Liens (including extensions, renewals and replacements thereof) upon
property acquired (the "Acquired Property") after the date of
original issuance of the Notes, provided that: (A) any
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such Lien is created solely for the purpose of securing Indebtedness
representing, or issued to finance, refinance or refund, the cost
(including the cost of construction) of the Acquired Property, (B)
the principal amount of the Indebtedness secured by such Lien does
not exceed 100% of the cost of the Acquired Property, (C) such Lien
does not extend to or cover any property other than the Acquired
Property and any improvements on such Acquired Property, and (D) the
issuance of the Indebtedness to purchase the Acquired Property is
permitted by the "Limitation on Incurrence of Indebtedness"
covenant;
(7) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with
the importation of goods;
(8) judgment and attachment Liens not giving rise to an Event of
Default;
(9) leases or subleases granted to others not interfering in any
material respect with the business of the Company or any of its
Restricted Subsidiaries;
(10) Liens securing Indebtedness under Hedging Obligations;
(11) Liens encumbering deposits made to secure obligations arising from
statutory, regulatory, contractual or warranty requirements;
(12) Liens arising out of consignment or similar arrangements for the
sale of goods entered into by the Company or its Restricted
Subsidiaries in the ordinary course of business;
(13) any interest or title of a lessor in property subject to any capital
lease obligation or operating lease;
(14) Liens arising from filing Uniform Commercial Code financing
statements regarding leases;
(15) Liens existing on the date of original issuance of the Notes and any
extensions, refinancings, renewals, replacements, substitutions or
refundings thereof;
(16) any Lien granted to the Trustee and any substantially equivalent
Lien granted to any trustee or similar institution under any
indenture for Senior Indebtedness permitted by the terms of the
Indenture; and
(17) additional Liens at any one time outstanding in respect of
properties or assets where aggregate fair market value does not
exceed $10,000,000 (the fair market value to be determined on the
date such Lien is granted on such properties or assets);
(b) with respect to the Restricted Subsidiaries,
(1) Liens securing Restricted Subsidiaries' reimbursement Obligations
with respect to letters of credit that encumber documents and other
property relating to such letters of credit and the products and
proceeds thereof;
(2) Liens securing Indebtedness issued by Restricted Subsidiaries if
such Indebtedness is (A) under the Credit Agreement, or (B)
permitted by the first sentence of the "Limitation on Incurrence of
Indebtedness" covenant, clauses (i), (ii) or (iii) of the second
sentence of the "Limitation on Incurrence of Indebtedness" covenant,
or clauses (i), (iii) (to the extent the Indebtedness subject to
such Refinancing Indebtedness was subject to Liens), (vi), (vii),
(ix) or (x) of the definition of Other Permitted Indebtedness;
(3) Liens securing intercompany Indebtedness issued by any Restricted
Subsidiary to the Company or another Restricted Subsidiary; and
(4) Liens securing guarantees by Restricted Subsidiaries of Indebtedness
issued by the Company if such guarantees permitted by clause (xi)
(but only in respect of the property, rights and assets of the
Restricted Subsidiaries issuing such guarantees) of the definition
of Other Permitted Indebtedness;
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(c) with respect to the Company,
(1) Liens securing Indebtedness issued by the Company if such
Indebtedness is (A) under the Credit Agreement, or (B) if such
Indebtedness is permitted by the "Limitation on Incurrence of
Indebtedness" covenant (including, but not limited to, Indebtedness
issued by the Company under the Credit Agreement pursuant to clause
(i) and/or clause (iii) of the second sentence of "Limitation on
Incurrence of Indebtedness" covenant);
(2) Liens securing Indebtedness of the Company if such Indebtedness is
permitted by clauses (i), (iii) (to the extent the Indebtedness
subject to such Refinancing Indebtedness was subject to Liens) or
(vii) of the definition of Other Permitted Indebtedness;
(3) Liens securing guarantees by the Company of Indebtedness issued by
Restricted Subsidiaries if such Indebtedness is permitted by the
"Limitation on Incurrence of Indebtedness" covenant (including, but
not limited to, Indebtedness issued by Restricted Subsidiaries under
the Credit Agreement pursuant to clause (i) and/or clause (iii) of
the second sentence of the "Limitation on Incurrence of
Indebtedness" covenant) and if such guarantees are permitted by
clause (xii) (but only in respect of Indebtedness issued by the
Restricted Subsidiaries under the Credit Agreement pursuant to the
"Limitation on Incurrence of Indebtedness" covenant) of the
definition of Other Permitted Indebtedness; and
(4) Liens securing the Company's reimbursement obligations with respect
to letters of credit that encumber documents and other property
relating to such letters of credit and the products and proceeds
thereof.
provided that, notwithstanding any of the foregoing, the Permitted Liens
referred to in clause (c) of this definition shall not include any Lien on
Capital Stock of Restricted Subsidiaries held directly by the Company (as
distinguished from Liens on Capital Stock of Restricted Subsidiaries held by
other Restricted Subsidiaries) other than Liens securing (A) Indebtedness of
the Company issued under the Credit Agreement pursuant to the "Limitation on
Incurrence of Indebtedness" covenant and any permitted Refinancing
Indebtedness of such Indebtedness, and (B) guarantees by the Company of
Indebtedness issued by Restricted Subsidiaries under the Credit Agreement
pursuant to the "Limitation on Incurrence of Indebtedness" covenant and any
permitted Refinancing Indebtedness of such Indebtedness.
"Pro Forma Basis" means, for purposes of determining Consolidated Net Income
in connection with the Cash Flow Coverage Ratio (including in connection with
the "Limitation on Restricted Payments" covenant, the "Designation of
Restricted and Non-Restricted Subsidiaries" covenant, the "Merger or
Consolidation" covenant, the incurrence of Indebtedness pursuant to the first
sentence of the "Limitation on Incurrence of Indebtedness" covenant and
Consolidated Net Worth for purposes of the "Merger or Consolidation" covenant)
giving pro forma effect to (x) any acquisition or sale of a person, business
or asset, related incurrence, repayment or refinancing of Indebtedness or
other related transactions, including any Restructuring Charges which would
otherwise be accounted for as an adjustment permitted by Regulation S-X under
the Securities Act or on a pro forma basis under GAAP, or (y) any incurrence,
repayment or refinancing of any Indebtedness and the application of the
proceeds therefrom, in each case, as if such acquisition or sale and related
transactions, restructurings, consolidations, cost savings, reductions,
incurrence, repayment or refinancing were realized on the first day of the
relevant period permitted by Regulation S-X under the Securities Act or on a
pro forma basis under GAAP. Furthermore, in calculating the Cash Flow Coverage
Ratio, (1) interest on outstanding Indebtedness determined on a fluctuating
basis as of the determination date and which will continue to be so determined
thereafter shall be deemed to have accrued at a fixed rate per annum equal to
the rate of interest on such Indebtedness in effect on the determination date,
(2) if interest on any Indebtedness actually incurred on the determination
date may optionally be determined at an interest rate based upon a factor of a
prime or similar rate, a eurocurrency interbank offered rate, or other rates,
then the interest rate in effect on the determination date will be deemed to
have been in effect during the relevant period, and (3) notwithstanding clause
(1) above, interest on Indebtedness determined on a fluctuating basis, to the
extent such interest is covered by agreements
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relating to interest rate swaps or similar interest rate protection Hedging
Obligations, shall be deemed to accrue at the rate per annum resulting after
giving effect to the operation of such agreements.
"Redeemable Preferred Stock" means preferred stock that by its terms or
otherwise is required to be redeemed or is redeemable at the option of the
holder thereof on, or prior to, the maturity date of the Notes.
"Refinancing Indebtedness" means (i) Indebtedness of the Company and its
Restricted Subsidiaries issued or given in exchange for, or the proceeds of
which are used to, extend, refinance, renew, replace, substitute or refund any
Indebtedness permitted under this Indenture or any Indebtedness issued to so
extend, refinance, renew, replace, substitute or refund such Indebtedness,
(ii) any refinancings of Indebtedness issued under the Credit Agreement, and
(iii) any additional Indebtedness issued to pay premiums and fees in
connection with clauses (i) and (ii).
"Representative" means the agent or other representative in respect of the
Credit Agreement.
"Restricted Investment" means any Investment in any person; provided that
Restricted Investments will not include: (i) Investments in marketable
securities and other negotiable instruments permitted by the Indenture; (ii)
any Incentive Arrangements; (iii) Investments in the Company; (iv) Investments
in any Restricted Subsidiary (provided that any Investment in a Restricted
Subsidiary was made for fair market value (as determined by the Board of
Directors in good faith)); or (v) other Investments in an aggregate amount not
to exceed $15,000,000 at any time outstanding. The amount of any Restricted
Investment shall be the amount of cash and the fair market value at the time
of transfer of all other property (as determined by the Board of Directors in
good faith) initially invested or paid for such Restricted Investment, plus
all additions thereto, without any adjustments for increases or decreases in
value of or write-ups, write-downs or write-offs with respect to, such
Restricted Investment.
"Restricted Subsidiary" means (i) any domestic Subsidiary of the Company
existing on the date of original issuance of the Notes, and (ii) any other
Subsidiary of the Company formed, acquired or existing after the date of
original issuance of the Notes that is designated as a "Restricted Subsidiary"
by the Company pursuant to a resolution approved a majority of the Board of
Directors, provided that the term Restricted Subsidiary shall not include any
Subsidiary of the Company that has been redesignated by the Company pursuant
to a resolution approved by a majority of the Board of Directors as a Non-
Restricted Subsidiary in accordance with the "Designation of Restricted and
Non-Restricted Subsidiaries" covenant, unless such Subsidiary shall have
subsequently been redesignated a Restricted Subsidiary in accordance with
clause (ii) of this definition.
"Restructuring Charges" means any charges or expenses in respect of
restructuring or consolidating any business, operations or facilities, any
compensation or headcount reduction, or any other cost savings, of any persons
or businesses either alone or together with the Company or any Restricted
Subsidiary, as permitted by GAAP or Regulation S-X under the Securities Act.
"SAR Agreements" means stock appreciation rights agreements, dated on or
prior to the date of the Indenture, between the Company and each of Robert H.
Elkin, Christopher T. Paule and Mark R. Hefty, providing for, under certain
circumstances, an aggregate payment to such persons of up to 3.0% of the
equity value of the Company.
"Senior Indebtedness" means, with respect to any Person, (a) all
Indebtedness of such Person outstanding under the Credit Agreement and all
guarantees thereof and all Hedging Obligations with respect thereto, (b) any
other Indebtedness of such person permitted to be incurred under the terms of
the Indenture, provided that Senior Indebtedness shall not include any
Indebtedness which by the terms of the instrument creating or evidencing the
same is subordinated or junior in right of payment to any other Senior
Indebtedness in any respect, and (c) all Obligations (including any interest
accruing subsequent to the filing of a petition of bankruptcy at the rate
provided for in the documentation with respect thereto, whether or not such
interest is an allowable claim under applicable law) with respect to the
foregoing, in each case, whether outstanding on the date of the Indenture or
thereafter incurred. Notwithstanding anything to the contrary in the
foregoing, Senior Indebtedness will not include (i) any liability for federal,
state, local or other taxes owed or owing by the Company, (ii) any
Indebtedness of such Person to any of its Subsidiaries or other Affiliates
(other than pursuant to the Credit
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Facility), (iii) any trade payables or other liability to trade creditors
arising in the ordinary course of business (including guarantees thereof or
instruments evidencing such liabilities) or (iv) any Indebtedness that is
incurred in violation of the Indenture.
"SFAS 106" means Statement of Financial Accounting Standards No. 106.
"SFAS 109" means Statement of Financial Accounting Standards No. 109.
"Significant Subsidiary" means any Restricted Subsidiary of the Company that
would be a "significant subsidiary" as defined in clause (2) of the definition
of such term in Rule 1-02 of Regulation S-X under the Securities Act and the
Exchange Act.
"Subordinated Indebtedness" means all Obligations with respect to
Indebtedness if the instrument creating or evidencing the same, or pursuant to
which the same is outstanding, designates such Obligations as subordinated or
junior in right of payment to Senior Indebtedness.
"Subsidiary" of any person means any entity of which the Equity Interests
entitled to cast at least a majority of the votes that may be cast by all
Equity Interests having ordinary voting power for the election of directors or
other governing body of such entity are owned by such person (regardless of
whether such Equity Interests are owned directly by such person or through one
or more Subsidiaries).
"TJC Management Agreement" means the Management Consulting Agreement,
between the Company and The Jordan Company Management Corporation, as in
effect on the date of the Indenture.
"Voting Stock" means any class or classes of Capital Stock pursuant to which
the holders thereof have the general voting power under ordinary circumstances
to elect the board of directors.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the then outstanding
principal amount of such Indebtedness into (ii) the sum of the product(s)
obtained by multiplying (a) the amount of each then remaining installment,
sinking fund, serial maturity or other requirement payment of principal,
including payment at final maturity, in respect thereof, by (b) the number of
years (calculated to the nearest one-twelfth) which will elapse between such
date and the making of such payment.
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PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account as a result
of market-making activities or other trading activities in connection with the
Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Old Notes where
such Old Notes were acquired as a result of market-making activities or other
trading activities. The Company has agreed that for a period of 120 days after
the Expiration Date, it will make available a prospectus meeting the
requirements of the Securities Act to any broker-dealer for use in connection
with any such resale. In addition, until , 1998, all dealers effecting
transactions in the New Notes may be required to deliver a prospectus.
The Company will receive no proceeds in connection with the Exchange Offer.
New Notes received by broker-dealers for their own account pursuant to the
Exchange Offer may be sold from time to time in one or more transactions in
the over-the-counter market, in negotiated transactions, through the writing
of options on the New Notes or a combination of such methods of resale, at
market prices prevailing at the time of resale, at prices related to such
prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such broker-
dealer or the purchasers of any such New Notes. Any broker-dealer that resells
New Notes that were received by it for its own account pursuant to the
Exchange Offer and any broker or dealer that participates in a distribution of
such New Notes may be deemed to be "underwriter" within the meaning of the
Securities Act and any profit on any such resale of New Notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
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CERTAIN TAX CONSIDERATIONS
The following general discussion is a summary of the material U.S. federal
income tax considerations relevant to the acquisition, ownership and
disposition of the Notes acquired in the Offering, but does not purport to be
a complete analysis of all potential tax effects. The discussion is based upon
the Internal Revenue Code of 1986, as amended (the "Code"), Treasury
Regulations, Internal Revenue Service (the "IRS") rulings and pronouncements
and judicial decisions all in effect as of the date hereof, and all of which
are subject to change at any time. Any such change may be applied
retroactively in a manner that could adversely affect a holder of the Notes.
The discussion does not address all of the U.S. federal income tax
consequences that may be relevant to a holder in light of such holder's
particular circumstances or to holders subject to special rules (such as
certain financial institutions, insurance companies, dealers in securities,
foreign corporations, nonresident alien individuals and persons holding the
Notes as part of a "straddle," "hedge" or "conversion transaction"). Moreover,
the effect of any applicable state, local or foreign tax laws is not
discussed. The discussion deals only with Notes held as "capital assets"
within the meaning of Section 1221 of the Code.
The Company has not sought and will not seek any rulings from the IRS with
respect to any position of the Company discussed below. There can be no
assurance that the IRS will not take a different position from the Company
concerning aspects of the tax consequences of the acquisition, ownership or
disposition of the Notes or that any such position would not be sustained.
PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH REGARD TO
THE APPLICATION OF THE TAX CONSIDERATIONS DISCUSSED BELOW TO THEIR PARTICULAR
SITUATIONS AS WELL AS THE APPLICATION OF ANY STATE, LOCAL, FOREIGN OR OTHER
TAX LAWS.
U.S. HOLDERS
The following is a general discussion of certain U.S. federal income and tax
consequences of ownership of the Notes by a beneficial owner of the Notes who
is a U.S. Holder and who holds the Notes as a capital asset. For purposes of
this discussion, a "U.S. Holder" means a citizen or resident (as defined in
Section 7701(b) of the Code) of the United States, a corporation, partnership
or other entity created or organized in the United States or any political
subdivision thereof, an estate whose income is includible in gross income for
U.S. federal income tax purposes regardless of its source, or a trust if (i) a
court within the United States is able to exercise primary supervision over
the administration of the trust and (ii) one or more U.S. persons have the
authority to control all substantial decisions of the trust.
Interest Income and Gain on Disposition
Interest payable on the Notes will be includible in the income of a U.S.
Holder in accordance with such holder's regular method of accounting. If a
Note is redeemed, sold or otherwise disposed of, a U.S. Holder generally will
recognize gain or loss equal to the difference between the amount realized on
the sale or other disposition of such Note (to the extent such amount does not
represent accrued but unpaid interest, which will be taxed as ordinary
interest income) and such holder's tax basis in the Note. Such gain or loss
generally will be capital gain or loss, provided that the U.S. Holder has held
the Note as a capital asset. In general, the maximum tax rate for non-
corporate taxpayers on capital gains is 20% for most capital assets (including
the Notes) held for more than 18 months. Capital gain on such assets for non-
corporate holders having a holding period of more than one year but not more
than 18 months will be subject to a maximum tax rate of 28%.
Information Reporting and Backup Withholding
A U.S. Holder of a Note may be subject to "backup withholding" at a rate of
31% with respect to certain "reportable payments," including interest payments
and, under certain circumstances, principal payments on the Notes. These
backup withholding rules apply if the holder, among other things, (i) fails to
furnish a social security number or other taxpayer identification number
("TIN") certified under penalties of perjury within a
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reasonable time after the request therefor, (ii) furnishes an incorrect TIN,
(iii) fails to report properly the receipt of interest or (iv) under certain
circumstances, fails to provide a certified statement, signed under penalties
of perjury, that the TIN furnished is the correct number and that such holder
is not subject to backup withholding. A holder who does not provide the
Company with its correct TIN also may be subject to penalties imposed by the
IRS. Any amount withheld from a payment to a holder under the backup
withholding rules is creditable against the holder's U.S. federal income tax
liability, provided that the required information is furnished to the IRS.
Backup withholding will not apply, however, with respect to payments made to
certain holders, including corporations and tax-exempt organizations, provided
their exemptions from backup withholding are properly established.
The Company will report to U.S. Holders and to the IRS the amount of any
"reportable payments" for each calendar year and the amount of U.S. federal
income tax withheld, if any, with respect to such payments.
NON-U.S. HOLDERS
The following discussion is limited to the U.S. federal income and estate
tax consequences relevant to a Non-U.S. Holder. As used herein, a "Non-U.S.
Holder" is any holder other than a U.S. Holder. For purposes of withholding
tax on interest discussed below, a Non-U.S. Holder includes a non-resident
fiduciary of an estate or trust. In addition, for purposes of the following
discussion, interest and gain on the sale, exchange or other disposition of a
Note generally will be considered to be "U.S. trade or business income" if
such income or gain is (i) effectively connected with the conduct of a U.S.
trade or business or (ii) in the case of most treaty residents, attributable
to a permanent establishment (or, in the case of an individual, a fixed base)
in the United States.
Under present U.S. federal income and estate tax law, and subject to the
discussion below concerning U.S. trade or business income and backup
withholding:
(a) Generally, interest paid to a Non-U.S. Holder of a Note that is not
U.S. trade or business income will not be subject to U.S. tax if the
interest qualifies as "portfolio interest. " Interest on the Notes
generally will qualify as portfolio interest if (i) the beneficial owner
does not actually or constructively own 10% or more of the total combined
voting power of all classes of stock of the Company entitled to vote within
the meaning of section 871(h)(3) of the Code and the regulations
thereunder, (ii) the beneficial owner is not a controlled foreign
corporation that is related to the Company through stock ownership within
the meaning of the Code, (iii) the beneficial owner is not a bank receiving
interest on an extension of credit made pursuant to a loan agreement made
in the ordinary course of its business and (iv) the beneficial owner
satisfies the statement requirement (described generally below) set forth
in section 871(h) and section 881(c) of the Code and the regulations
thereunder;
(b) no withholding of U.S. federal income tax will be required with
respect to any gain or income realized by a Non-U.S. Holder upon the sale,
exchange or retirement of a Note; and
(c) a Note beneficially owned by an individual who at the time of his or
her death is not a citizen or resident (as specifically defined for U.S.
estate tax purposes) of the United States will not be subject to U.S.
federal estate tax at the time of such individual's death, provided that
the interest thereon qualifies as portfolio interest and was not U.S. trade
or business income.
To satisfy the requirement referred to in (a)(iv) above, the beneficial
owner of a Note, or a financial institution holding the Note on behalf of such
owner, must provide, in accordance with specified procedures, the Company, or
a paying agent, as the case may be, with a statement to the effect that the
beneficial owner is not a U.S. person. Currently these requirements will be
met if (1) the beneficial owner provides his or her name and address, and
certifies, under penalties of perjury, that he or she is not a U.S. person
(which certification may be made on an IRS Form W-8) or (2) a securities
clearing organization, bank or other financial institution that holds customer
securities in the ordinary course of its trade or business (a "Financial
Institution") and holds the Note on behalf of a beneficial owner thereof,
certifies, under penalties of perjury, that such certificate has been received
by it or by a Financial Institution between it and the beneficial owner and
furnishes the payor with a copy thereof. Under recently finalized Treasury
regulations (the "Final Regulations"), the statement requirement referred to
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in (a)(iv) above also may be satisfied with other documentary evidence for
interest paid after December 31, 1999 with respect to an offshore account or
through certain foreign intermediaries. The Final Regulations generally will
require, in the case of Notes held by a foreign partnership, that the
certificate described above be provided by the partners rather than by the
foreign partnership, and that the partnership provide certain information,
including a U.S. TIN.
If a Non-U.S. Holder cannot satisfy the requirements of the "portfolio
interest" exception described in (a) above, payments of interest made to such
Non-U.S. Holder will be subject to 30% withholding unless the beneficial owner
of the Note provides the Company or its paying agent, as the case may be, with
a properly executed (1) IRS Form 1001 (or successor form) claiming an
exemption from withholding or a reduction in withholding under the benefit of
a tax treaty or (2) IRS Form 4224 (or successor form) stating that interest
paid on the Note is not subject to withholding because it is U.S. trade or
business income. Under the Final Regulations, Non-U.S. Holders generally will
be required to provide IRS Form W-8 in lieu of IRS Form 1001 and IRS Form
4224, although alternative documentation may be applicable in certain
situations.
U.S. trade or business income, although exempt from the withholding tax
discussed above, will be subject to U.S. federal income tax on a net income
basis at applicable graduated individual or corporate rates. In addition, if
such holder is a foreign corporation, it may be subject to a branch profits
tax equal to 30% (or lower treaty rate) of its effectively connected earnings
and profits for the taxable year, subject to adjustments. For this purpose,
interest on a Note will be included in such foreign corporation's earnings and
profits.
Any gain or income realized upon the sale, exchange or retirement of a Note
generally will not be subject to U.S. federal income tax unless (i) such gain
is U.S. trade or business income, or (ii) in the case of a Non-U.S. Holder who
is an individual, such individual is present in the United States for 183 days
or more in the taxable year of such sale, exchange or retirement, and certain
other conditions are met.
Information Reporting and Backup Withholding
The Company must report annually to the IRS and to each Non-U.S. Holder any
interest that is subject to withholding, or that is exempt from U.S.
withholding pursuant to a tax treaty, or interest that is exempt from U.S. tax
under the portfolio interest exception. Copies of these information returns
may also be made available under the provisions of a specific treaty or
agreement to the tax authorities of the country in which the Non-U.S. Holder
resides.
Treasury Regulations provide that backup withholding and additional
information reporting will not apply to payments of principal on the Notes by
the Company to a Non-U.S. Holder if the holder certifies as to its Non-U.S.
status under penalties of perjury or otherwise establishes an exemption
(provided that neither the Company nor any paying agent has actual knowledge
that the holder is a U.S. person or that the conditions of any other exemption
are not, in fact, satisfied).
The payment of the proceeds from the disposition of Notes to or through the
U.S. office of any broker, U.S. or foreign, will be subject to information
reporting and possible backup withholding at a rate of 31% unless the owner
certifies as to its Non-U.S. Holder status under penalty of perjury or
otherwise establishes an exemption, provided that the broker does not have
actual knowledge that the holder is a U.S. person or that the conditions of
any other exemption are not, in fact, satisfied. The payment of the proceeds
from the disposition of a Note to or through a non-U.S. office of a non-U.S.
broker that is not a U.S. related person will not be subject to information
reporting or backup withholding. In the case of the payment of proceeds from
the disposition of a Note to or through a non-U.S. office of a broker that is
either a U.S. person or a U.S. related person, information reporting is
required on the payment unless the broker has documentary evidence in its
files that the owner is a Non-U.S. Holder and the broker has no knowledge to
the contrary. Backup withholding will not apply to payments made through
foreign offices of a broker that is not a U.S. person or a U.S. related person
(absent actual knowledge that the payee is a U.S. person). For purposes of
this paragraph, a "U.S. related person" is (i) a "controlled foreign
corporation" for U.S. federal income tax purposes, (ii) a foreign person 50%
or more of whose gross
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income from all sources for the three-year period ending with the close of its
taxable year preceding the payment (or for such part of the period that the
broker has been in existence) is derived from activities that are effectively
connected with the conduct of a U.S. trade or business or (iii) with respect
to payments made after December 31, 1999, a foreign partnership that, at any
time during its taxable year, is 50% or more (by income or capital interest)
owned by U.S. persons or is engaged in the conduct of a U.S. trade or
business. The Final Regulations provide certain presumptions under which a
Non-U.S. Holder will be subject to backup withholding and information
reporting unless the Non-U.S. Holder provides a certification as to its non-
U.S. Holder status.
Any amounts withheld under the backup withholding rules from a payment to a
Non-U.S. Holder will be allowed as a refund or a credit against such Non-U.S.
Holder's U.S. federal income tax liability, provided that the requisite
procedures are followed.
LIQUIDATED DAMAGES
The treatment of interest described above with respect to the Notes is based
in part upon the Company's determination that, as of the date of issuance of
the Notes, the possibility that Liquidated Damages would be paid to holders of
the Notes pursuant to a Registration Default will be remote. See "Description
of Notes--Registration Rights; Liquidated Damages" The IRS may take a
different position, which could affect the timing and character of interest
income reported by holders of the Notes. While not free from doubt, if such
Liquidated Damages are in fact paid, the Company believes the Liquidated
Damages will be taxable to a holder as ordinary income in accordance with such
holder's method of accounting.
CONSEQUENCES OF THE EXCHANGE OFFER TO EXCHANGING AND NONEXCHANGING HOLDERS
The exchange of a Note for an Exchange Note pursuant to the Exchange Offer
will not be taxable to an exchanging holder for U.S. federal income tax
purposes. As a result (i) an exchanging holder will not recognize any gain or
loss on the exchange, (ii) the holding period for the Exchange Note will
include the holding period for the Note and (iii) the holder's basis in the
Exchange Note will be the same as its basis in the Note.
The Exchange Offer will result in no U.S. federal income tax consequences to
a nonexchanging holder of Notes.
THE PRECEDING DISCUSSION OF CERTAIN U.S. FEDERAL INCOME AND ESTATE TAX
CONSEQUENCES IS FOR GENERAL INFORMATION ONLY, DOES NOT CONSTITUTE TAX ADVICE
AND IS NOT BASED UPON ANY OPINION OF COUNSEL. ACCORDINGLY, EACH INVESTOR
SHOULD CONSULT ITS OWN TAX ADVISOR AS TO PARTICULAR TAX CONSEQUENCES TO IT OF
PURCHASING, HOLDING AND DISPOSING OF THE NOTES, INCLUDING THE APPLICABILITY
AND EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS, AND OF ANY PROPOSED
CHANGES IN APPLICABLE LAWS.
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LEGAL MATTERS
The validity of the Notes will be passed upon for the Company by Mayer,
Brown & Platt, New York, New York.
EXPERTS
The consolidated financial statements of (i) Jackson Products, Inc. and
subsidiaries as of December 31, 1997 and 1996, for the years ended December
31, 1997 and 1996, and for the period from August 17, 1995 (inception) to
December 31, 1995 and (ii) Jackson Holding Company and subsidiary for the
period from January 1, 1995 to August 16, 1995, have been included herein and
in the registration statement in reliance upon the reports of KPMG Peat
Marwick LLP, independent certified public accountants, appearing elsewhere
herein, and upon the authority of said firm as experts in accounting and
auditing.
The combined financial statements of American Allsafe Company and
Silencio/Safety Direct, Inc. (wholly-owned subsidiaries of NCH Corporation) as
of April 30, 1997 and for the year then ended, have been included herein and
in the registration statement in reliance upon the report of KPMG Peat Marwick
LLP, independent certified public accountants, appearing elsewhere herein, and
upon the authority of said firm as experts in accounting and auditing.
AVAILABLE INFORMATION
The Company has filed with the Commission the Registration Statement
pursuant to the Securities Act, and the rules and regulations promulgated
thereunder, covering the New Notes being offered hereby. This Prospectus does
not contain all the information set forth in the Registration Statement,
certain parts of which are omitted in accordance with the rules and
regulations of the Commission. For further information with respect to the
Company and the New Notes, reference is hereby made to the Registration
Statement. Statements made in this Prospectus as to the contents of any
contract, agreement or other document referred to in the Registration
Statement are not necessarily complete. With respect to each such contract,
agreement or other document filed as an exhibit to the Registration Statement,
reference is made to the exhibit for a more complete description of the matter
involved, and each such statement shall be deemed qualified in its entirety by
such reference. Upon consummation of the Exchange Offer, the Company will
become subject to the periodic and other informational requirements of the
Exchange Act. Periodic reports and other information filed by the Company with
the Commission may be inspected at the public reference facilities maintained
by the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C.
20549, or at its regional offices located at Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661 and 7 World Trade Center, New
York, New York 10048 at prescribed rates. Such materials may also be accessed
electronically by means of the Commission's home page on the Internet at
http://www.sec.gov.
97
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The unaudited pro forma consolidated statement of operations of the Company
for 1997 and the three months ended March 31, 1998 gives effect to: (i) the
Acquisitions; (ii) the acquisition of Lansec; and (iii) the Offering as if
each had occurred on the first day of the period presented for Statements of
Operations Data and Other Data and at March 31, 1998 for Balance Sheet Data.
The unaudited pro forma adjustments contained herein are based upon
historical information, preliminary estimates and certain assumptions
management deems appropriate. The Company believes that the assumptions used
in the pro forma financial statements provide a reasonable basis on which to
present such statements. The pro forma financial statements are provided for
information purposes only and should not be construed to be indicative of the
Company's results of operations or financial position had the Offerings and
the other events described above been consummated on or as of the dates
assumed, and are not intended to project the Company's results of operations
or its financial position for any future period or as of any future date. The
pro forma financial statements of the Company and accompanying notes should be
read in conjunction with the other financial statements and the notes thereto
appearing elsewhere in this Prospectus.
P-1
<PAGE>
JACKSON PRODUCTS, INC. AND SUBSIDIARIES
PRO FORMA STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
THE ALLSAFE CRYSTALOID PRO FORMA PRO
COMPANY ACQUISITION(/1/) ACQUISITION(/2/) ADJUSTMENTS(/3/) FORMA
------- ---------------- ---------------- ---------------- -------
<S> <C> <C> <C> <C> <C>
Net sales............... $31,106 $8,174 $2,513 $ -- $41,793
Operating expenses:
Cost of sales.......... 21,849 4,878 1,861 -- 28,588
Selling, general and
administrative........ 5,256 1.705 411 -- 7,372
Amortization of
intangibles........... 1,764 -- -- 889 2,653
------- ------ ------ ------- -------
Operating income (loss). 2,237 1,591 241 (889) 3,180
Other expense (income)
Interest expense....... 2,996 -- 57 1,134 4,187
Amortization of
deferred financing
costs................. 309 -- -- (21) 288
Other.................. 172 175 -- -- 347
------- ------ ------ ------- -------
Income (loss) before
income tax provision
and extraordinary
items.................. (1,240) 1,416 184 (2,002) (1,642)
Income tax expense...... 159 -- 57 -- 216
------- ------ ------ ------- -------
Income (loss) before
extraordinary items
(/4/).................. $(1,399) $1,416 $ 127 $(2,002) $(1,858)
======= ====== ====== ======= =======
</TABLE>
- --------
(1) The results of operations for Allsafe for the three months ended March
31, 1998 are based upon unaudited financial statements.
(2) The results of operations for Crystaloid for the three months ended March
31, 1998 are based upon unaudited financial statements.
(3) Gives effect to (i) increase in interest expense associated with an
average increase in net borrowings for the Acquisitions, and assumes a
weighted average interest rate of 8.0% on the New Credit Facility and a
9.5% interest rate on the Notes; (2) an increase in amortization expense
associated with the excess of the Allsafe and Crystaloid purchase price
over the allocated fair market value of the assets and liabilities.
Allsafe's and Crystaloid's intangibles are amortized over a five and
three year life respectively.
(4) Nonrecurring charges consisting of $7.6 million were charged to
operations upon the closing of the Transactions and are not reflected in
the unaudited pro forma consolidated statement of operations. The charges
reflect (i) the write-off of existing deferred financing fees of $4,870,
(ii) the write-off of the unamortized debt discount of $478 and (iii)
premium on the repayment of the Prior Notes of $2,210.
P-2
<PAGE>
JACKSON PRODUCTS, INC. AND SUBSIDIARIES
PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
THE ALLSAFE LANSEC CRYSTALOID PRO FORMA PRO FORMA
COMPANY(/1/) ACQUISITION(/2/) ACQUISITION(/1/) ACQUISITION ADJUSTMENTS 1997
------------ ---------------- ---------------- ----------- ----------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net sales............... $123,417 $32,479 $9,137 $8,569 $ -- $173,602
Operating expenses:
Cost of sales......... 87,466 21,306 7,506 6,736 (1,000)(/3/) 122,014
Selling, general and
administrative....... 15,205 7,739 1,594 1,387 216 (/4/) 26,141
Write-down of assets.. 335 -- -- -- -- 335
Amortization of
intangibles.......... 16,378 -- -- -- 3,557(/5/) 19,935
-------- ------- ------ ------ ------- --------
Operating income (loss). 4,033 3,434 37 446 (2,773) 5,177
Other expense (income):
Interest expense(/6/). 12,050 -- 52 213 4,435 16,750
Amortization of
deferred financing
costs................ 1,261 -- -- -- (271) 990
Other................. 401 648 (137) -- -- 912
-------- ------- ------ ------ ------- --------
Income (loss) before
income tax provision
and extraordinary
items.................. (9,679) 2,786 122 233 (6,937) (13,475)
Income tax expense...... 684 -- 51 72 -- 807
-------- ------- ------ ------ ------- --------
Income (loss) before
extraordinary
items(/7/)............. $(10,363) $ 2,786 $ 71 $ 161 $(6,937) $(14,282)
======== ======= ====== ====== ======= ========
</TABLE>
- --------
(1) Due to the immateriality of Lansec's results of operations subsequent to
its acquisition, the Company's results for 1997 do not give effect to the
operations of Lansec, which was acquired by the Company on October 29,
1997. The Lansec Acquisition column represents the results of operations
for the twelve months ended December 31, 1997.
(2) The results of operations for Allsafe for the twelve months ended December
31, 1997 are based upon the audited financial statements for Allsafe for
the twelve months ended April 30, 1997, included elsewhere in this
Offering Circular, the unaudited financial statements of Allsafe for the
eight months ended December 31, 1997 and the unaudited financial
statements of Allsafe for the eight months ended December 31, 1996.
(3) Represents a $1,000 reduction resulting from Jackson's replacement of
Lansec's welding filter lens supplier.
(4) Represents increased selling, general and administrative expenses as a
result of the Lansec acquisition.
(5) Represents an increase in amortization expense associated with the excess
of cost over the net tangible assets acquired for the Allsafe Acquisition
and the Crystaloid Acquisition. These intangibles consists primarily of
patents and goodwill and are amortized over their estimated useful lives
of 3 to 15 years.
(6) Reflects an increase in interest expense associated with an average
increase in net borrowings for the Acquisitions, and assumes a weighted
average interest rate of 8.0% on the New Credit Facility and a 9.50%
interest rate on the Notes.
(7) Nonrecurring charges consisting of $7.8 million were charged to operations
upon the closing of the Transactions and are not reflected in the
unaudited pro forma consolidated statement of operations. The charges
reflect (i) the write-off of existing deferred financing fees of $5,180,
(ii) the write-off of the unamortized debt discount of $494 and (iii)
premium on the repayment of the Prior Notes of $2,210.
P-3
<PAGE>
JACKSON PRODUCTS, INC. AND SUBSIDIARIES
PRO FORMA BALANCE SHEET
AT MARCH 31, 1998
<TABLE>
<CAPTION>
ALLSAFE CRYSTALOID PRO FORMA PRO
THE COMPANY ACQUISITION(1) ACQUISITION(2) ADJUSTMENTS(3) FORMA
----------- -------------- -------------- -------------- --------
ASSETS
------
<S> <C> <C> <C> <C> <C>
Current Assets:
Cash and cash
equivalents........... $ 252 $ -- $ -- $ -- $ 252
Accounts receivable,
net................... 18,804 4,065 1,502 -- 24,371
Inventories............ 24,785 6,267 1,374 -- 32,426
Prepaid expenses....... 567 27 31 -- 625
-------- ------- ------ ------- --------
Total current assets. 44,408 10,359 2,907 -- 57,674
Property, plant and
equipment............. 20,260 6,602 1,066 4,000 31,928
Intangibles............ 58,837 -- -- 15,217 74,054
Deferred financing
costs................. 4,870 -- -- 2,630 7,500
Other noncurrent
assets................ 352 189 72 (72) 541
-------- ------- ------ ------- --------
$128,727 $17,150 $4,045 $21,775 $171,697
======== ======= ====== ======= ========
<CAPTION>
LIABILITIES AND
STOCKHOLDERS' EQUITY
(DEFICIT)
--------------------
<S> <C> <C> <C> <C> <C>
Current liabilities:
Current matures of
long-term debt........ $ 6,118 $ -- $1,221 $(7,339) $ --
Accounts payable....... 12,845 914 863 -- 14,622
Accrued and other
liabilities........... 4,735 177 259 1,200 6,371
Accrued interest....... 1,086 -- -- (1,086) --
Accrued taxes.......... 520 927 -- -- 1,447
-------- ------- ------ ------- --------
Total current
liabilities......... 25,304 2,018 2,343 (7,225) 22,440
Long-term debt, less
current maturities..... 111,723 -- 1,119 79,733 192,575
Other noncurrent
liabilities............ 3,389 -- -- 500 3,889
Preferred stock......... 21,389 -- -- (21,389) --
Stockholders' equity
(deficit)
Common stock........... -- -- 422 (422) --
Additional paid-in
capital............... 7,102 -- 262 (4,412) 2,952
Cumulative translation
adjustment............ (24) -- -- -- (24)
Loans due on common
stock................. (343) -- -- -- (343)
Accumulated deficit.... (39,813) 15,132 (101) (25,010) (49,792)
-------- ------- ------ ------- --------
Total stockholders'
deficit............. (33,078) 15,132 583 (29,844) (47,207)
-------- ------- ------ ------- --------
Total liabilities and
stockholders'
equity.............. $128,727 $17,150 $4,045 $21,775 $171,697
======== ======= ====== ======= ========
</TABLE>
- -------
(1) Reflects the unaudited balance sheet of Allsafe as of March 31, 1998
prior to giving effect to the Allsafe Acquisition.
(2) Represents the unaudited balance sheet of Crystaloid as of March 31, 1998
prior to giving effect to the Crystaloid Acquisition.
(3) Reflects the estimated purchase price accounting adjustments related to
the Allsafe and Crystaloid Acquisitions to allocate the purchase prices
to the respective assets and liabilities based on market values, to
include (i) intangibles resulting from the excess of the purchase prices
over the allocated fair market values of assets and liabilities; (ii) the
elimination of deferred taxes at the division level; (iii) the
anticipated valuation of Allsafe's property, plant and equipment; (iv)
accrued closing and transitional expenses associated with the Allsafe and
Crystaloid Acquisitions; (v) the debt proceeds from the offering required
to fund the purchase prices; (vi) the elimination of Allsafe's and
Crystaloid's predecessors' common stock, paid-in capital and accumulated
earnings in accordance with purchase accounting requirements; (vii) the
write-off of existing deferred financing fees of $4,870 and the
establishment of the new deferred financing fees of $7,500; (viii) the
repayment of existing accrued interest; (ix) the repayment of the
Preferred Stock and accrued dividends; (x) the write-off of the
unamortized debt discount of $478 related to the Prior Notes and the
premium paid at Closing on the repayment of the Prior Notes of $2,210;
(xi) the proceeds from the Offering to effect the closing transactions
other than payment of the cash portion of the purchase price of the
Acquisitions; (xii) the net difference of $2,421 between the accreted
value of the Preferred Stock and it carrying value on the Company's
balance sheet and (xiii) the repurchase of $4,150 of common equity held
by an Institutional Investor.
P-4
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Jackson Products, Inc.--Audited
Independent Auditors' Report............................................ F-2
Consolidated Balance Sheets--December 31, 1997 and 1996................. F-3
Consolidated Statements of Operations--Years Ended December 31, 1997
and 1996 and period from August 17, 1995 (inception) to December 31,
1995................................................................... F-4
Consolidated Statements of Stockholders' Equity (Deficit)--Years Ended
December 31, 1997 and 1996 and period from August 17, 1995 (inception)
to December 31, 1995................................................... F-5
Consolidated Statements of Cash Flows--Years Ended December 31, 1997 and
1996 and period from August 17, 1995 (inception) to December 31, 1995.. F-6
Notes to Consolidated Financial Statements.............................. F-7
Jackson Products, Inc.--Unaudited
Consolidated Balance Sheet--March 31, 1998.............................. F-26
Consolidated Statements of Operations--Three Months Ended March 31, 1998
and 1997............................................................... F-27
Consolidated Statements of Cash Flows--Three Months Ended March 31, 1998
and 1997............................................................... F-28
Notes to Consolidated Financial Statements.............................. F-29
Jackson Holding Company (Predecessor)--Audited
Independent Auditors' Report............................................ F-37
Consolidated Statement of Operations--January 1, 1995 to August 16,
1995................................................................... F-38
Consolidated Statement of Stockholders' Equity--January 1, 1995 through
August 16, 1995....................................................... F-39
Consolidated Statement of Cash Flows--January 1, 1995 through August 16,
1995................................................................... F-40
Notes to Consolidated Financial Statements.............................. F-41
American Allsafe Company and Silencio/Safety Direct, Inc.--Audited
Independent Auditors' Report............................................ F-49
Combined Balance Sheet--April 30, 1997.................................. F-50
Combined Statement of Earnings--Year Ended April 30, 1997............... F-51
Combined Statement of Stockholders' Equity--Year Ended April 30, 1997... F-52
Combined Statement of Cash Flows--Year Ended April 30, 1997............. F-53
Notes to Combined Financial Statements.................................. F-54
American Allsafe Company and Silencio/Safety Direct, Inc.--Unaudited
Combined Balance Sheet--January 31, 1998................................ F-58
Combined Statements of Earnings--Nine Months Ended January 31, 1998 and
1997................................................................... F-59
Combined Statements of Cash Flows--Nine Months Ended January 31, 1998
and 1997............................................................... F-60
Notes to Combined Financial Statements.................................. F-61
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Jackson Products, Inc.:
We have audited the accompanying consolidated balance sheets of Jackson
Products, Inc. and subsidiaries (the Company) as of December 31, 1997 and
1996, and the related consolidated statements of operations, stockholders'
equity (deficit), and cash flows for the years ended December 31, 1997 and
1996 and for the period from August 17, 1995 (inception) through December 31,
1995. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Jackson
Products, Inc. and subsidiaries as of December 31, 1997 and 1996, and the
results of their operations and their cash flows for the years ended December
31, 1997 and 1996 and for the period from August 17, 1995 (inception) through
December 31, 1995, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
St. Louis, Missouri,
March 27, 1998, except for note 14
as to which the date is April 16, 1998.
F-2
<PAGE>
JACKSON PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
-------- --------
(IN THOUSANDS,
EXCEPT SHARE
DATA)
<S> <C> <C>
ASSETS
------
Current assets:
Cash and cash equivalents................................ $ 523 $ --
Accounts receivable, net of allowance for doubtful
accounts of $404 and $467 in 1997 and 1996 respectively. 14,888 13,003
Inventories.............................................. 22,837 19,074
Prepaid expenses......................................... 409 240
-------- --------
Total current assets................................... 38,657 32,317
Property, plant and equipment.............................. 20,818 21,863
Intangibles................................................ 60,050 74,394
Deferred financing costs................................... 5,180 6,441
Other noncurrent assets ................................... 342 --
-------- --------
$125,047 $135,015
======== ========
LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------
Current liabilities:
Current maturities of long-term obligations.............. $ 6,120 $ 6,080
Accounts payable......................................... 11,432 7,783
Other accrued liabilities................................ 5,201 5,218
Accrued interest......................................... 2,102 2,071
Accrued taxes............................................ 534 22
-------- --------
Total current liabilities.............................. 25,389 21,174
-------- --------
Long-term debt............................................. 106,381 110,235
Other non-current liabilities.............................. 3,603 3,465
Series A cumulative, 13.25%, exchangeable preferred stock,
$.01 par value; 2,000 shares authorized, 1,700 shares
issued and outstanding (liquidation value of $23,065 and
$20,287 in 1997 and 1996, respectively) .................. 20,951 17,879
Stockholders' deficit:
Class A common stock, $.01 par value; 100,000 shares
authorized; 40,000 shares issued and outstanding at
December 31, 1997 and 1996.............................. -- --
Class C common stock, $.01 par value; 15,000 shares
authorized; 8,526 and 9,048 shares issued and
outstanding at December 31, 1997 and 1996,
respectively............................................ -- --
Additional paid-in capital............................... 7,102 7,154
Cumulative translation adjustment........................ (106) (22)
Loans due on common stock................................ (343) (375)
Accumulated deficit...................................... (37,930) (24,495)
-------- --------
Total stockholders' deficit............................ (31,277) (17,738)
-------- --------
$125,047 $135,015
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
JACKSON PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997 AND 1996 AND PERIOD FROM
AUGUST 17, 1995 (INCEPTION) TO DECEMBER 31, 1995
<TABLE>
<CAPTION>
YEARS ENDED AUGUST 17,
DECEMBER 31, TO
------------------ DECEMBER 31,
1997 1996 1995
-------- -------- ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Net sales............................. $123,417 $111,788 $37,558
Operating expenses:
Cost of sales....................... 87,466 80,485 30,566
Selling, general and administrative. 15,205 14,440 4,965
Write-down of assets................ 335 1,050 --
Amortization of intangibles......... 16,378 18,849 1,688
-------- -------- -------
Total operating expenses.............. 119,384 114,824 37,219
Operating income (loss)............... 4,033 (3,036) 339
Other:
Interest expense.................... (12,050) (11,306) (4,381)
Amortization of deferred financing
costs.............................. (1,261) (1,076) (340)
Other............................... (401) (599) 14
-------- -------- -------
Loss before income tax provision...... (9,679) (16,017) (4,368)
Income tax expense.................... 684 429 --
-------- -------- -------
Net loss.............................. $(10,363) $(16,446) $(4,368)
======== ======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
JACKSON PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
YEARS ENDED DECEMBER 31, 1997 AND 1996 AND PERIOD
FROM AUGUST 17, 1995 (INCEPTION) TO DECEMBER 31, 1995
<TABLE>
<CAPTION>
CLASS CLASS LOANS
A C ADDITIONAL CUMULATIVE DUE ON
COMMON COMMON PAID-IN TRANSLATION COMMON ACCUMULATED
STOCK STOCK CAPITAL ADJUSTMENT STOCK DEFICIT TOTAL
------ ------ ---------- ----------- ------ ----------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of common
stock.................. $ 40 $ 10 $4,863 $ -- $(427) $ -- $ 4,486
Issuance of warrants.... -- -- 3,230 -- -- -- 3,230
Issuance of preferred
stock.................. -- -- (894) -- -- -- (894)
Accrued dividends--
preferred stock........ -- -- -- -- -- (845) (845)
Accretion of preferred
stock.................. -- -- -- -- -- (106) (106)
Cumulative translation
adjustment............. -- -- -- 14 -- -- 14
Net loss................ -- -- -- -- -- (4,368) (4,368)
---- ---- ------ ----- ----- -------- --------
Balance, December 31,
1995................... 40 10 7,199 14 (427) (5,319) 1,517
Reverse stock split..... (40) (10) 50 -- -- -- --
Repurchase of common
stock.................. -- -- (140) -- 60 -- (80)
Sale of common stock.... -- -- 45 -- (8) -- 37
Accrued dividends--
preferred stock........ -- -- -- -- -- (2,442) (2,442)
Accretion of preferred
stock.................. -- -- -- -- -- (288) (288)
Cumulative translation
adjustment............. -- -- -- (36) -- -- (36)
Net loss................ -- -- -- -- -- (16,446) (16,446)
---- ---- ------ ----- ----- -------- --------
Balance, December 31,
1996................... -- -- 7,154 (22) (375) (24,495) (17,738)
Repurchase of common
stock.................. -- -- (52) -- 32 -- (20)
Accrued dividends--
preferred stock........ -- -- -- -- -- (2,778) (2,778)
Accretion of preferred
stock.................. -- -- -- -- -- (294) (294)
Cumulative translation
adjustment............. -- -- -- (84) -- -- (84)
Net loss................ -- -- -- -- -- (10,363) (10,363)
---- ---- ------ ----- ----- -------- --------
Balance, December 31,
1997................... $-- $-- $7,102 $(106) $(343) $(37,930) $(31,277)
==== ==== ====== ===== ===== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
JACKSON PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997 AND 1996 AND
PERIOD FROM AUGUST 17, 1995 (INCEPTION) TO DECEMBER 31, 1995
<TABLE>
<CAPTION>
YEARS ENDED AUGUST 17,
DECEMBER 31, TO
------------------ DECEMBER 31,
1997 1996 1995
-------- -------- ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss..................................... $(10,363) $(16,446) $ (4,368)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization............... 3,914 4,282 1,453
Write down of assets........................ 335 1,050 --
Net gain on sale of assets.................. (298) -- --
Amortization of deferred financing costs,
intangibles, and debt discount............. 17,706 19,989 2,048
Changes in operating assets and liabilities
net of effects of acquisitions:
Accounts receivable........................ (409) (7) 4,775
Inventories................................ (4,725) 378 4,058
Accounts payable........................... 3,169 (286) (1,267)
Accrued and other liabilities.............. 611 (2,327) (1,297)
Accrued interest........................... 31 159 1,912
Accrued taxes.............................. 459 54 (37)
Other, net................................. (117) (13) 133
-------- -------- --------
Net cash provided by operating activities.... 10,313 6,833 7,410
Cash flows from investing activities:
Acquisition of businesses.................... (2,461) (14,947) (129,000)
Deferral of acquisition price, net of
payments ................................... (1,695) 2,125 --
Capital expenditures......................... (3,246) (1,910) (465)
Proceeds from sale of assets................. 1,512 180 311
-------- -------- --------
Net cash used in investing activities........ (5,890) (14,552) (129,154)
-------- -------- --------
Cash flows from financing activities:
Proceeds from issuance of long-term
obligations................................. -- 13,634 115,153
Repurchase of common stock, net of loan
repayments ................................. (20) (53) --
Equity proceeds ............................. -- -- 22,219
Financing costs ............................. -- (856) (8,200)
Repayment of long-term obligations........... (3,880) (5,006) (7,553)
-------- -------- --------
Net cash (used in) provided by financing
activities.................................. (3,900) 7,719 121,619
-------- -------- --------
Increase (decrease) in cash and cash
equivalents.................................. 523 -- (125)
Cash and cash equivalents, beginning of
period....................................... -- -- 125
-------- -------- --------
Cash and cash equivalents, end of period...... $ 523 $ -- $ --
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
JACKSON PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(1) THE COMPANY
Jackson Acquisition Corp., a Delaware corporation, was formed on July 27,
1995 for the purpose of acquiring (the Acquisition) all of the outstanding
common stock of Jackson Holding Company (Holding). On August 17, 1996, Jackson
Acquisition Corp. purchased all of the outstanding stock of Holding for
$129,000, with Holding the surviving corporation. Prior to the Acquisition,
Holding owned 100% of the outstanding common stock of Jackson Products, Inc.
Immediately following the Acquisition, Jackson Products, Inc. was merged into
Holding with Holding being the surviving corporation and renamed Jackson
Products, Inc. (the Company). The acquisition was accounted for using the
purchase method of accounting. Accordingly, total purchase cost was allocated
to the assets and liabilities of the Company based on their respective fair
values. Intangible assets totaling approximately $80,662 were recorded in
connection with the acquisition and are being amortized over 5-15 years.
The Company is engaged in the manufacture, design, and distribution of
safety equipment used primarily in the cutting and welding, construction, and
general industrial markets. In addition, the Company manufactures electric
welding accessories and precision layout and measuring tools used in the
cutting and welding industry.
The Company owns 100% of the outstanding common stock of Flex-O-Lite, Inc.;
OSD Envizion, Inc. (OSD); and Lansec Holding GmbH (GmbH). Flex-O-Lite, Inc. is
engaged in the manufacture, design, and distribution of highway and industrial
safety products in addition to reflective glass beads used in highway and
industrial applications. OSD is engaged in the manufacture and design of auto-
darkening filter lenses for welding helmets. GmbH is engaged in the assembly
and distribution of safety equipment in Europe.
(2) ACQUISITIONS
On October 29, 1997, GmbH acquired all of the outstanding stock of Lansec
GmbH and Lansec S.A. for $2,461 (the Lansec Acquisition). On October 22, 1996,
the Company acquired all of the outstanding stock of OSD for $14,947 (the OSD
Acquisition). As of December 31, 1996, $2,125 of the purchase price was
payable in 1997 based upon certain performance requirements which were met and
paid during 1997. The OSD Acquisition and the Lansec Acquisition were
accounted for using the purchase method of accounting. Accordingly, total
purchase cost for each of these transactions has been allocated to the assets
and liabilities of the Company based on their respective fair values. The
determination of the final fair values of assets acquired and liabilities
assumed resulted in certain adjustments from initially recorded values at
December 31, 1996 and 1995. The results of operations of the acquired
businesses have been included in the consolidated financial statements since
their respective acquisition dates, except for Lansec, whose results
subsequent to the acquisition were immaterial to 1997. Intangible assets
totaling approximately $14,251 and $2,034 were recorded in connection with the
OSD Acquisition and Lansec Acquisition, respectively.
Had the Lansec Acquisition and the OSD Acquisition occurred at the beginning
of their respective years of acquisition, pro forma net sales would have been
$133,300 and $127,000 for 1997 and 1996, respectively, and the pro forma net
loss would have been $10,400 and $14,400 for 1997 and 1996, respectively.
These amounts represent unaudited data and in management's opinion are not
indicative of actual results had the acquisitions been consummated at the
beginning of the respective fiscal years.
(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries, Flex-O-Lite, Inc., OSD, and GmbH. All
material intercompany balances and transactions have been eliminated in
consolidation.
F-7
<PAGE>
JACKSON PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Use of Estimates
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities to prepare these
consolidated financial statements in conformity with generally accepted
accounting principles. Actual results could differ from those estimates.
Consolidated Statements of Cash Flows
For purposes of the consolidated statements of cash flows, the Company
considers all highly liquid investments purchased with initial maturities of
three months or less to be cash equivalents. Interest paid for the years ended
December 31, 1997 and 1996 and for the period from August 17, 1995 through
December 31, 1995 totaled $11,952, $11,083, and $2,449, respectively. Taxes
paid for the years ended December 31, 1997 and 1996 and for the period from
August 17, 1995 through December 31, 1995 totaled $224, $375, and $37,
respectively.
Revenue and Accounts Receivable
The Company recognizes revenue upon shipment of merchandise to its
customers. The Company's sales are primarily North American, with customers
generally located throughout the United States, Canada, and Europe.
Financial instruments that potentially subject the Company to concentrations
of credit risk consist primarily of trade receivables. The Company performs
ongoing credit evaluations of its customers and generally does not require
collateral. For the years ended December 31, 1997 and 1996 and for the period
from August 17, 1995 through December 31, 1995, the Company had two major
customers, each of whose purchases exceeded 10% of net sales. The percentage
of net sales to these customers totaled 12% and 13% respectively, for the
period ended December 31, 1997; 12% and 12% respectively, for the period ended
December 31, 1996; and 12% and 16% respectively for the period from August 17,
1995 through December 31, 1995. The outstanding accounts receivable balance
related to those customers represented 19% of the accounts receivable balances
at December 31, 1997 and 1996.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined
using the first-in, first-out (FIFO) method. Elements of cost in inventory
include raw materials, direct labor, and manufacturing overhead.
Property, Plant, and Equipment
Property, plant, and equipment acquired through the purchases of businesses
is recorded at fair value. Subsequent additions and improvements to property,
plant, and equipment are capitalized at cost.
Depreciation is calculated using the straight-line method. The average
estimated lives utilized in calculating depreciation are as follows: buildings
and improvements, 7-40 years; and machinery and equipment, 2-18 years.
Leasehold improvements, which are included in buildings and improvements, are
depreciated over the shorter of the term of the respective lease or the life
of the respective improvement.
Intangibles
The excess of cost over the net tangible assets acquired consists of
patents, customer lists, technology-related agreements, and goodwill, and is
amortized on a straight-line basis over periods from 2-15 years. The Company
periodically re-evaluates the carrying value of its intangibles and its other
long-term assets based on the expected undiscounted cash flows over the
remaining life of the related assets.
Deferred Financing Costs
Deferred financing costs, consisting of fees and other expenses associated
with the debt financing, are amortized over the term of the related debt using
the effective interest method.
F-8
<PAGE>
JACKSON PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Related-Party Transactions
In connection with the Acquisition and obtaining the related financing, the
Company entered into a Management Services Agreement (Agreement) with The
Jordan Company (Jordan), an affiliate of the Company. The Agreement provides
that the Company shall pay Jordan an annual fee of the higher of (i) $550 or
(ii) 2.5% of the Company's annual Earnings Before Interest Taxes Depreciation
and Amortization (EBITDA) as defined in the Agreement. For the years ended
December 31, 1997 and 1996 and for the period from August 17, 1995 through
December 31, 1995, the Company expensed $699, $550, and $207, respectively,
related to the Agreement. These amounts are included in other expense.
In connection with the Acquisition, the Company loaned certain employees
$427, of which $343 is outstanding as of December 31, 1997. All of the loans
are due upon the earlier of March 31, 2006, or within 90 days after a borrower
ceases to be an employee of the Company. The loans relate to the purchase of
common stock of the Company, are collateralized by the pledge of common shares
of the Company, may be prepaid in part or in full without notice or penalty,
and are represented by nonrecourse promissory notes which bear interest at a
rate per annum of 7%. The loans have been recorded as a reduction of
stockholders' equity in the consolidated financial statements.
Financial Instruments
The fair market value of those long-term obligations which carry variable
rates approximates carrying value since the interest rates are periodically
adjusted for changes in market interest rates. The fair market value of the
12.25% senior subordinated notes approximates carrying value as the rates
approximate those which could be obtained for similar issues with similar
maturities given the Company's overall financial condition.
The fair market values of the Company's other financial instruments included
in the consolidated balance sheets approximate the carrying values of the
financial instruments.
Income Taxes
The Company accounts for income taxes in accordance with the provisions of
Statement of Financial Accounting Standards (SFAS) No. 109, Accounting for
Income Taxes. The provision for income taxes includes federal and state income
taxes currently payable and those deferred because of temporary differences
between the financial statements and tax basis of assets and liabilities.
Comprehensive Income
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 130, "Comprehensive Income." SFAS No. 130
requires all items that are required to be recognized under accounting
standards as components of comprehensive income be reported in a financial
statement that is displayed with the same prominence as other financial
statements. The provisions of the Statement however, need not be applied to
immaterial items. The Company's comprehensive loss is impacted only by foreign
currency translation adjustments, which are immaterial in nature.
(4) INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Raw materials............................................ $ 9,780 $ 8,051
Work-in-process.......................................... 4,455 3,542
Finished goods........................................... 8,602 7,481
------- -------
$22,837 $19,074
======= =======
</TABLE>
F-9
<PAGE>
JACKSON PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(5) PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment consists of the following:
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Land.................................................... $ 844 $ 844
Buildings and improvements.............................. 9,763 8,698
Machinery and equipment................................. 18,513 17,736
------- -------
29,120 27,278
Less accumulated depreciation........................... 8,302 5,415
------- -------
$20,818 $21,863
======= =======
</TABLE>
Depreciation expense totaled $3,657, $4,283, and $1,453 for the years ended
December 31, 1997 and 1996 and for the period from August 17, 1995 through
December 31, 1995, respectively.
(6) INTANGIBLES
Intangibles, net of accumulated amortization, consist of the following:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Goodwill............................................. $ 67,488 $ 65,454
Customer lists....................................... 15,362 15,362
Patents, technology agreement, and other............. 14,114 14,114
-------- --------
96,964 94,930
Less accumulated amortization........................ 36,914 20,536
-------- --------
$ 60,050 $ 74,394
======== ========
(7) DEFERRED FINANCING COSTS
In connection with the Acquisition and the OSD Acquisition, the Company
recorded fees and expenses totaling $9,056. Costs of $7,856 related to debt
financing are included in deferred financing costs and are being amortized over
the term of the related debt instruments using the effective interest method.
Costs of $1,200 related to the issuance of the Company's common stock have been
recorded as a reduction in additional paid-in capital in the consolidated
financial statements.
(8) LONG-TERM OBLIGATIONS
Long-term obligations consist of the following:
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Term loans........................................... $ 65,095 $ 69,975
Revolver............................................. 13,900 12,901
12.25% senior subordinated notes..................... 34,000 34,000
Unamortized debt discount............................ (494) (561)
-------- --------
112,501 116,315
Less current maturities.............................. 6,120 6,080
-------- --------
$106,381 $110,235
======== ========
</TABLE>
F-10
<PAGE>
JACKSON PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
At December 31, 1997, the schedule of principal payments is as follows:
<TABLE>
<S> <C>
1998........................................................... $ 6,120
1999........................................................... 6,150
2000........................................................... 7,000
2001........................................................... 11,630
2002........................................................... 15,985
Thereafter..................................................... 66,110
Unamortized debt discount...................................... (494)
--------
$112,501
========
</TABLE>
Credit Agreement
In connection with the Acquisition, the Company entered into a Credit
Agreement dated as of August 16, 1995. In connection with the OSD Acquisition,
the Company entered into a Second Amendment to the Credit Agreement dated as
of October 21, 1996 (collectively the "Credit Agreement"). Borrowings under
the Credit Agreement are secured by first priority mortgages and liens on
substantially all of the assets of the Company.
The Credit Agreement consists of a $25,000 Term A loan, a $23,000 Term B
loan, a $16,000 Term C loan, a $10,000 Term D loan (collectively, the "Term
Loans"), and a $28,000 revolving credit facility (Revolver). The Revolver
provides that up to $5,000 of such facility may be used for the issuance of
letters of credit and lender guaranties. There are letters of credit and
lender guaranties totaling $2,285 outstanding as of December 31, 1997. The
Credit Agreement also contains several financial covenants, which require the
Company to maintain certain financial ratios and restrict the Company's
ability to incur indebtedness, make capital expenditures, and pay dividends.
The Company was in compliance with these covenants at December 31, 1997. The
commitment fee on the unused portion of the Revolver is 1/2% per annum,
payable quarterly.
Mandatory principal payments on the Term Loans are due in quarterly
installments beginning on December 1, 1996, with the final installment due on
September 1, 2003. The Revolver is due on September 1, 2003. The Credit
Agreement requires annual prepayments on the Term Loans on a date 130 days
following the end of each fiscal year, beginning with the year ended December
31, 1997, based on Excess Cash Flow (as defined in the Credit Agreement).
Through March 31, 1997, borrowings under the Credit Agreement bear interest,
at the option of the Company, at a rate per annum equal to (i) the Base Rate
(as defined in the Credit Agreement) plus 1.25% for the Revolver and Term A
loan; the Base Rate plus 1.75% for the Term B loan; and Base Rate plus 2.25%
for the Term C and Term D loans; or (ii) the LIBOR Rate (as defined in the
Credit Agreement) plus 2.75% for the Revolver and Term A loan; the LIBOR Rate
plus 3.25% for the Term B loan; and the LIBOR Rate plus 3.75% for the Term C
and Term D loan. For each fiscal quarter following March 31, 1997, the factor
added to either the Base Rate or the LIBOR Rate will be adjusted based on the
ratio of the Company's Total Debt to Operating Cash Flow (as defined in the
Credit Agreement). The average interest rate on outstanding borrowings was
9.4% and 9.1% at December 31, 1997 and 1996, respectively.
Senior Subordinated Notes
The 12.25% Senior Subordinated Notes due August 15, 2004 (the "Notes"), were
issued in connection with the Acquisition pursuant to an agreement dated
August 16, 1995, among Jackson Acquisition Corp. and the purchasers named
within the agreement. The Notes represent unsecured general obligations of the
Company and are subordinated to all Senior Indebtedness (as defined in the
Credit Agreement) of the Company.
F-11
<PAGE>
JACKSON PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Notes mature on August 15, 2004. Commencing February 15, 1996, interest
on the Notes is payable semiannually on February 15 and August 15. The Notes
bear interest at the rate of 12.25% per annum. The Notes may not be redeemed
prior to August 15, 2000, except in the event of a public offering of the
Company or in the event of a Change of Control (as defined in the Credit
Agreement). The Notes are callable on or after August 15, 2000, in whole or
from time to time in part, at the option of the Company, at a call price of
105% commencing August 15, 2000; 102.5% commencing August 15, 2001; and 100%
commencing August 15, 2002.
The Notes require the Company to maintain certain financial ratios and
restrict the incurrence of additional indebtedness by the Company; the payment
of dividends and other distributions with respect to the Company's capital
stock; the creation of liens on the assets of the Company to secure certain
subordinated debt; and certain mergers, sales of assets, and transactions with
affiliates. The Company was in compliance with these covenants at December 31,
1997.
The net proceeds of the issuance of the Notes totaled $33,353. The
difference between the face value and the net proceeds from issue is being
amortized over nine years.
Interest Rate Cap
The Company utilizes an interest rate cap agreement to reduce the impact of
increases in interest rates on its floating rate debt. The interest rate cap
agreement was purchased on December 1, 1997 and expires December 1, 1999, and
entitles the Company to receive from a counterparty an amount, if any, by
which the selected market interest rate exceeds the strike rate stated in the
agreement. The interest rate cap has a notional amount of $50,000 and a strike
rate of 7%. Any amounts received related to the agreement are recorded as
adjustments to interest expense.
(9) STOCKHOLDERS' DEFICIT AND PREFERRED STOCK
On July 1, 1996, the Company amended its Certificate of Incorporation to
reflect the 100-to-1 reverse stock split of all authorized and issued common
and preferred stock. Following this stock split, the authorized capital stock
of the Company consists of 100,000 shares of Class A common stock, 45,000
shares of Class B common stock, 15,000 shares of Class C common stock
(collectively the "Common Stock"), and 2,000 shares of Series A Cumulative
13.25% Exchangeable Preferred Stock (the "Preferred Stock").
In connection with the financing for the Acquisition, the Company issued, on
a post-stock split basis, 40,000 shares of Class A common stock, 10,000 shares
of Class C common stock, and 1,700 shares of Preferred Stock.
Common Stock
Dividends are payable equally on shares of all classes of common stock in
amounts as and when declared by the Company's Board of Directors, subject to
legally available funds and restrictions contained in certain agreements.
Holders of Class A and Class C common stock are entitled to one vote per share
on all matters submitted to a vote of stockholders.
Upon the sale of shares of Class B common stock and pursuant to a public
offering, each share of Class B common stock will be converted into one share
of Class A common stock. In addition, each holder of Class B common stock may,
at their option, convert each share of Class B common stock into Class A
common stock at any time, subject to applicable banking and other regulations.
Upon the sale of Common Stock pursuant to a public offering, each share of
Class C common stock will be converted into one share of Class A common stock.
F-12
<PAGE>
JACKSON PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Warrants
In connection with the Acquisition, the Company issued warrants to purchase
34,482.76 shares of common stock at an exercise price of $100 per share. These
warrants may be exercised at any time prior to their expiration date of August
15, 2005. The proceeds from the sale of these warrants ($100 per warrant) have
been recorded as additional paid-in capital in the consolidated financial
statements. No warrants have been exercised since their issuance.
Stock Option Plan
In connection with the Acquisition, the Company adopted a nonqualified stock
option plan (the Option Plan) for its officers and key employees. Under the
Option Plan, eligible participants may receive incentive and nonqualified
options to purchase shares of the Company's Class C common stock. Options are
exercisable at such time an option is earned and vested. Generally, options
become exercisable at a rate of 20% for each full year of employment from the
date of grant and may be exercised only if the holder is an employee of the
Company. No options have been exercised since the adoption of the Option Plan.
All options currently outstanding have an exercise price of $100 per share.
All options expire on the earlier of (i) 10 years from date of grant; (ii)
90 days from the employee's termination date; or (iii) one year from the
employee's termination due to death or disability.
The following is a summary of options granted and outstanding:
<TABLE>
<CAPTION>
PERIOD FROM AUGUST 17
YEARS ENDED DECEMBER 31, TO DECEMBER 31,
1997 1996 1995
----------------- ----------------- -----------------------
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
-------- -------- -------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Beginning of Period..... 1,704.14 $ 100.00 1,724.14 $100.00 -- $ --
Granted................. 1,503.90 100.00 10.00 100.00 1,724.14 100.00
Exercised............... -- -- -- -- -- --
Cancelled............... 10.00 100.00 30.00 100.00 -- 100.00
-------- -------- -------- ------- ----------- ----------
End of period........... 3,198.04 $ 100.00 1,704.14 $100.00 1,724.14 $ 100.00
-------- -------- -------- ------- ----------- ----------
Exercisable at the end
of period.............. 849.18 $ 100.00 424.59 $100.00 -- $ 100.00
======== ======== ======== ======= =========== ==========
Weighted average fair
value of options
granted................ $ 63.70 $ -- $ 100.00
-------- ------- ----------
</TABLE>
The weighted average fair value of options granted is estimated on the date
of grant using the Black-Scholes options pricing model with the following
assumptions for 1997 and 1995: risk free interest rate of 6.5%; expected
dividend yield of 0%; expected life of ten years and expected volatility of
0%. Use of the Black-Scholes options pricing model for 1996 results in a non-
meaningful fair value.
The weighted average contractual life of the options outstanding at December
31, 1997 was 8.5 years.
The Company has elected to continue to measure compensation cost using the
intrinsic value method as prescribed by Accounting Principles Board (APB)
Opinion No. 25 and has recorded no compensation expense relative to the
issuance of its stock options. Had the Company applied the principles of
Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for
Stock-Based Compensation, compensation expense would have been $44, $34 and
$11 for 1997, 1996 and the period from August 17 to December 31, 1995,
respectively.
F-13
<PAGE>
JACKSON PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Preferred Stock
The Preferred Stock has a Liquidation Preference (as defined) of $10,000 per
share, plus accretion due to dividends at the rate of 13.25%, compounded
semiannually on February 15 and August 15, commencing February 15, 1996. The
Board of Directors may declare a dividend at any time, commencing February 15,
1996, provided that the Liquidation Preference, following the declaration of
any dividend, equals $10,000 per share or greater. The Preferred Stock is
exchangeable at any time, at the option of the Company, for 13.25% Senior
Subordinated Notes, due August 15, 2005. The 13.25% Senior Subordinated Notes
would contain the same rights, restrictions, and other terms as the Notes.
The Company may redeem the Preferred Stock, in whole or in part, commencing
August 15, 2000, at $10,600 per share plus accrued dividends; commencing
August 15, 2001, at $10,300 per share plus accrued dividends; and commencing
August 15, 2002, at $10,000 per share plus accrued dividends. Prior to August
15, 2000, the Company may redeem up to 680 shares of Preferred Stock with
proceeds of a public offering, at $11,200 per share plus accrued dividends. In
the event of a Change of Control (as defined), each share of Preferred Stock
may be redeemed by the Company, at the option of the holder, at $10,100 per
share, plus accrued dividends. The Company shall redeem all outstanding shares
of Preferred Stock on August 15, 2005, at $10,000 per share plus accrued
dividends. Accrued dividends on the Company's preferred stock totaled $6,065
and $3,287 at December 31, 1997 and 1996, respectively.
The net proceeds of the issuance of Preferred Stock in connection with the
Acquisition totaled $14,198. The difference between the liquidation value at
issuance and the net proceeds from issue is being accreted over 10 years.
The holders of Preferred Stock have no voting rights with the exception of
certain matters such as amendment of the Company's Certificate of
Incorporation or By-Laws, authorization of additional capital stock senior to
the Preferred Stock, or the sale or other disposition of substantially all of
the Company's assets.
(10) INCOME TAXES
Current income tax expense for the year ended December 31, 1997 consisted of
$40, $310, and $334 for federal, state and local, and foreign income taxes,
respectively. Current income tax expense for the year ended December 31, 1996
consisted of $-0-, $215, and $214 for federal, state and local, and foreign
taxes, respectively. There was no current income tax expense for the period
from August 17, 1995 through December 31, 1995. There was no deferred income
tax expense during 1997, 1996 or for the period from August 17, 1995 through
December 31, 1995.
Reconciliation between the statutory income tax provision and effective tax
provision is summarized below for the years ended December 31, 1997 and 1996
and for the period from August 17, 1995 through December 31, 1995:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Statutory rate (34%)........................... $(3,291) $(5,446) $(1,485)
Amortization of goodwill and other............. 4,778 5,435 1,425
Change in valuation allowance.................. (803) 440 60
------- ------- -------
Income tax provision........................... $ 684 $ 429 $ --
======= ======= =======
</TABLE>
F-14
<PAGE>
JACKSON PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The tax effects of significant temporary differences, representing deferred
tax assets and the deferred tax liability, as of December 31, 1997 and 1996
are as follows:
<TABLE>
<CAPTION>
1997 1996
-------- -------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards...................... $ 7,912 $ 8,725
Receivables........................................... 125 157
Accrued liabilities................................... 680 665
Postretirement benefits............................... 739 738
Inventory............................................. 373 363
Other................................................. 392 476
-------- -------
10,221 11,124
Valuation allowance..................................... (10,076) (10,879)
-------- -------
Net deferred tax assets................................. 145 245
Deferred tax liability property, plant, and equipment... (145) (245)
-------- -------
Net deferred taxes...................................... $ -- $ --
======== =======
</TABLE>
The Company establishes valuation allowances in accordance with SFAS No. 109
and continually reviews the adequacy of the allowance, recognizing benefits
only as their reassessment indicates that it is more likely than not that
benefits will be realized. The valuation allowance of net deferred taxes
decreased by $803 in 1997 and increased by $1,134 in 1996. The reduction in
1997 was a result of changes in temporary differences and a decrease in the
net operating loss carryforwards due to taxable income. The increase during
1996 was the result of an increase in net operating loss carryforwards and
changes in temporary differences. At December 31, 1997 and 1996, the Company
concluded that it did not meet the requirement that it was more likely than
not that the benefits would be realized. At December 31, 1997, the Company had
net operating loss carryforwards (NOL) of approximately $22,602 for U.S.
federal income tax purposes which begin to expire in 2009 to the extent not
previously utilized. Approximately $13,564 of the NOL is restricted in
availability subject to an annual limitation of approximately $1,236 under
Section 382 of the Internal Revenue Code. The remaining balance of
approximately $9,038 is available without restriction.
(11) RETIREMENT BENEFIT PLANS
Retirement benefits are provided to substantially all employees under a
discretionary profit sharing and contributory retirement plan under Section
401(k) of the Internal Revenue Code.
The Company provides postretirement health care and other benefits to
certain qualifying retirees. The Company does not fund retiree health care
benefits in advance and has the right to modify these benefits in the future.
Net periodic postretirement benefit cost (NPPBC) for the years ended December
31, 1997 and 1996 and for the period from August 17, 1995 through December 31,
1995 includes the following components:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Service cost.............................................. $ 78 $ 73 $ 79
Interest cost............................................. 58 49 52
Other..................................................... (57) (61) 3
---- ---- ----
NPPBC..................................................... $ 79 $ 61 $134
==== ==== ====
</TABLE>
F-15
<PAGE>
JACKSON PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Plan's status as of December 31 is as follows:
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Actuarial present value of benefit obligation:
Fully eligible active participants........................ $ 98 $ 40
Other active participants................................. 861 693
Retirees.................................................. 40 42
Unrecognized net gain..................................... 1,187 1,332
Unrecognized prior service cost........................... 23 24
------ ------
Accumulated postretirement benefit obligation (APBO)........ $2,209 $2,131
====== ======
</TABLE>
The APBO was determined by application of the terms of the Plan, together
with relevant actuarial assumptions for active employees. Health care cost
trends are projected at annual rates ranging from 7.5% in 1998 down to 5.5% in
2019 and thereafter. The effect of a 1% annual increase in these assumed rates
would increase the APBO at December 31, 1997 by approximately $267 and the
service and interest cost components of the NPPBC for the years ended December
31, 1997 and 1996 by approximately $42. The assumed discount rate used in
determining the APBO was 7.5%. The APBO is included in other noncurrent
liabilities on the consolidated balance sheets.
(12) COMMITMENTS AND CONTINGENCIES
The Company is involved in certain legal actions from time to time related
to the normal conduct of its business. Management believes that liabilities,
if any, resulting from litigation will not materially affect the consolidated
financial position or results of operations of the Company.
Future minimum lease payments under all operating leases with initial or
remaining noncancelable lease terms in excess of one year at December 31, 1997
are as follows:
<TABLE>
<S> <C>
1998................................................................ $966
1999................................................................ 919
2000................................................................ 448
2001................................................................ 416
2002 and thereafter................................................. 250
</TABLE>
Rent expense for the years ended December 31, 1997 and 1996 and for the
period from August 17, 1995 through December 31, 1995 totaled $1,462, $1,300,
and $534, respectively.
(13) SALE OF ASSETS HELD FOR DISPOSAL
During 1996, the Company decided to divest its arrowboard product line in
LaMirada, California. The Company recorded a $1,050 charge to operations to
reduce the carrying value of inventory and property, plant, and equipment to
their estimated fair values. During July 1997, the Company completed the sale
of this product line and recorded an additional loss on sale of assets of
$335.
(14) SUBSEQUENT EVENTS
On April 16, 1998, the Company offered $115 million aggregate principal
amount of Senior Subordinated Notes (the "Notes") due April 15, 2005 (the
"Offering"). The Notes will bear interest at the rate of 9 1/2% per annum,
payable semi-annually in arrears on April 15 and October 15 of each year,
commencing October 15,
F-16
<PAGE>
JACKSON PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
1998. The payment of principal, premium, interest and liquidated damages on
the Notes will be unconditionally guaranteed, jointly and severally, on a
senior subordinated basis by American Allsafe Company, a Delaware corporation,
Crystaloid Technologies, Inc., a Delaware corporation, OSD Envizion, Inc., a
Delaware corporation, Flex-O-Lite, Inc., a Delaware corporation and
Silencio/Safety Direct, Inc., a Nevada Corporation, as guarantors
(collectively, the "Guarantors"). Simultaneously with the Offering, the
Company entered into a credit agreement (the "New Credit Facility") with
BankBoston, N.A. and Mercantile Bank National Association, which will provide
for a line of credit in the aggregate amount of $125.0 million, consisting of
an acquisition line facility in the principal amount of $95.0 million and a
revolving credit facility in the principal amount of $30.0 million.
Pursuant to certain stock purchase agreements, in March 1998 the Company,
through its subsidiaries, Jackson Acquisition, Inc. and Crystaloid
Technologies, Inc., agreed to acquire i) all of the outstanding capital stock
of American Allsafe Company and Silencio/Safety Direct, Inc. for $29.5 million
(the "Allsafe Acquisition") and ii) all of the outstanding capital stock of
Crystaloid Electronics, Inc. for $6.5 million (the "Crystaloid Acquisition"),
$0.5 million of which is payable in 18 months subject to certain conditions.
These acquisitions closed on April 21, 1998 and April 22, 1998 respectively.
Financial information regarding the Guarantors as of December, 1997 and 1996
and for the years ended December 31, 1997 and 1996 and for the period from
August 17, 1995 (inception) through December 31, 1995 is presented below for
purposes of complying with the reporting requirements of the Guarantor
Subsidiaries. The financial information regarding the Guarantors is being
presented through condensed consolidating financial statements since the
guarantees are full and unconditional and are joint and several. Guarantor
financial statements have not been presented because management does not
believe that such financial statements are material to investors. Crystaloid
Technologies, Inc. was incorporated in April 1998. OSD Envizion, Inc. was
incorporated in October 1996. Flex-O-Lite, Inc. was acquired in 1994 by the
Company's predecessor. Disclosures concerning the operations of Lansec, the
only non-Guarantor Subsidiary, prior to December 31, 1997 have not been
presented because its operations are not material.
(Note 14 continued on next page)
F-17
<PAGE>
JACKSON PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(14) SUBSEQUENT EVENTS (CONT.)
CONDENSED CONSOLIDATING BALANCE SHEETS
DECEMBER 31, 1997
<TABLE>
<CAPTION>
NON-
PARENT GUARANTOR GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED
------- ------------ ---------- ------------ ------------
ASSETS
------
<S> <C> <C> <C> <C> <C>
Current Assets:
Cash and cash
equivalents........... $ -- $ -- $ 523 $ -- $ 523
Accounts receivable,
net................... 7,565 8,426 1,476 (2,579) 14,888
Inventories............ 8,064 14,322 476 (25) 22,837
Prepaid expenses....... 256 104 49 -- 409
------- ------- ------- -------- --------
Total current assets. 15,885 22,852 2,524 (2,604) 38,657
Property, plant and
equipment............. 11,625 9,035 158 -- 20,818
Intangibles............ 16,836 41,179 2,035 -- 60,050
Deferred financing
costs................. 5,180 -- -- -- 5,180
Investment in
subsidiaries.......... 34,758 -- -- (34,758) --
Other noncurrent
assets................ -- 342 -- -- 342
------- ------- ------- -------- --------
$84,284 $73,408 $ 4,717 $(37,362) $125,047
======= ======= ======= ======== ========
<CAPTION>
LIABILITIES AND
STOCKHOLDERS' EQUITY
(DEFICIT)
--------------------
<S> <C> <C> <C> <C> <C>
Current liabilities:
Current maturities of
long-term debt........ $ 6,120 $ -- $ 2,579 $ (2,579) 6,120
Accounts payable....... 3,743 7,493 196 -- 11,432
Accrued and other
liabilities........... 2,949 855 1,397 -- 5,201
Accrued interest....... 2,102 -- -- -- 2,102
Accrued taxes.......... 482 -- 52 -- 534
------- ------- ------- -------- --------
Total current
liabilities......... 15,396 8,348 4,224 (2,579) 25,389
Long-term debt, less
current maturities..... 106,381 -- -- -- 106,381
Other noncurrent
liabilities............ 3,368 -- 235 -- 3,603
Due to parent........... (43,734) 43,734 -- -- --
Preferred stock......... 20,951 -- -- -- 20,951
Stockholders' deficit
Common stock........... -- 1 29 (30) --
Additional paid-in
capital............... 7,102 34,499 229 (34,728) 7,102
Cumulative translation
adjustment............ -- (106) -- -- (106)
Loans due on common
stock................. (343) -- -- -- (343)
Accumulated deficit.... (24,837) (13,068) -- (25) (37,930)
------- ------- ------- -------- --------
Total stockholders'
equity (deficit).... (18,078) 21,326 258 (34,783) (31,277)
------- ------- ------- -------- --------
$84,284 $73,408 $ 4,717 $(37,362) $125,047
======= ======= ======= ======== ========
</TABLE>
F-18
<PAGE>
JACKSON PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(14) SUBSEQUENT EVENTS (CONT.)
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
PARENT GUARANTOR
COMPANY SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales..................... $ 47,759 $83,033 $(7,375) $123,417
Operating expenses:
Cost of sales............... 32,257 62,594 (7,385) 87,466
Selling, general and
administrative............. 8,876 6,329 -- 15,205
Write-down of assets -- 335 -- 335
Amortization of intangibles. 13,185 3,193 -- 16,378
-------- ------- ------- --------
54,318 72,451 (7,385) 119,384
Operating income (loss) ...... (6,559) 10,582 10 4,033
Other:
Interest expense............ (12,050) -- -- (12,050)
Amortization of deferred
financing costs............ (1,261) -- -- (1,261)
Other....................... 6,996 (7,397) -- (401)
-------- ------- ------- --------
Income (loss) before income
tax provision................ (12,874) 3,185 10 (9,679)
Income tax expense............ 540 144 -- 684
-------- ------- ------- --------
Net income (loss)............. $(13,414) $ 3,041 $ 10 $(10,363)
======== ======= ======= ========
</TABLE>
F-19
<PAGE>
JACKSON PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(14) SUBSEQUENT EVENTS (CONT.)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOW
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
PARENT GUARANTOR
COMPANY SUBSIDIARIES CONSOLIDATED
------- ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net cash (used in) provided by operating
activities................................. $ 1,328 8,985 10,313
------- ------ ------
Cash flows from investing activities:
Capital expenditures........................ (2,168) (1,078) (3,246)
Acquisition of business..................... (2,461) -- (2,461)
Deferral of acquisition price, net of
payments................................... (1,695) -- (1,695)
Proceeds from sale of assets ............... 708 804 1,512
------- ------ ------
Net cash used in investing activities...... (5,616) (274) (5,890)
------- ------ ------
Cash flows from financing activities:
Repayment of long-term obligations ......... (3,880) -- (3,880)
Repayment of common stock, net of loan
payments .................................. (20) -- (20)
------- ------ ------
Net cash used in financing activities...... (3,900) -- (3,900)
------- ------ ------
Net increase (decrease) in cash and cash (8,188) 8,711 523
equivalents................................ ======= ======
Cash and cash equivalents, beginning of period................... --
------
Cash and cash equivalents, end of period........................ $ 523
======
</TABLE>
F-20
<PAGE>
JACKSON PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(14) SUBSEQUENT EVENTS (CONT.)
CONDENSED CONSOLIDATING BALANCE SHEETS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
PARENT GUARANTOR
COMPANY SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------- ------------ ------------ ------------
ASSETS
------
<S> <C> <C> <C> <C>
Current Assets:
Cash and cash equivalents..... $ -- $ -- $ -- $ --
Accounts receivable, net...... 4,321 8,682 -- 13,003
Inventories................... 6,911 12,199 (36) 19,074
Prepaid expenses.............. 192 48 -- 240
------- ------- -------- --------
Total current assets........ 11,424 20,929 (36) 32,317
Property, plant and
equipment.................... 11,014 10,849 -- 21,863
Intangibles................... 22,522 51,872 -- 74,394
Deferred financing costs...... 6,441 -- -- 6,441
Investment in subsidiaries.... 34,500 -- (34,500) --
------- ------- -------- --------
$85,901 $83,650 $(34,536) $135,015
======= ======= ======== ========
<CAPTION>
LIABILITIES AND STOCKHOLDERS'
DEFICIT
-----------------------------
<S> <C> <C> <C> <C>
Current liabilities:
Current maturities of long-
term debt.................... $ 6,080 $ -- $ -- $ 6,080
Accounts payable.............. 2,771 5,012 -- 7,783
Accrued and other
liabilities.................. 4,427 791 -- 5,218
Accrued interest.............. 2,071 -- -- 2,071
Accrued taxes................. 22 -- -- 22
------- ------- -------- --------
Total current liabilities... 15,371 5,803 -- 21,174
Long-term debt, less current
maturities.................... 110,235 -- -- 110,235
Other noncurrent liabilities... 3,465 -- -- 3,465
Due to parent.................. (59,477) 59,477 -- --
Preferred stock................ 17,879 -- -- 17,879
Stockholders' deficit
Common stock.................. -- 1 (1) --
Additional paid-in capital.... 7,154 34,499 (34,499) 7,154
Cumulative translation
adjustment................... -- (22) -- (22)
Loans due on common stock..... (375) -- -- (375)
Accumulated deficit........... (8,351) (16,108) (36) (24,495)
------- ------- -------- --------
Total stockholders' deficit. (1,572) 18,370 (34,536) (17,738)
------- ------- -------- --------
$85,901 $83,650 $(34,536) $135,015
======= ======= ======== ========
</TABLE>
F-21
<PAGE>
JACKSON PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(14) SUBSEQUENT EVENTS (CONT.)
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
PARENT GUARANTOR
COMPANY SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales..................... $ 43,236 $72,509 $(3,957) $111,788
Operating expenses:
Cost of sales............... 29,036 55,370 (3,921) 80,485
Selling, general and
administrative............. 7,807 6,633 -- 14,440
Write-down of assets........ 1,050 -- -- 1,050
Amortization of intangibles. 16,196 2,653 -- 18,849
-------- ------- ------- --------
54,089 64,656 (3,921) 114,824
Operating income (loss)....... (10,853) 7,853 (36) (3,036)
Other:
Interest expense............ (11,306) -- -- (11,306)
Amortization of deferred
financing costs............ (1,076) -- -- (1,076)
Other....................... 8,112 (9,459) 748 (599)
-------- ------- ------- --------
Income (loss) before income
tax provision................ (15,123) (1,606) 712 (16,017)
Income tax expense............ 215 214 -- 429
-------- ------- ------- --------
Net income (loss)............. $(15,338) $(1,820) $ 712 $(16,446)
======== ======= ======= ========
</TABLE>
F-22
<PAGE>
JACKSON PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(14) SUBSEQUENT EVENTS (CONT.)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOW
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
PARENT GUARANTOR
COMPANY SUBSIDIARY ELIMINATIONS CONSOLIDATED
-------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Cash flows from operating
activities:
Net cash provided by operating
activities:.................... $ 3,870 2,215 748 6,833
-------- ----- --- -------
Cash flows from investing
activities:
Capital expenditures............ (1,210) (700) -- (1,910)
Acquisition of business......... (14,947) -- -- (14,947)
Deferral of acquisition price,
net of payments................ 2,125 -- -- 2,125
Proceeds from sale of assets.... 180 -- -- 180
-------- ----- --- -------
Net cash used in investing
activities.................... (13,852) (700) -- (14,552)
-------- ----- --- -------
Cash flows from financing
activities:
Proceeds from borrowings........ 13,634 -- -- 13,634
Repurchase of common stock, net
of loan payments............... (53) -- -- (53)
Financing costs................. (856) -- -- (856)
Repayment of long term
obligations.................... (5,006) -- -- (5,006)
-------- ----- --- -------
Net cash provided by financing
activities.................... 7,719 -- -- 7,719
-------- ----- --- -------
Net increase (decrease) in cash (2,263) 1,515 748 --
and cash equivalents........... ======== ===== ===
Cash and cash equivalents, beginning of period................... --
-------
Cash and cash equivalents, end of period....................... $ --
=======
</TABLE>
F-23
<PAGE>
JACKSON PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(14) SUBSEQUENT EVENTS (CONT.)
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
FROM AUGUST 17, 1995 (INCEPTION) TO DECEMBER 31, 1995
<TABLE>
<CAPTION>
PARENT GUARANTOR
COMPANY SUBSIDIARIES CONSOLIDATED
------- ------------ ------------
<S> <C> <C> <C>
Net sales.................................... $15,766 $ 21,792 $37,558
Operating expenses:
Cost of sales.............................. 11,294 19,272 30,566
Selling, general and administrative........ 2,950 2,015 4,965
Amortization of intangibles................ 1,268 420 1,688
------- -------- -------
15,512 21,707 37,219
Operating income ............................ 254 85 339
Other:
Interest expense........................... (4,381) -- (4,381)
Amortization of deferred financing costs... (340) -- (340)
Other...................................... 10,640 (10,626) 14
------- -------- -------
Income (loss) before income tax provision.... 6,173 (10,541) (4,368)
Income tax expense........................... -- -- --
------- -------- -------
Net income (loss)............................ $ 6,173 $(10,541) $(4,368)
======= ======== =======
</TABLE>
F-24
<PAGE>
JACKSON PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(14) SUBSEQUENT EVENTS (CONT.)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOW
FROM AUGUST 17, 1995 (INCEPTION) TO DECEMBER 31, 1995
<TABLE>
<CAPTION>
PARENT GUARANTOR
COMPANY SUBSIDIARY CONSOLIDATED
-------- ---------- ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net cash (used in) provided by operating
activities.................................. $10,098 (2,688) 7,410
-------- ------ --------
Cash flows from investing activities:
Capital expenditures......................... (408) (57) (465)
Acquisition of business...................... (129,000) -- (129,000)
Proceeds from sale of assets ................ 311 -- 311
-------- ------ --------
Net cash used in investing activities....... (129,097) (57) (129,154)
-------- ------ --------
Cash flows from financing activities:
Proceeds from borrowings..................... 115,153 -- 115,153
Equity proceeds ............................. 22,219 -- 22,219
Financing costs.............................. (8,200) -- (8,200)
Repayment of long-term obligations........... (7,553) -- (7,553)
-------- ------ --------
Net cash provided by financing activities... 121,619 -- 121,619
-------- ------ --------
Net increase (decrease) in cash and cash 2,620 (2,745) (125)
equivalents................................. ======== ====== ========
Cash and cash equivalents, beginning of period................... 125
--------
Cash and cash equivalents, end of period........................ $ --
========
</TABLE>
F-25
<PAGE>
JACKSON PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
MARCH 31, 1998
<TABLE>
<CAPTION>
1998
--------
<S> <C>
ASSETS
------
Current assets:
Cash and cash equivalents.......................................... $ 252
Accounts receivable, net of allowance for doubtful accounts of
$404.............................................................. 18,804
Inventories........................................................ 24,785
Prepaid expenses................................................... 567
--------
Total current assets............................................. 44,408
Property, plant and equipment........................................ 20,260
Intangibles.......................................................... 58,837
Deferred financing costs............................................. 4,870
Other noncurrent assets ............................................. 352
--------
$128,727
========
LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------
Current liabilities:
Current maturities of long-term obligations........................ $ 6,118
Accounts payable................................................... 12,845
Other accrued liabilities.......................................... 4,735
Accrued interest................................................... 1,086
Accrued taxes...................................................... 520
--------
Total current liabilities........................................ 25,304
--------
Long-term debt....................................................... 111,723
Other non-current liabilities........................................ 3,389
Series A cumulative, 13.25%, exchangeable preferred stock, $.01 par
value; 2,000 shares authorized, 1,700 shares issued and outstanding
(liquidation value of $23,810)...................................... 21,389
Stockholders' deficit:
Class A common stock, $.01 par value; 100,000 shares authorized;
40,000 shares issued and outstanding.............................. --
Class C common stock, $.01 par value; 15,000 shares authorized;
8,526 shares issued and outstanding .............................. --
Additional paid-in capital......................................... 7,102
Cumulative translation adjustment.................................. (24)
Loans due on common stock.......................................... (343)
Accumulated deficit................................................ (39,813)
--------
Total stockholders' deficit...................................... (33,078)
--------
$128,727
========
</TABLE>
See accompanying notes to consolidated financial statements.
F-26
<PAGE>
JACKSON PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Net sales.................................................... $31,106 $26,683
Operating expenses:
Cost of sales.............................................. 21,849 19,140
Selling, general and administrative........................ 5,256 3,715
Amortization of intangibles................................ 1,764 4,670
------- -------
Total operating expenses..................................... 28,869 27,525
Operating income (loss)...................................... 2,237 (842)
Other:
Interest expense........................................... (2,996) (3,008)
Amortization of deferred financing costs................... (309) (318)
Other...................................................... (172) (173)
------- -------
Loss before income tax provision............................. (1,240) (4,341)
Income tax expense........................................... 159 30
------- -------
Net loss..................................................... $(1,399) $(4,371)
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-27
<PAGE>
JACKSON PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................... $(1,399) $(4,371)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization.............................. 1,397 1,186
Amortization of deferred financing costs & intangibles, and
debt discount............................................. 2,090 5,005
Changes in operating assets and liabilities net of effects
of acquisitions:
Accounts receivable....................................... (3,916) (2,340)
Inventories............................................... (1,948) (2,168)
Accounts payable.......................................... 1,413 2,287
Accrued and other liabilities............................. (466) 355
Accrued interest.......................................... (1,016) (1,034)
Accrued taxes............................................. (14) 857
Other, net................................................ (633) (1,112)
------- -------
Net cash used in operating activities....................... (4,492) (1,335)
Cash flows from investing activities:
Acquisition of businesses................................... (292) (2,107)
Capital expenditures........................................ (809) (397)
Proceeds from sale of assets................................ -- 980
------- -------
Net cash used in investing activities....................... (1,101) (1,524)
------- -------
Cash flows from financing activities:
Proceeds from issuance of long-term obligations............. 5,322 2,859
------- -------
Net cash provided by financing activities................... 5,322 2,859
------- -------
Decrease in cash and cash equivalents........................ (271) --
Cash and cash equivalents, beginning of period............... 523 --
------- -------
Cash and cash equivalents, end of period..................... $ 252 $ --
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-28
<PAGE>
JACKSON PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statements
include all adjustments, consisting of only normal recurring adjustments,
which are, in the opinion of management of the registrant, necessary for a
fair statement of the operating results for the three month periods ending
March 31, 1998 and 1997. These financial statements have been prepared in
accordance with the instructions to Form 10-Q and therefore do not include all
information and footnotes necessary for a fair presentation of financial
position, results of operations, and changes in cash flows in conformity with
generally accepted accounting principles.
(2) INVENTORY
Inventories at March 31, 1998 consist of the following:
<TABLE>
<CAPTION>
1998
-------
<S> <C>
Raw materials........................................................ $10,531
Work-in-process...................................................... 4,000
Finished goods....................................................... 10,254
-------
$24,785
=======
</TABLE>
(3) INTANGIBLE ASSETS
The excess of cost over the net tangible assets acquired consists of
patents, customer lists, technology-related agreements, and goodwill, and is
amortized on a straight-line basis over periods from 2-15 years. The Company
periodically re-evaluates the carrying value of its intangibles and its other
long-term assets based on the expected undiscounted cash flows over the
remaining life of the related assets. Certain intangibles which were created
at the inception of the company became fully amortized in 1997.
(4) COMPREHENSIVE INCOME
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 130, "Comprehensive Income." SFAS No. 130
requires all items that are required to be recognized under accounting
standards as components of comprehensive income be reported in a financial
statement that is displayed with the same prominence as other financial
statements. The provisions of the Statement, however, need not be applied to
immaterial items. The Company's comprehensive loss is impacted only by foreign
currency transaction adjustments, which are immaterial in nature.
(5) SUBSEQUENT EVENTS
On April 16, 1998, the Company offered $115 million aggregate principal
amount of Senior Subordinated Notes (the "Notes") due April 15, 2005 (the
"Offering"). The Notes will bear interest at the rate of 9 1/2% per annum,
payable semi-annually in arrears on April 15 and October 15 of each year,
commencing October 15, 1998. The payment of principal, premium, interest and
liquidated damages on the Notes are unconditionally guaranteed, jointly and
severally, by American Allsafe Company, a Delaware Corporation, Crystaloid
Technologies, Inc., a Delaware Corporation, OSD Envizion, Inc., a Delaware
Corporation, Flex-O-Lite, Inc., a Delaware Corporation, and Silencio/Safety
Direct Inc., a Nevada Corporation, as guarantors (the "Guarantors").
Simultaneously with the Offering, the Company entered into a credit agreement
(the "New Credit Facility")
F-29
<PAGE>
JACKSON PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
with BankBoston, N.A. and Mercantile Bank National Association, which will
provide for a line of credit in the aggregate amount of $125.0 million,
consisting of an acquisition line facility in the principal amount of $95.0
million and a revolving credit facility in the principal amount of $30.0
million.
Pursuant to certain stock purchase agreements, in March 1998 the Company,
through its subsidiaries, Jackson Acquisition, Inc. and Crystaloid
Technologies, Inc., agreed to acquire i) all of the outstanding capital stock
of American Allsafe Company and Silencio/Safety Direct, Inc. for $29.5 million
(the "Allsafe Acquisition") and ii) all of the outstanding capital stock of
Crystaloid Electronics, Inc. for $6.5 million (the "Crystaloid Acquisition"),
$0.5 million of which is payable in 18 months subject to certain conditions.
These acquisitions closed on April 21, 1998 and April 22, 1998 respectively.
Financial information regarding the Guarantors as of March 31, 1998 and 1997
and for the three months ended March 31, 1998 and 1997 is presented below for
purposes of complying with the reporting requirements of the Guarantors. The
financial information regarding the Guarantors is being presented through
condensed consolidating financial statements since the guarantees are full and
unconditional and are joint and several. Guarantor financial statements have
not been presented because management does not believe that such financial
statements are material to investors. Crystaloid Technologies, Inc. was
incorporated in April 1998. OSD Envizion, Inc. was incorporated in October
1996. Flex-O-Lite, Inc. was acquired in 1994 by the Company's predecessor. The
only non-Guarantor Subsidiary is Lansec which was acquired in October, 1997.
(Note 5 continued on following page)
F-30
<PAGE>
JACKSON PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(5) SUBSEQUENT EVENT (CONT.)
CONDENSED CONSOLIDATING BALANCE SHEETS
MARCH 31, 1998
<TABLE>
<CAPTION>
NON-
PARENT GUARANTOR GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED
------- ------------ ---------- ------------ ------------
ASSETS
------
<S> <C> <C> <C> <C> <C>
Current Assets:
Cash and cash
equivalents........... $ -- $ -- $ 252 $ -- $ 252
Accounts receivable,
net................... 8,024 11,837 1,822 (2,879) 18,804
Inventories............ 8,007 15,899 957 (78) 24,785
Prepaid expenses....... 422 101 44 -- 567
------- ------- ------ -------- --------
Total current assets. 16,453 27,837 3,075 (2,957) 44,408
Property, plant and
equipment............. 11,226 8,880 154 -- 20,260
Intangibles............ 13,671 42,772 3,284 (890) 58,837
Deferred financing
costs................. 4,870 -- -- -- 4,870
Investment in
subsidiaries.......... 34,758 -- -- (34,758) --
Other noncurrent
assets................ -- 331 366 (345) 352
------- ------- ------ -------- --------
$80,978 $79,820 $6,879 $(38,950) $128,727
======= ======= ====== ======== ========
<CAPTION>
LIABILITIES AND STOCKHOLDERS'
DEFICIT
- -----------------------------
<S> <C> <C> <C> <C> <C>
Current liabilities:
Current maturities of
long-term debt........ $6,118 $ -- $2,879 ($2,879) $ 6,118
Accounts payable....... 3,129 8,942 774 -- 12,845
Accrued and other
liabilities........... 1,932 1,280 1,523 -- 4,735
Accrued interest....... 1,086 -- -- -- 1,086
Accrued taxes.......... 482 -- 38 -- 520
------- ------- ------ -------- --------
Total current
liabilities......... 12,747 10,222 5,214 (2,879) 25,304
Long-term debt, less
current maturities..... 111,723 -- -- -- 111,723
Other noncurrent
liabilities............ 3,371 -- 18 -- 3,389
Due to parent........... (48,545) 48,162 383 -- --
Preferred stock......... 21,389 -- -- -- 21,389
Stockholders' deficit
Common stock........... -- 1 258 (259) --
Additional paid-in
capital............... 7,102 34,499 1,235 (35,734) 7,102
Cumulative translation
adjustment............ -- (89) 65 -- (24)
Loans due on common
stock................. (343) -- -- -- (343)
Accumulated deficit.... (26,466) (12,975) (294) (78) (39,813)
------- ------- ------ -------- --------
Total stockholders'
deficit............. (19,707) 21,436 1,264 (36,071) (33,078)
------- ------- ------ -------- --------
$80,978 $79,820 $6,879 $(38,950) $128,727
======= ======= ====== ======== ========
</TABLE>
F-31
<PAGE>
JACKSON PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(5) SUBSEQUENT EVENTS (CONT.)
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
NON
PARENT GUARANTOR GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED
-------- ------------ ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales............... $10,435 $19,884 $2,867 $(2,080) $31,106
Operating expenses:
Cost of sales......... 6,886 15,058 1,932 (2,027) 21,849
Selling, general and
administrative....... 2,768 1,529 959 -- 5,256
Amortization of
intangibles.......... 276 1,301 187 -- 1,764
-------- ------- ------ ------- -------
9,930 17,888 3,078 (2,027) 28,869
Operating income (loss)
....................... 505 1,996 (211) (53) 2,237
Other:
Interest expense...... (2,996) -- -- -- (2,996)
Amortization of
deferred financing
costs................ (309) -- -- -- (309)
Other................. 1,344 (1,519) 3 -- (172)
-------- ------- ------ ------- -------
Income (loss) before
income tax provision... (1,456) 477 (208) (53) (1,240)
Income tax expense...... 76 38 45 -- 159
-------- ------- ------ ------- -------
Net income (loss)....... $ (1,532) $ 439 $ (253) $ (53) $(1,399)
======== ======= ====== ======= =======
</TABLE>
F-32
<PAGE>
JACKSON PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(5) SUBSEQUENT EVENTS (CONT.)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOW
THREE MONTHS ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
NON-
PARENT GUARANTOR GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED
------- ------------ ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash flows from
operating activities:
Net cash (used in)
provided by operating
activities............. $(3,256) (930) (1,004) 698 (4,492)
------- ------ ------ --- ------
Cash flows from
investing activities:
Capital expenditures.... (536) (273) -- -- (809)
Acquisition of business. (292) -- -- -- (292)
------- ------ ------ --- ------
Net cash used in
investing activities.. (828) (273) -- -- (1,101)
------- ------ ------ --- ------
Cash flows from
financing activities:
Proceeds from
borrowings............. 5,322 -- -- -- 5,322
------- ------ ------ --- ------
Net cash provided by
financing activities.. 5,322 -- -- -- 5,322
------- ------ ------ --- ------
Net increase (decrease)
in cash and cash 1,238 (1,203) (1,004) 698
equivalents............ ======= ====== ====== === (271)
Cash and cash equivalents, beginning of period....................... 523
------
Cash and cash equivalents, end of period............................. $ 252
======
</TABLE>
F-33
<PAGE>
JACKSON PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(5) SUBSEQUENT EVENTS (CONT.)
CONDENSED CONSOLIDATING BALANCE SHEETS
MARCH 31, 1997
<TABLE>
<CAPTION>
PARENT GUARANTOR
COMPANY SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------- ------------ ------------ ------------
ASSETS
------
<S> <C> <C> <C> <C>
Current Assets:
Cash and cash equivalents..... $ -- $ -- $ -- $ --
Accounts receivable, net...... 5,012 10,331 -- 15,343
Inventories................... 6,964 13,128 (31) 20,061
Prepaid expenses.............. 213 197 -- 410
------- ------- -------- --------
Total current assets........ 12,189 23,656 (31) 35,814
Property, plant and
equipment.................... 10,735 10,260 -- 20,995
Intangibles................... 26,400 43,325 -- 69,725
Deferred financing costs...... 6,123 -- -- 6,123
Investment in subsidiaries.... 34,500 -- (34,500) --
Other noncurrent assets....... -- 350 -- 350
------- ------- -------- --------
$89,947 $77,591 $(34,531) $133,007
======= ======= ======== ========
<CAPTION>
LIABILITIES AND STOCKHOLDERS'
DEFICIT
-----------------------------
<S> <C> <C> <C> <C>
Current liabilities:
Current maturities of long-
term debt.................... $5,333 $ -- $ -- $5,333
Accounts payable.............. 1,991 8,079 -- 10,070
Accrued and other
liabilities.................. 2,424 1,042 -- 3,466
Accrued interest.............. 1,037 -- -- 1,037
Accrued taxes................. 879 -- -- 879
------- ------- -------- --------
Total current liabilities... 11,664 9,121 -- 20,785
Long-term debt, less current
maturities.................... 113,858 -- -- 113,858
Other noncurrent liabilities... 2,609 -- -- 2,609
Due to parent.................. (50,609) 50,609 -- --
Preferred stock................ 18,326 -- -- 18,326
Stockholders' deficit
Common stock.................. -- 1 (1) --
Additional paid-in capital.... 7,102 34,499 (34,499) 7,102
Cumulative translation
adjustment................... -- (6) -- (6)
Loans due on common stock..... (353) -- -- (353)
Accumulated deficit........... (12,650) (16,663) (31) (29,314)
------- ------- -------- --------
Total stockholders' deficit. (5,901) 17,861 (34,531) (22,571)
------- ------- -------- --------
$89,947 $77,591 $(34,531) $133,007
======= ======= ======== ========
</TABLE>
F-34
<PAGE>
JACKSON PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(5) SUBSEQUENT EVENTS (CONT.)
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1997
<TABLE>
<CAPTION>
PARENT GUARANTOR
COMPANY SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales...................... $10,389 $17,670 $(1,376) $26,683
Operating expenses:
Cost of sales................ 6,917 13,604 (1,381) 19,140
Selling, general and
administrative.............. 2,121 1,594 -- 3,715
Amortization of intangibles.. 3,622 1,048 -- 4,670
------- ------- ------- -------
12,660 16,246 (1,381) 27,525
Operating income (loss)........ (2,271) 1,424 5 (842)
Other
Interest expense............. (3,008) -- -- (3,008)
Amortization of deferred
financing costs............. (318) -- -- (318)
Other........................ 1,751 (1,924) -- (173)
------- ------- ------- -------
Income (loss) before income tax
provision..................... (3,846) (500) 5 (4,341)
Income tax expense............. 6 24 -- 30
------- ------- ------- -------
Net income (loss).............. $(3,852) $ (524) $ 5 $(4,371)
======= ======= ======= =======
</TABLE>
F-35
<PAGE>
JACKSON PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(5) SUBSEQUENT EVENTS (CONT.)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOW
THREE MONTHS ENDED MARCH 31, 1997
<TABLE>
<CAPTION>
PARENT GUARANTOR
COMPANY SUBSIDIARIES CONSOLIDATED
------- ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net cash (used in) provided by operating
activities:................................ $(1,434) 99 (1,335)
------- ---- ------
Cash flows from investing activities:
Capital expenditures........................ (220) (177) (397)
Acquisition of business..................... (2,107) -- (2,107)
Proceeds from sale of assets................ 180 800 980
------- ---- ------
Net cash used in investing activities...... (2,147) 623 (1,524)
------- ---- ------
Cash flows from financing activities:
Proceeds from borrowings.................... 2,859 -- 2,859
------- ---- ------
Net cash provided by financing activities.. 2,859 -- 2,859
------- ---- ------
Net increase (decrease) in cash and cash (722) 722
equivalents................................ ======= ==== --
Cash and cash equivalents, beginning of period................... --
------
Cash and cash equivalents, end of period........................ $ --
======
</TABLE>
F-36
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Jackson Holding Company:
We have audited the accompanying consolidated statements of operations,
stockholders' equity, and cash flows of Jackson Holding Company (a Delaware
Corporation) and subsidiary (the Company) for the period from January 1, 1995
to August 16, 1995. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audit.
We conducted our audit 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 audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the results of operations and cash
flows of Jackson Holding Company and subsidiary for the period from January 1,
1995 to August 16, 1995, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
St. Louis, Missouri
March 27, 1998
F-37
<PAGE>
JACKSON HOLDING COMPANY
CONSOLIDATED STATEMENT OF OPERATIONS
PERIOD FROM JANUARY 1, 1995 TO AUGUST 16, 1995
(IN THOUSANDS)
<TABLE>
<S> <C>
Net sales............................................................. $72,541
Operating expenses:
Cost of sales....................................................... 52,416
Selling, general, and administrative................................ 9,640
Amortization of intangibles......................................... 3,009
-------
65,065
-------
Operating income...................................................... 7,476
Other income (expense):
Interest expense.................................................... (5,279)
Amortization of deferred financing costs............................ (525)
Other............................................................... 14
Sale of company expenses............................................ (4,391)
-------
Loss before income tax provision and extraordinary item............... (2,705)
Income tax expense.................................................... --
-------
Loss before extraordinary item........................................ (2,705)
Extraordinary item--loss due to early extinguishment of debt.......... (7,236)
Net loss.............................................................. $(9,941)
=======
</TABLE>
See accompanying notes to consolidated financial statements.
F-38
<PAGE>
JACKSON HOLDING COMPANY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
PERIOD FROM JANUARY 1 TO AUGUST 16, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
CLASS CLASS
A C CUMULATIVE, ADDITIONAL CUMULATIVE
COMMON COMMON 8% PREFERRED PAID-IN TRANSLATION ACCUMULATED
STOCK STOCK STOCK CAPITAL ADJUSTMENT DEFICIT TOTAL
------ ------ ------------ ---------- ----------- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1,
1995................... $184 $15 $538 $19,888 $(7) $ (6,403) $14,215
Accrued dividends--
preferred stock........ -- -- 62 -- -- (62) --
Cumulative translation
adjustment............. -- -- -- -- 55 -- 55
Net loss................ -- -- -- -- -- (9,941) (9,941)
---- --- ---- ------- --- -------- -------
Balance at August 16,
1995................... $184 $15 $600 $19,888 $48 $(16,406) $ 4,329
==== === ==== ======= === ======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-39
<PAGE>
JACKSON HOLDING COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
PERIOD FROM JANUARY 1, 1995 TO AUGUST 16, 1995
(IN THOUSANDS)
<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss............................................................. $(9,941)
Adjustments to reconcile net loss to net cash provided by operating
activities:
Extraordinary item.................................................. 7,236
Sale of company expenses............................................ 4,391
Depreciation........................................................ 2,542
Amortization of deferred financing costs, intangibles, and debt
discount........................................................... 3,617
Changes in operating assets and liabilities
Accounts receivable............................................... (4,494)
Inventories....................................................... (509)
Accounts payable.................................................. 1,109
Accrued and other liabilities..................................... (1,803)
Accrued interest.................................................. 231
Accrued taxes..................................................... 123
Other, net........................................................ 272
-------
Net cash provided by operating activities............................ 2,774
-------
Cash flows from investing activities:
Capital expenditures................................................. (1,744)
Other................................................................ 83
-------
Net cash used in investing activities................................ (1,661)
-------
Cash flows from financing activities--Repayment of long-term
obligations.......................................................... (1,113)
-------
Net cash used in financing activities................................ (1,113)
-------
Change in cash and cash equivalents................................... --
Cash and cash equivalents, beginning of period........................ --
-------
Cash and cash equivalents, end of period.............................. $ --
=======
</TABLE>
See accompanying notes to consolidated financial statements.
F-40
<PAGE>
JACKSON HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 16, 1995
(IN THOUSANDS, EXCEPT SHARE DATA)
(1) THE COMPANY
Jackson Holding Company (the Company), a Delaware corporation, was formed on
February 24, 1993, for the purpose of acquiring the assets and certain
liabilities of Jackson Products, Inc. (Jackson) (the Acquisition). The Company
had no operations prior to the Acquisition. Jackson is engaged in the
manufacture, design, and distribution of safety equipment used primarily in
the cutting and welding, construction, and general industrial markets. In
addition, Jackson manufactures electric welding accessories and precision
layout and measuring tools used in the cutting and welding industry.
Jackson owns 100% of the outstanding common stock of Flex-O-Lite, Inc. Flex-
O-Lite, Inc. is engaged in the manufacture, design, and distribution of
highway and industrial safety products. In addition, Flex-O-Lite, Inc.
manufactures and distributes reflective glass beads used in highway and
industrial applications.
(2) ACQUISITIONS
On March 25, 1994 Jackson purchased all of the outstanding common stock of
Flex-O-Lite, Inc. (Flex-O-Lite) for $33,344 (the Flex-O-Lite Acquisition). On
October 18, 1994, Jackson purchased the assets and rights to manufacture the
electronic quick change lens used in the welding industry for $9,200 (the EQC
Acquisition).
The total costs of the Flex-O-Lite Acquisition and the EQC Acquisition were
as follows:
<TABLE>
<CAPTION>
FLEX-O-LITE EQC TOTAL
----------- ------ -------
<S> <C> <C> <C>
Purchase price................................. $33,344 $9,200 $42,544
Transaction fees and expenses.................. 3,500 375 3,875
------- ------ -------
$36,844 $9,575 $46,419
======= ====== =======
</TABLE>
The Flex-O-Lite Acquisition and the EQC Acquisition were accounted for using
the purchase method of accounting. Accordingly, total purchase cost has been
allocated to the assets and liabilities based on their respective fair values.
The results of operations have been included in the consolidated financial
statements since the date of acquisition. Intangible assets totaling
approximately $4,798 and $8,950 were recorded in connection with the Flex-O-
Lite Acquisition and EQC Acquisition, respectively.
(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of the Company;
its wholly owned subsidiary, Jackson; and Jackson's wholly owned subsidiary,
Flex-O-Lite, Inc. All material intercompany balances and transactions have
been eliminated in consolidation.
The consolidated statements of operations, stockholders' equity and cash
flows presented are for the period from January 1, 1995 through August 16,
1995.
Use of Estimates
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities to prepare these
consolidated financial statements in conformity with generally accepted
accounting principles. Actual results could differ from those estimates.
F-41
<PAGE>
JACKSON HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Consolidated Statement of Cash Flows
For purposes of the consolidated statement of cash flows, the Company
considers all highly liquid investments purchased with initial maturities of
three months or less to be cash equivalents. Interest paid for the period
ended August 16, 1995 was $4,962. Taxes refunded for the period ended August
16, 1995 was $123.
Revenue and Accounts Receivable
The Company recognizes revenue upon shipment of merchandise to its
customers. The Company's sales are primarily North American, with customers
generally located throughout the United States, Canada, and Europe.
Financial instruments that potentially subject the Company to concentrations
of credit risk consist primarily of trade receivables. The Company performs
ongoing credit evaluations of its customers and generally does not require
collateral. The Company had two major customers, each of whose purchases
exceeded 10% of net sales. For the period ended August 16, 1995, the two
customers accounted for 22% of net sales. The outstanding accounts receivable
balance related to those customers represented 17% of the accounts receivable
balance at August 16, 1995.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined
using the last-in, first-out (LIFO) method. Elements of cost in inventory
include raw materials, direct labor, and manufacturing overhead.
Property, Plant, and Equipment
Property, plant, and equipment acquired through the purchases of businesses
is recorded at fair value. Subsequent additions and improvements to property,
plant, and equipment are capitalized at cost.
Depreciation is calculated using the straight-line method. The average
estimated lives utilized in calculating depreciation are as follows: buildings
and improvements, 7-40 years; and machinery and equipment, 2-18 years.
Leasehold improvements, which are included in buildings and improvements, are
depreciated over the shorter of the term of the respective lease or the life
of the respective improvement.
Intangibles
The excess of cost over the net tangible assets acquired consists primarily
of noncompetition agreements, customer lists, assembled work force,
distributor relationships, computer software, organizational costs,
trademarks, and goodwill. These intangible assets are amortized on a straight-
line basis over periods from 5-40 years.
Related-Party Transactions
In connection with the Acquisition, the Company entered into a Management
Agreement (Agreement) that requires Thermadyne Industries, Inc. (Thermadyne),
a preferred stockholder of the Company, to perform management services for the
Company. Thermadyne is entitled to an annual management fee equal to 1/4 of 1%
of Jackson's annual net revenues not to exceed $100. This management agreement
was terminated on July 31, 1995. In addition, Thermadyne was issued 20,000
shares of the Company's 8% Cumulative Senior Preferred Stock.
During the period ended August 16, 1995, the Company had sales of $1,902 to
Thermadyne subsidiaries and as of August 16, 1995, had trade accounts
receivable balances of $467 from Thermadyne subsidiaries.
F-42
<PAGE>
JACKSON HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Financial Instruments
The fair market value of those long-term obligations which carry variable
rates approximates carrying value since the interest rates are periodically
adjusted for changes in market interest rates. The fair market value of the
12.25% senior subordinated notes approximates carrying value as the rates
approximate those which could be obtained for similar issues with similar
maturities given the Company's overall financial condition.
Income Taxes
The Company accounts for income taxes in accordance with the provisions of
Statement of Financial Accounting Standards (SFAS) No. 109, Accounting for
Income Taxes. The provision for income taxes includes federal and state income
taxes currently payable and those deferred because of temporary differences
between the financial statements and tax basis of assets and liabilities.
(4) INVENTORIES
Inventories consist of the following:
<TABLE>
<S> <C>
Raw materials..................................................... $ 7,278
Work-in-process................................................... 3,879
Finished goods.................................................... 10,933
LIFO reserve...................................................... (486)
-------
$21,604
=======
</TABLE>
(5) PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment, net consists of the following:
<TABLE>
<S> <C>
Land.............................................................. $ 1,245
Buildings and improvements........................................ 7,671
Machinery and equipment........................................... 23,637
-------
32,553
Less accumulated depreciation..................................... 6,750
-------
$25,803
=======
</TABLE>
Depreciation expense totaled $2,542 for the period from January 1, 1995
through August 16, 1995.
F-43
<PAGE>
JACKSON HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(6) INTANGIBLES
Intangibles, net of accumulated amortization, consist of the following:
<TABLE>
<S> <C>
Goodwill.......................................................... $15,796
Customer lists.................................................... 21,000
Noncompetition agreements, technology, and other.................. 20,540
-------
57,336
Less accumulated amortization..................................... 14,680
-------
$42,656
=======
</TABLE>
(7) LONG-TERM OBLIGATIONS
Long-term obligations consist of the following:
<TABLE>
<S> <C>
Term loans........................................................ $51,203
Revolver.......................................................... 12,250
12.75% senior subordinated notes.................................. 17,500
-------
80,953
Less current maturities........................................... 5,897
-------
$75,056
=======
</TABLE>
Credit Agreement
The Company has a Credit Agreement which consists of a $39,600 Term A loan,
a $20,000 Term B loan, (collectively, the "Term Loans"), and a $25,000
revolving credit facility (the "Revolver"). The Revolver provides that up to
$3,500 of such facility may be used for the issuance of letters of credit and
lender guaranties. Letters of credit and lender guaranties totaling $1,488
were outstanding at August 16, 1995. Borrowings under the Credit Agreement are
secured by first priority mortgages and liens on all of the assets of Jackson
and are guaranteed by the Company. The Credit Agreement also contains several
financial covenants, which require Jackson to maintain certain financial
ratios and restrict the Company's ability to incur indebtedness, make capital
expenditures, and pay dividends. The Company was in compliance with these
covenants at August 16, 1995. The commitment fee on the unused portion of the
Revolver is 1/2% per annum, payable quarterly.
Mandatory principal payments on the Term Loans are due in quarterly
installments on January 1, April 1, July 1, and October 1, with the final
installment due on March 31, 2001. The Revolver is due on March 31, 2001. The
Credit Agreement requires annual prepayments on the Term Loans on a date one
hundred days following the end of each fiscal year, based on Excess Cash Flow
(as defined).
Through March 31, 1995, borrowings under the Credit Agreement bear interest,
at the option of Jackson, at a rate per annum equal to (i) the Base Rate (as
defined) plus 1.5%; or (ii) LIBOR Rate (as defined) plus 2.75% for the
Revolver and Term A loans, and LIBOR Rate plus 3.25% for the Term B loans. For
each fiscal quarter following March 31, 1995, the factor added to either the
Base Rate or the LIBOR Rate will be adjusted based on the ratio of the
Jackson's Total Debt to Operating Cash Flow (as defined). The average interest
rate on outstanding borrowings was 9.1% at as of August 16, 1995.
F-44
<PAGE>
JACKSON HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Senior Subordinated Notes
The 12.25% Senior Subordinated Notes due 2003 (the "Notes") were issued in
connection with the Acquisition pursuant to an agreement dated April 12, 1993,
among the Company, Jackson, and the purchasers named within the agreement. The
Notes represent unsecured general obligations of the Company and are
subordinated to all Senior Indebtedness (as defined) of Jackson. The Notes are
guaranteed by the Company.
The Notes mature on April 30, 2003 and bear interest at the rate of 12.25%
per annum, payable quarterly on each January 31, April 30, July 31, and
October 31. The Notes may not be redeemed prior to April 30, 1997, except in
the event of a public offering of the Company or in the event of a Change of
Control (as defined). The Notes may be redeemed on or after May 1, 1997, in
whole or from time to time in part, at the option of Jackson, at a redemption
price of 107.80% in 1997 with annual reductions to 100% in 2002 and
thereafter. Jackson is required to redeem $2,500 of the aggregate principal
amount of the Notes at 100% of the principal amount thereof, plus accrued but
unpaid interest to the redemption date, commencing October 31, 2000, and each
six months thereafter until April 30, 2003.
The Notes require Jackson to maintain certain financial ratios and restrict
the incurrence of additional indebtedness by Jackson, the payment of
dividends, and other distributions with respect to Jackson's capital stock,
the creation of liens on the assets of Jackson to secure certain subordinated
debt, and certain mergers, sales of assets, and transactions with affiliates.
Jackson was in compliance with these covenants at August 16, 1995.
As discussed in Note 12 to the consolidated financial statements, the Term
Loans, the Revolver and the Notes were redeemed in full as part of the Merger
Agreement. In exchange for the early redemption, Jackson agreed to pay a 6%
prepayment penalty to all noteholders in connection with the transaction.
(8) STOCKHOLDERS' EQUITY
The authorized capital stock of the Company consists of 25,500,000 shares of
common stock, 1,523,103 shares of Class A common stock, and 5,000,000 shares
of preferred stock.
In connection with the financing for the Acquisition, the Company issued
14,761,608 shares of common stock and 1,213,484 shares of Class A Series I
common stock. In connection with the Flex-O-Lite Acquisition, the Company
issued 3,685,898 shares of common stock and 309,619 shares of Class A Series
II common stock.
Common Stock
Dividends are payable equally on shares of all classes of common stock in
amounts as and when declared by the Company's Board of Directors, subject to
legally available funds and restrictions contained in certain agreements. In
the event of any liquidation, dissolution, or winding up of the Company,
before any payment or distribution of the assets of the Company shall be made
to the holders of Class A common stock, each share of common stock shall be
entitled to a liquidation preference based on a formula set forth in the
Company's Certificate of Incorporation. Holders of common stock and Class A
common stock are entitled to one vote per share on all matters submitted to a
vote of stockholders.
Class A Series I common stock and Class A Series II common stock (the "Class
A common stock") may be converted into shares of common stock at the option of
the holder at any time. In addition, shares of Class A common stock (i) may be
converted into common stock at the option of the Company effective immediately
prior to the occurrence of a Triggering Event (as defined), or (ii) shall
automatically be converted into common stock on March 31, 2003. Such
conversions are based on a formula set forth in the Company's Certificate of
Incorporation.
F-45
<PAGE>
JACKSON HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Stock Option Plan
During 1993, the Company adopted a nonqualified incentive stock option plan
(the Option Plan) for its officers and key employees. Under the Option Plan,
eligible participants may receive incentive and nonqualified options to
purchase shares of the Company's common stock. Options are exercisable at such
time an option is earned and vested. Generally, options become exercisable at
a rate of 20% for each full year of employment from the date of grant and may
be exercised only if the holder is an employee of the Company. A total of
487,662 options were issued and outstanding during the period ended August 16,
1995. All options were exercised in connection with the transaction discussed
in Note 12.
The Company has elected to continue to measure compensation cost using the
intrinsic value method as prescribed by Accounting Principles Board (APB)
Opinion No. 25 and has recorded no compensation expense relative to the
issuance of its stock options. Had the Company applied the principles of
Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for
Stock-Based Compensation, compensation expense would not have been material to
the consolidated financial statements.
(9) INCOME TAXES
Reconciliation between the statutory income tax provision and effective tax
provision is summarized below for the period from January 1, 1995 through
August 16, 1995:
<TABLE>
<S> <C>
Statutory rate (35%)............................................. $(3,479)
Amortization of goodwill and other............................... 551
Other, net....................................................... 194
Change in valuation allowance.................................... 2,734
-------
Income tax expense............................................... $ --
=======
</TABLE>
The tax effects of significant temporary differences, representing deferred
tax assets and the deferred tax liability, as of August 16, 1995, are as
follows:
<TABLE>
<S> <C>
Deferred tax assets:
Net operating loss carryforwards............................... $ 4,923
Receivables.................................................... 187
Accrued liabilities............................................ 1,721
Postretirement benefits........................................ 701
Other.......................................................... 1,401
-------
8,933
Valuation allowance.............................................. (8,412)
-------
Net deferred tax assets.......................................... 521
Deferred tax liability--inventory................................ (521)
-------
Net deferred taxes $ --
=======
</TABLE>
The Company establishes valuation allowances in accordance with SFAS No. 109
and continually reviews the adequacy of the allowance, recognizing benefits
only as its reassessment indicates that it is more likely than not that
benefits will be realized. The increase was the result of an increase in net
operating loss carryforwards and changes in temporary differences. At August
16, 1995, the Company had net operating loss carryforwards (NOL) of
approximately $14,065 for U.S. federal income tax purposes which begin to
expire in 2009 to the extent not previously utilized.
F-46
<PAGE>
JACKSON HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(10) RETIREMENT BENEFIT PLANS
Retirement benefits are provided to substantially all employees under a
discretionary profit sharing and contributory retirement plan under Section
401(k) of the Internal Revenue Code.
The Company provides postretirement healthcare and other benefits to certain
qualifying retirees. The Company does not fund retiree healthcare benefits in
advance and has the right to modify these benefits in the future. Net periodic
postretirement benefit cost (NPPBC) for the period from January 1, 1995
through August 16, 1995 includes the following components:
<TABLE>
<S> <C>
Service cost.......................................................... $145
Interest cost......................................................... 85
Other................................................................. 65
----
NPPBC................................................................. $295
====
</TABLE>
The Plan's status as of August 16, 1995 is as follows:
<TABLE>
<S> <C>
Actuarial present value of benefit obligation:
Fully eligible active participants............................... $ 75
Other active participants........................................ 1,709
Retirees......................................................... 72
------
Accumulated postretirement benefit obligation (APBO)............... $1,856
======
</TABLE>
The APBO was determined by application of the terms of the plan, together
with relevant actuarial assumptions for active employees. Healthcare cost
trends are projected at annual rates ranging from 8.5% in 1996 down to 5.5% in
2009 and thereafter. The effect of a 1% annual increase in these assumed rates
would increase the APBO at August 16, 1995 by a total of $600 and the service
and interest cost components of the NPPBC for the period ended August 16, 1995
by a total of $120. The assumed discount rate used in determining the APBO was
7.5%. No assets have been segregated and restricted for payment of
postretirement benefits. The APBO is included in other noncurrent liabilities
on the consolidated balance sheet.
(11) COMMITMENTS AND CONTINGENCIES
The Company is involved in certain legal actions from time to time related
to the normal conduct of its business. Management believes that liabilities,
if any, resulting from litigation will not materially affect the financial
position or results of operations of the Company.
Future minimum lease payments under all operating leases with initial or
remaining noncancelable lease terms in excess of one year at August 16, 1995
are as follows:
<TABLE>
<S> <C>
1995................................................................ $ 530
1996................................................................ 1,311
1997................................................................ 1,246
1998................................................................ 871
1999................................................................ 809
2000 and thereafter................................................. 427
</TABLE>
Rent expense for the period from January 1, 1995 through August 16, 1995 was
$1,037.
F-47
<PAGE>
JACKSON HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
(12) SUBSEQUENT EVENT
On August 17, 1995, Jackson and Jackson Acquisition Corp., a nonaffiliated
company, entered into a Merger Agreement ("the Merger Agreement") providing
for the acquisition by Jackson Acquisition Corp. of all of the outstanding
common stock of Jackson at a purchase price of $129,000. Under the terms of
the Agreement, Jackson used the proceeds from the sale to repay the
outstanding principal balance of the Term Loans, the Revolver, the Notes and
related accrued interest. Expenses related to the early retirement of debt,
including write-off of deferred financing fees, have been reflected as an
extraordinary item in the consolidated financial statements.
F-48
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
NCH Corporation:
We have audited the accompanying combined balance sheet of American Allsafe
Company and Silencio/Safety Direct, Inc. (wholly-owned subsidiaries of NCH
Corporation) as of April 30, 1997, and the related combined statements of
earnings, stockholders' equity and cash flows for the year then ended. These
combined financial statements are the responsibility of NCH Corporation's
management. Our responsibility is to express an opinion on these combined
financial statements based on our audit.
We conducted our audit 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 audit provides a reasonable basis
for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of American Allsafe
Company and Silencio/Safety Direct, Inc. as of April 30, 1997, and the results
of their operations and their cash flows for the year then ended in conformity
with generally accepted accounting principles.
KPMG Peat Marwick LLP
Dallas, Texas
March 6, 1998
F-49
<PAGE>
AMERICAN ALLSAFE COMPANY AND SILENCIO/SAFETY DIRECT, INC.
(WHOLLY-OWNED SUBSIDIARIES OF NCH CORPORATION)
COMBINED BALANCE SHEET
APRIL 30, 1997
(IN THOUSANDS)
<TABLE>
<S> <C>
ASSETS
------
Current assets:
Cash................................................................. $ 164
Accounts receivable--trade, net of allowance for doubtful accounts of
$247................................................................ 4,249
Inventories (note 3)................................................. 5,238
Receivables from affiliates (note 9)................................. 4,005
Deferred income taxes (note 2)....................................... 278
Prepaid expenses..................................................... 46
-------
Total current assets............................................... 13,980
Property, plant and equipment, net (note 4)............................ 7,578
Goodwill, net of accumulated amortization of $239...................... 845
Other assets........................................................... 377
-------
$22,780
=======
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Industrial revenue bonds (note 5).................................... $ 3,700
Accounts payable..................................................... 1,063
Accrued expenses (note 6)............................................ 671
Income taxes payable to Parent (note 2).............................. 646
-------
Total current liabilities.......................................... 6,080
Deferred income taxes (note 2)......................................... 591
Other noncurrent liabilities........................................... 52
Stockholders' equity (note 7):
Common stock......................................................... 520
Additional paid-in capital........................................... 3,719
Retained earnings.................................................... 11,818
-------
Total stockholders' equity......................................... 16,057
-------
$22,780
=======
</TABLE>
See accompanying notes to combined financial statements.
F-50
<PAGE>
AMERICAN ALLSAFE COMPANY AND SILENCIO/SAFETY DIRECT, INC.
(WHOLLY-OWNED SUBSIDIARIES OF NCH CORPORATION)
COMBINED STATEMENT OF EARNINGS
YEAR ENDED APRIL 30, 1997
(IN THOUSANDS)
<TABLE>
<S> <C>
Net sales.............................................................. $30,527
Cost of sales.......................................................... 20,370
Marketing and administrative expenses (note 19)........................ 8,252
-------
28,622
-------
Operating earnings................................................... 1,905
Interest expense....................................................... 220
-------
Earnings before income taxes......................................... 1,685
Provision for income taxes (note 2).................................... 600
-------
Net earnings......................................................... $ 1,085
=======
</TABLE>
See accompanying notes to combined financial statements.
F-51
<PAGE>
AMERICAN ALLSAFE COMPANY AND SILENCIO/SAFETY DIRECT, INC.
(WHOLLY-OWNED SUBSIDIARIES OF NCH CORPORATION)
COMBINED STATEMENT OF STOCKHOLDERS' EQUITY
YEAR ENDED APRIL 30, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
------------- PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS TOTAL
------ ------ ---------- -------- -------
<S> <C> <C> <C> <C> <C>
Balance, May 1, 1996.................. 500 $500 $3,539 $10,733 $14,772
Net earnings.......................... -- -- -- 1,085 1,085
Issuance of common stock to Parent.... 20 20 180 -- 200
--- ---- ------ ------- -------
Balance, April 30, 1997............... 520 $520 $3,719 $11,818 $16,057
=== ==== ====== ======= =======
</TABLE>
See accompanying notes to combined financial statements.
F-52
<PAGE>
AMERICAN ALLSAFE COMPANY AND SILENCIO/SAFETY DIRECT, INC.
(WHOLLY-OWNED SUBSIDIARIES OF NCH CORPORATION)
COMBINED STATEMENT OF CASH FLOWS
YEAR ENDED APRIL 30, 1997
(IN THOUSANDS)
<TABLE>
<S> <C>
Cash Flows From Operating Activities:
Net earnings.......................................................... $1,085
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Depreciation and amortization........................................ 1,053
Deferred income taxes................................................ (35)
Changes in operating assets and liabilities:
Accounts receivable.................................................. (836)
Inventories.......................................................... 209
Intercompany receivables............................................. (812)
Prepaid expenses..................................................... 13
Accounts payable, accrued expenses and income taxes payable.......... 441
Other noncurrent assets.............................................. (100)
------
Net cash provided by operating activities........................ 1,018
------
Cash Flows From Investing Activities:
Purchases of property, plant and equipment............................ (1,173)
Proceeds from sales of property, plant and equipment.................. (10)
------
Net cash used in investing activities............................ (1,183)
------
Cash flows from financing activities--issuance of stock to parent
company............................................................... 200
------
Net increase in cash................................................... 35
Cash at beginning of year.............................................. 129
------
Cash at end of year.................................................... $ 164
======
</TABLE>
See accompanying notes to combined financial statements.
F-53
<PAGE>
AMERICAN ALLSAFE COMPANY AND SILENCIO/SAFETY DIRECT, INC.
(WHOLLY-OWNED SUBSIDIARIES OF NCH CORPORATION)
NOTES TO COMBINED FINANCIAL STATEMENTS
APRIL 30, 1997
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Principles of Combination
The accompanying combined financial statements include the accounts of
American Allsafe Company and Silencio/Safety Direct, Inc., (collectively, the
"Company"), wholly owned subsidiaries of NCH Corporation (the "Parent").
Significant intercompany transactions and balances between these two
subsidiaries of the Parent have been eliminated. The accompanying combined
financial statements present the financial position, results of operations and
cash flows of the Company which is subject to a proposed acquisition by an
unrelated party.
(b) Nature of Operations
The Company manufactures and markets head, eye and hearing protection, as
well as safety spectacles and personal safety products, to customers
throughout the United States.
(c) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(d) Cash
Cash includes cash on hand and cash in banks.
(e) Inventories
Raw materials, sales supplies and purchased finished goods are stated at a
moving average cost, which approximates cost on a first-in, first-out basis
and is not in excess of market value. Manufactured finished goods are stated
at an amount approximating cost of manufacturing, which is not in excess of
net realizable value.
(f) Intercompany Receivables
The Company's cash funding needs are handled by the Parent for short-term
investing purposes. Also, any charges between the Company and the Parent or
other affiliates are recorded in intercompany accounts.
(g) Property, Plant and Equipment
These assets are recorded at cost. When these assets are disposed of, the
cost and related accumulated depreciation are removed from the accounts, and
any resulting gain or loss is included in income during that year. The cost of
maintenance and repairs is charged to expense as incurred, whereas
expenditures that substantially increase the useful lives of plant or
equipment are capitalized.
(h) Depreciation
Depreciation on buildings and equipment is provided for financial statement
purposes using the straight-line method over the estimated useful lives of the
related assets. Depreciation on certain buildings and equipment is provided
for income tax purposes using accelerated methods.
F-54
<PAGE>
AMERICAN ALLSAFE COMPANY AND SILENCIO/SAFETY DIRECT, INC.
(WHOLLY-OWNED SUBSIDIARIES OF NCH CORPORATION)
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(i) Goodwill
Goodwill in the combined financial statements is amortized using the
straight-line method over an estimated useful life of 15 years. The
unamortized cost of impaired intangible assets is charged to expense when
impairment occurs.
The Company assesses the recoverability of goodwill by determining whether
the amortization of the asset balance over its remaining life can be recovered
through undiscounted future operating cash flows of the acquired operation.
The amount of impairment, if any, is measured based on projected discounted
future operating cash flows. At this time, the Company believes that no
significant impairment of goodwill has occurred and that no reduction of the
estimated useful lives is warranted.
(j) Income Taxes
Deferred income taxes result from temporary differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. State income tax has been included in the
provision for income taxes and income taxes payable.
The Company files a consolidated federal income tax return with the Parent
and its subsidiaries. The income tax provision has been computed as if the
Company were filing a separate federal income tax return.
(2) INCOME TAXES
The following are the components of the provision for income taxes for the
year ended April 30, 1997 (in thousands of dollars):
<TABLE>
<S> <C>
U.S. federal:
Current.......................................................... $615
Deferred......................................................... (35)
State-current...................................................... 20
----
$600
====
</TABLE>
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled.
The components of deferred tax assets and liabilities as of April 30, 1997
are as follows (in thousands of dollars):
<TABLE>
<S> <C>
Deferred tax assets:
Allowance for doubtful accounts................................. $ 80
Inventory reserves.............................................. 79
Accrued settlements............................................. 119
Other noncurrent liabilities.................................... 18
----
296
Deferred tax liabilities--depreciation............................ 609
----
Net deferred tax liability...................................... $313
====
</TABLE>
F-55
<PAGE>
AMERICAN ALLSAFE COMPANY AND SILENCIO/SAFETY DIRECT, INC.
(WHOLLY-OWNED SUBSIDIARIES OF NCH CORPORATION)
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
The following is a reconciliation of the difference between the U.S.
statutory income tax rate and the effective tax rate:
<TABLE>
<S> <C>
U.S. statutory rate................................................ 34.0%
Effect of state income taxes, net of federal benefit............... .6
Other.............................................................. 1.0
----
Effective tax rate................................................. 35.6%
====
</TABLE>
For the year ended April 30, 1997, federal income tax payments amounted to
$964,000.
(3) INVENTORIES
A summary of inventories at April 30, 1997, net of reserves of approximately
$155,000 follows (in thousands of dollars):
<TABLE>
<S> <C>
Raw materials..................................................... $2,650
Finished goods.................................................... 2,588
------
$5,238
======
</TABLE>
(4) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at April 30, 1997 consists of the following
(in thousands of dollars):
<TABLE>
<S> <C>
Land............................................................ $ 200
Buildings....................................................... 4,633
Equipment....................................................... 11,503
-------
16,336
Accumulated depreciation........................................ (8,758)
-------
$ 7,578
=======
</TABLE>
Depreciation charged to income was $980,000 for the year ended April 30,
1997. The estimated useful life of buildings is 25 to 40 years; equipment is 3
to 10 years.
(5) INDUSTRIAL REVENUE BONDS
At April 30, 1997, $3,700,000 of industrial revenue bonds which accrue
interest at 71.9% of prime (8.25% at April 30, 1997) were outstanding. During
the year ended April 30, 1997, interest costs, approximating $220,000, were
expensed as incurred. For the same period, interest payments were $219,000.
The bonds are secured by property and mature on December 1, 2005. The bonds
are classified as current based on call provisions in the loan agreement. In
March 1998, the outstanding balance of the industrial revenue bonds was
retired. Concurrently, with the retirement of the industrial revenue bonds,
property having a carrying value of approximately $1,100,000 and which was
previously securing a portion of the industrial revenue bonds, was sold to a
related party for a sales price approximating carrying value.
F-56
<PAGE>
AMERICAN ALLSAFE COMPANY AND SILENCIO/SAFETY DIRECT, INC.
(WHOLLY-OWNED SUBSIDIARIES OF NCH CORPORATION)
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(6) ACCRUED EXPENSES
Accrued expenses at April 30, 1997 consist of the following (in thousands of
dollars):
<TABLE>
<S> <C>
Accrued employee compensation...................................... $308
Accrued settlements................................................ 350
Other.............................................................. 13
----
$671
====
</TABLE>
(7) CAPITAL STOCK
The Company has issued 520,000 shares of the 1,100,000 authorized shares of
$1 par value common stock to the Parent. No dividends are paid on this stock
and there are no related stock options.
(8) FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash, accounts receivable, accounts payable, and
accrued expenses approximate fair value because of the short maturities of
these financial instruments.
(9) TRANSACTIONS WITH AFFILIATES
Certain of the Company's corporate administrative functions, including
accounting and data processing are provided by the Parent. The cost of these
administrative functions is allocated to the Company in proportion to the
budgeted net revenues of each company. Management believes this allocation
method is reasonable, however, such allocated costs may not necessarily be
indicative of the cost of obtaining such services if the Company operated on a
stand alone basis. General and administrative expenses include approximately
$325,000 in fiscal year 1997 of these allocated expenses.
F-57
<PAGE>
AMERICAN ALLSAFE COMPANY AND SILENCIO/SAFETY DIRECT, INC
(WHOLLY-OWNED SUBSIDIARIES OF NCH CORPORATION)
UNAUDITED COMBINED BALANCE SHEET
JANUARY 31, 1998
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
JANUARY 31,
-----------
1998
-----------
<S> <C>
Current Assets:
Cash .............................................................. $ 212
Accounts receivable................................................ 3,883
Allowance for doubtful accounts.................................... (183)
Inventories........................................................ 6,052
Receivable from affiliates......................................... 4,969
Deferred Income taxes.............................................. 244
Prepaid expenses................................................... 36
-------
Total current assets............................................. 15,213
-------
Property, plant and equipment....................................... 17,015
-------
Accumulated depreciation............................................ (9,489)
-------
7,526
-------
Goodwill............................................................ 1,084
Accumulated amortization............................................ (295)
-------
789
-------
Other assets........................................................ 410
-------
Total assets........................................................ $23,938
=======
Current liabilities:
Industrial revenue bonds........................................... $ 3,700
Accounts payable................................................... 1,173
Accrued expenses................................................... 608
Income taxes payable to parent..................................... 645
-------
Total current liabilities........................................ 6,126
-------
Deferred income taxes............................................... 646
-------
Other noncurrent liabilities........................................ 54
-------
Stockholders' equity:
Common stock....................................................... 520
Additional paid-in capital......................................... 3,719
Retained earnings.................................................. 12,873
-------
Total stockholders' equity....................................... 17,112
-------
Commitments and contingencies
Total liabilities & equity.......................................... $23,938
=======
</TABLE>
See accompanying notes to unaudited combined financial statements.
F-58
<PAGE>
AMERICAN ALLSAFE COMPANY AND SILENCIO/SAFETY DIRECT, INC.
(WHOLLY-OWNED SUBSIDIARIES OF NCH CORPORATION)
UNAUDITED COMBINED STATEMENTS OF EARNINGS
FOR THE NINE MONTHS ENDED JANUARY 31, 1998 AND 1997
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED JANUARY
31,
---------------
1998 1997
------- -------
<S> <C> <C>
Net sales...................................................... $24,977 $22,652
Cost of sales.................................................. 16,407 15,063
Marketing & administrative expenses ........................... 6,611 6,112
------- -------
23,018 21,175
Operating earnings............................................ 1,959 1,477
Interest expense............................................... 170 165
------- -------
Earnings before income taxes.................................. 1,789 1,312
Provision for income taxes .................................... 734 466
------- -------
Net earnings.................................................. $ 1,055 $ 846
======= =======
</TABLE>
See accompanying notes to unaudited combined financial statements.
F-59
<PAGE>
AMERICAN ALLSAFE COMPANY AND SILENCIO/SAFETY DIRECT, INC.
(WHOLLY-OWNED SUBSIDIARIES OF NCH CORPORATION)
UNAUDITED COMBINED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JANUARY 31, 1998 AND 1997
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
JANUARY 31,
------------
1998 1997
------ ----
<S> <C> <C>
Cash Flows From Operating Activities:
Net earnings.................................................... $1,055 $846
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Depreciation and amortization.................................. 787 775
Deferred income taxes.......................................... 89 (67)
Changes in operating assets and liabilities:
Accounts receivable............................................ 549 233
Inventories.................................................... (814) (489)
Intercompany receivables....................................... (962) (588)
Prepaid expenses............................................... 8 39
Accounts payable, accrued expenses and income taxes payable.... 46 150
Other noncurrent assets........................................ (31) (27)
------ ----
Net cash provided by operating activities.................. 727 872
------ ----
Cash Flows From Investing Activities:
Purchases of property, plant and equipment...................... (679) (908)
Sales of property, plant and equipment.......................... -- (10)
------ ----
Net cash used in investing activities...................... (679) (918)
------ ----
Net Decrease in Cash and Cash Equivalents ....................... 48 (46)
Cash and Cash Equivalents at Beginning of Year................... 164 129
------ ----
Cash and Cash Equivalents at End of Year......................... $ 212 $ 83
====== ====
</TABLE>
See accompanying notes to unaudited combined financial statements.
F-60
<PAGE>
AMERICAN ALLSAFE COMPANY AND SILENCIO/SAFETY DIRECT, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
JANUARY 31, 1998 AND 1997
(1) BASIS OF PRESENTATION
The accompanying unaudited combined financial statements include the
accounts of American Allsafe Company and Silencio/Safety Direct, Inc.,
(collectively, the "Company"), wholly owned subsidiaries of NCH corporation
(the "Parent"). Significant intercompany transactions and balances between
these two subsidiaries of the Parent have been eliminated. In addition, all
adjustments, consisting of only normal recurring adjustments, which are, in
the opinion of management of the registrant, necessary for a fair statement of
the operating results for the nine month periods ending January 31, 1998 and
1997 have been made. These financial statements have been prepared in
accordance with the instructions to Form 10-Q and therefore do not include all
information and footnotes necessary for a fair presentation of financial
position, results of operations, and changes in cash flows is conformity with
generally accepted accounting principles.
(2) INVENTORY
Inventories at January 31, 1998, net of reserves of approximately $176,
consist of the following:
<TABLE>
<CAPTION>
1998
------
<S> <C>
Raw materials............................................................ $2,287
Finished goods........................................................... 3,765
------
$6,052
======
</TABLE>
(3) INCOME TAXES
The following are the components of the provision for income taxes for the
nine month periods ended January 31, 1998 and 1997.
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
U.S. federal:
Current.............................................................. $525 $526
Deferred............................................................. 89 (75)
State-current........................................................ 120 15
---- ----
$734 $466
==== ====
</TABLE>
(4) TRANSACTIONS WITH AFFILIATES
Certain of the Company's corporate administrative functions, including
accounting and data processing are provided by the Parent. The costs of these
administrative functions is allocated to the Company in proportion to the
budgeted net revenues of each company. Management believes this allocation
method is reasonable, however, such allocated costs may not necessarily be
indicative of the cost of obtaining such service if the Company operated on a
stand alone basis. General and administrative expenses include approximately
$252 and $222 for the nine month periods ended January 31, 1998 and 1997,
respectively.
(5) SUBSEQUENT EVENT
At January 31, 1998 and 1997, $3.7 million of industrial revenue bonds which
accrue interest at 71.9% of prime (8.26% at April 30, 1997) were outstanding.
During the period ended January 31, 1998 and 1997 interest
F-61
<PAGE>
AMERICAN ALLSAFE COMPANY AND SILENCIO/SAFETY DIRECT, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONCLUDED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
JANUARY 31, 1998 AND 1997
costs, approximately $170 and $165, respectively, were expensed as incurred.
For the same periods, interest payments were $169 and $164. The bonds are
secured by property and mature on December 1, 2005. In March 1998, the
outstanding balance of the industrial revenue bonds was retired. Concurrently,
with the retirement of the industrial revenue bonds, property having a
carrying value of approximately $1.1 million and which was previously securing
a portion of the industrial revenue bonds, was sold to a related party for a
sales price which approximated carrying value.
Pursuant to a certain stock purchase agreement, in March 1998 the Parent
agreed to sell all of the outstanding capital stock of the Company for $29.5
million. This sale was consummated on April 21, 1998.
F-62
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS
OFFERING OTHER THAN THOSE CONTAINED IN THIS OFFERING CIRCULAR, AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR THE INITIAL PURCHASERS. THIS OFFERING
CIRCULAR DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES, NOR DOES IT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS OFFERING CIRCULAR NOR ANY SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF
OR THAT INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
ITS DATE.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary................................................................... 1
Risk Factors.............................................................. 14
The Company............................................................... 21
Use of Proceeds........................................................... 23
Capitalization............................................................ 24
Selected Historical Financial Data........................................ 25
Management's Discussion and Analysis Of Results of Operations
and Financial Condition.................................................. 27
Business.................................................................. 30
Management................................................................ 42
Principal Stockholders.................................................... 46
Description of Certain Indebtedness....................................... 48
Certain Transactions...................................................... 49
The Exchange Offer........................................................ 50
Description of Notes...................................................... 59
Plan of Distribution...................................................... 92
Certain Tax Considerations................................................ 93
Legal Matters............................................................. 97
Experts................................................................... 97
Available Information..................................................... 97
Unaudited Pro Forma Consolidated Financial Statements..................... P-1
Index to Consolidated Financial Statements................................ F-1
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
$115,000,000
[LOGO OF JACKSON PRODUCTS, INC.]
JACKSON PRODUCTS, INC.
9 1/2% SERIES B
SENIOR SUBORDINATED NOTES
DUE 2005
---------------------
PROSPECTUS
---------------------
JEFFERIES & COMPANY, INC.
GOLDMAN, SACHS & CO.
, 1998
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
(a) The Delaware General Corporation Law (Section 145) gives Delaware
corporations broad powers to indemnify their present and former directors and
officers and those of affiliated corporations against expenses incurred in the
defense of any lawsuit to which they are made parties by reason of being or
having been such directors or officers, subject to specified conditions and
exclusions; gives a director or officer who successfully defends an action the
right to be so indemnified; and authorizes the registrant to buy directors'
and officers' liability insurance. Such indemnification is not exclusive of
any other rights to which those indemnified may be entitled under any by-laws,
agreement, vote of stockholders or otherwise.
(b) The Certificate of Incorporation of the registrant requires, and the By-
Laws of the registrant provides for, indemnification of directors, officers,
employees and agents to the full extent permitted by law.
(c) The Purchase Agreement and the Registration Rights Agreement (the forms
of which are included as Exhibits 1 and 4.3 to this Registration Statement)
provide for the identification under certain circumstances of the registrant,
its directors and certain of its officers by the Underwriters.
(d) In accordance with Section 102(b)(7) of the Delaware General Corporation
Law, the registrant's Amended and Restated Certificate of Incorporation
provides that directors shall not be personally liable for monetary damages
for breaches of their fiduciary duty as directors except for (1) breaches of
their duty of loyalty to the registrant or its stockholders, (2) acts or
omissions not in good faith or which involve intentional misconduct or knowing
violations of law, (3) under Section 174 of the Delaware General Corporation
Law (unlawful payment of dividends or stock purchase or redemption) or (4)
transactions from which a director derives an improper personal benefit.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits:
A list of the exhibits included as part of this Registration Statement is
set forth in the Exhibit Index that immediately precedes such exhibits and is
incorporated herein by reference.
(b) Financial Statement Schedules:
All schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission have been omitted
because they are not required, are inapplicable or the required information
has already been provided elsewhere in the registration statement.
ITEM 22. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registrant statement;
(i)To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii)To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high and of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
II-1
<PAGE>
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective registration statement.
(iii)To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
the offering.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
(c) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time is was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(d) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
(e) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(f) The registrant has not entered into any arrangement or understanding
with any person to distribute the securities to be received in the Exchange
Offer and to the best of the registrant's information and belief, each person
participating in the Exchange Offer is acquiring the securities in its
ordinary course of business and is not engaged in, does not intend to engage
in, and has no arrangement or understanding with any person to participate in
the distribution of the securities to be received in the Exchange Offer. In
this regard, the registrant will make
II-2
<PAGE>
each person participating in the Exchange Offer aware (through the Exchange
Offer Prospectus or otherwise) that if such person is participating in the
Exchange Offer for the purpose of distributing the securities to be acquired
in the registered exchange offer, such person (1) could not rely on the staff
position enunciated in Exxon Capital Holdings Corporation (available April 13,
1989) or interpretive letters of similar effect and (2) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction. The registrant acknowledges
that such a secondary resale transaction by such person participating in the
Exchange Offer for the purpose of distributing the securities to be acquired
in the registered exchange offer should be covered by an effective
registration statement containing the selling securityholder information
required by Item 507 of Regulation S-K.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Amendment No. 2 to this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in
the City of New York, State of New York, on July 28, 1998.
JACKSON PRODUCTS, INC.
By: /s/ A. Richard Caputo,
Jr.
_________________________
A. Richard Caputo, Jr.
Vice President and Direc-
tor
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 2 to this Registration Statement has been signed by the
following persons in the capacities indicated on July 28, 1998.
SIGNATURE TITLE
--------- -----
*
Chairman, President,
- --------------------------------- Chief Executive Officer
Robert H. Elkin and a Director
(Principal Executive
Officer)
*
Vice President, Chief
- --------------------------------- Financial Officer and
Christopher T. Paule Secretary (Principal
Financial and
Accounting Officer)
Vice President and
* Director
- ---------------------------------
A. Richard Caputo, Jr.
*
Director
- ---------------------------------
Jonathan F. Boucher
*
Director
- ---------------------------------
John W. Jordan, II
*
Director
- ---------------------------------
David W. Zalaznick
By: /s/ A. Richard Caputo,
Jr.
_________________________
As Attorney-in-Fact
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, this
additional registrant has duly caused this Amendment No. 2 to this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York, State of New York, on July
28, 1998.
FLEX-O-LITE, INC.
By: /s/ A. Richard Caputo,
Jr.
_____________________
A. Richard Caputo, Jr.
Vice President and Direc-
tor
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 2 to this Registration Statement has been signed by the
following persons in the capacities indicated on July 28, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
*
- --------------------------------- Chairman, President,
Robert H. Elkin Chief Executive Officer
and a Director
(Principal Executive
Officer)
*
- --------------------------------- Vice President, Chief
Christopher T. Paule Financial Officer and
Secretary (Principal
Financial and
Accounting Officer)
* Vice President and
- --------------------------------- Director
A. Richard Caputo, Jr.
*
- --------------------------------- Director
Jonathan F. Boucher
*
- --------------------------------- Director
John W. Jordan, II
*
- --------------------------------- Director
David W. Zalaznick
By: /s/ A. Richard Caputo, Jr.
_____________________
As Attorney-in-Fact
</TABLE>
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, this
additional registrant has duly caused this Amendment No. 2 to this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York, State of New York, on July
28, 1998.
AMERICAN ALLSAFE COMPANY
By: /s/ A. Richard Caputo,
Jr.
_____________________
A. Richard Caputo, Jr.
Vice President and Direc-
tor
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 2 to this Registration Statement has been signed by the
following persons in the capacities indicated on July 28, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
*
- --------------------------------- Chairman, President,
Robert H. Elkin Chief Executive Officer
and a Director
(Principal Executive
Officer)
*
- --------------------------------- Vice President, Chief
Christopher T. Paule Financial Officer and
Secretary (Principal
Financial and
Accounting Officer)
* Vice President and
- --------------------------------- Director
A. Richard Caputo, Jr.
*
- --------------------------------- Director
Jonathan F. Boucher
*
- --------------------------------- Director
John W. Jordan, II
*
- --------------------------------- Director
David W. Zalaznick
By: /s/ A. Richard Caputo, Jr.
_____________________
As Attorney-in-Fact
</TABLE>
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, this
additional registrant has duly caused this Amendment No. 2 to this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York, State of New York, on July
28, 1998.
SILENCIO/SAFETY DIRECT, INC.
By: /s/ A. Richard Caputo,
Jr.
_____________________
A. Richard Caputo, Jr.
Vice President and Direc-
tor
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 2 to this Registration Statement has been signed by the
following persons in the capacities indicated on July 28, 1998.
SIGNATURE TITLE
--------- -----
*
- --------------------------------- Chairman, President,
Robert H. Elkin Chief Executive Officer
and a Director
(Principal Executive
Officer)
*
- --------------------------------- Vice President, Chief
Christopher T. Paule Financial Officer and
Secretary (Principal
Financial and
Accounting Officer)
* Vice President and
- --------------------------------- Director
A. Richard Caputo, Jr.
*
- --------------------------------- Director
Jonathan F. Boucher
*
- --------------------------------- Director
John W. Jordan, II
*
- --------------------------------- Director
David W. Zalaznick
By: /s/ A. Richard Caputo, Jr.
--------------------------
As Attorney-in-Fact
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, this
additional registrant has duly caused this Amendment No. 2 to this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, State of New York, on July 28, 1998.
OSD ENVIZION, INC.
By: /s/ A. Richard Caputo, Jr.
___________________________
A. Richard Caputo, Jr.
Vice President and Director
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 2 to this Registration Statement has been signed by the
following persons in the capacities indicated on July 28, 1998.
SIGNATURE TITLE
*
- --------------------------------- Chairman, President,
Chief Executive Officer
Robert H. Elkin and a Director
(Principal Executive
Officer)
*
- --------------------------------- Vice President, Chief
Financial Officer and
Christopher T. Paule Secretary (Principal
Financial and
Accounting Officer)
*
- --------------------------------- Vice President and
Director
A. Richard Caputo, Jr.
*
- --------------------------------- Director
Jonathan F. Boucher
*
- --------------------------------- Director
John W. Jordan, II
*
- --------------------------------- Director
David W. Zalaznick
By: /s/ A. Richard Caputo, Jr.
_____________________
As Attorney-in-Fact
II-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, this
additional registrant has duly caused this Amendment No. 2 to this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York, State of New York, on July
28, 1998.
CRYSTALOID TECHNOLOGIES,
INC.
By: /s/ A. Richard Caputo,
Jr.
_____________________
A. Richard Caputo, Jr.
Vice President and Direc-
tor
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 2 to this Registration Statement has been signed by the
following persons in the capacities indicated on July 28, 1998.
SIGNATURE TITLE
--------- -----
*
- --------------------------------- Chairman, President,
Robert H. Elkin Chief Executive Officer
and a Director
(Principal Executive
Officer)
*
- --------------------------------- Vice President, Chief
Christopher T. Paule Financial Officer and
Secretary (Principal
Financial and
Accounting Officer)
* Vice President and
- --------------------------------- Director
A. Richard Caputo, Jr.
*
- --------------------------------- Director
Jonathan F. Boucher
*
- --------------------------------- Director
John W. Jordan, II
*
- --------------------------------- Director
David W. Zalaznick
By: /s/ A. Richard Caputo, Jr.
--------------------------
As Attorney-in-Fact
II-9
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------- ----------- ------------
<C> <S> <C>
1 Purchase Agreement, dated as of April 16, 1998, by
and among Jackson Products, Inc. (the "Registrant"),
Jefferies & Company, Inc. and Goldman, Sachs & Co.... +
2.1 Stock Purchase Agreement, dated as of March 30, 1998,
by and among Jackson Acquisition, Inc., NCH
Corporation, American Allsafe Company and
Silencio/Safety Direct, Inc.*........................ +
2.2 Stock Purchase Agreement, dated as of March 31, 1998,
by and among Crystaloid Technologies, Inc., the
Management Sellers party thereto, Dahl Partners
Incorporated and Crystaloid Electronics Company*..... +
3.1 Amended and Restated Certificate of Incorporation of
the Registrant....................................... +
3.2 Bylaws of the Registrant............................. +
4.1 Indenture, dated as of April 22, 1998, between the
Registrant and State Street Bank and Trust Company,
as Trustee........................................... +
4.2 Form of Global Series A Senior Note.................. +
4.3 Form of Global Series B Senior Note .................
4.4 Registration Rights Agreement, dated as of April 22,
1998, by and among the Registrant, Jefferies &
Company, Inc. and Goldman, Sachs & Co. .............. +
4.5 Supplemental Indenture, dated as of April 24, 1998,
among the Registrant, its subsidiaries named therein
and State Street Bank and Trust Company..............
4.6 Stockholders Agreement, dated as of August 16, 1995,
by and among the Registrant and its stockholders.....
4.7 First Amendment to Stockholders Agreement, dated as
of March 1, 1996, by and among the Registrant and its
stockholders.........................................
4.8 Second Amendment to Stockholders Agreement, dated as
of July 1, 1996, by and among the Registrant and its
stockholders.........................................
4.9 Third Amendment to Stockholders Agreement, dated as
of June 1, 1997, by and among the Registrant and its
stockholders.........................................
4.10 Jackson Products, Inc. 1995 Management Stock Option
Plan, dated as of August 16, 1995....................
4.11 First Amendment to 1995 Management Stock Option Plan,
dated as of June 1,
1997.................................................
4.12 Form of Stock Option Agreement.......................
4.13 Jordan Investors Subscription Agreement, dated as of
August 16, 1995, by and among the Registrant and
certain stockholders named therein...................
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------- ----------- ------------
<C> <S> <C>
4.14 Advisor Subscription Agreement, dated as of August
16, 1995, between the Registrant and Safety Partners,
L.P. ................................................
4.15 Management Subscription Agreement, dated as of August
16, 1995, by and among the Registrant and certain
stockholders named therein...........................
4.16 First Amendment to Management Subscription Agreement,
dated March 1, 1996, by and among the Registrant and
certain stockholders named therein...................
4.17 Second Amendment to Management Subscription
Agreement, dated as of December 1, 1996, by and among
the Registrant and certain stockholders named
therein..............................................
4.18 Form of Non-Recourse Promissory Note between the
Registrant and certain of its stockholders...........
4.19 Form of Stock Pledge Agreement between the Registrant
and certain of its stockholders......................
4.20 Securities Purchase Agreement, dated as of August 16,
1995, by and among the Registrant and certain
stockholders named therein...........................
4.21 First Amendment to Securities Purchase Agreement,
dated as of July 1, 1996, by and among the Registrant
and certain stockholders named therein...............
4.22 Form of Warrant of the Registrant....................
5 Opinion of Mayer, Brown & Platt......................
8 Tax opinion (included in the opinion filed as Exhibit
5)...................................................
10.1 Credit Agreement, dated as of April 22, 1998, by and
among the Registrant, BankBoston, N.A., as Agent,
Mercantile Bank National Association, as Co-agent,
the other lenders party thereto, and BancBoston
Securities, Inc., as Syndication Agent and Arranger.. +
10.2 Revolving Note in the aggregate principal amount of
$19,500,000.......................................... +
10.3 Revolving Note in the aggregate principal amount of
$10,500,000.......................................... +
10.4 Acquisition Note in the aggregate principal amount of
$61,750, 000......................................... +
10.5 Acquisition Note in the aggregate principal amount of
$33,250,000.......................................... +
10.6 Guaranty, dated as of April 22, 1998, by and among
Flex-O-Lite, Inc., OSD Envizion, Inc., Crystaloid
Technologies, Inc., Jackson Acquisition, Inc.,
American Allsafe Company, Silencio/Safety Direct,
Inc. and BankBoston, N.A., as Agent.................. +
10.7 Stock Pledge Agreement, dated as of April 22, 1998,
by and between the Registrant and BankBoston, N.A.,
as Agent............................................. +
10.8 Stock Pledge Agreement (Subsidiaries), dated as of
April 22, 1996, by and between Flex-O-Lite, Inc. and
BankBoston, N.A., as Agent........................... +
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------- ----------- ------------
<C> <S> <C>
10.9 Stock Pledge Agreement (Subsidiaries), dated as of
April 22, 1998, by and between Jackson Acquisition,
Inc. and BankBoston, N.A., as Agent.................. +
10.10 Security Agreement, dated as of April 22, 1998, by
and between the Registrant and BankBoston, N.A., as
Agent................................................ +
10.11 Security Agreement (Subsidiaries), dated as of April
22, 1998 by and among Flex-O-Lite, Inc., OSD
Envizion, Inc., Crystaloid Technologies, Inc.,
Jackson Acquisition, Inc., American Allsafe Company,
Silencio/Safety Direct, Inc. and BankBoston, N.A., as
Agent................................................ +
10.12 Patent Collateral Assignment and Security Agreement,
dated as of April 22, 1998, by and between the
Registrant and BankBoston, N.A., as Agent............ +
10.13 Patent Collateral Assignment and Security Agreement,
dated as of April 22, 1998, by and between the Flex-
O-Lite, Inc. and BankBoston, N.A., as Agent.......... +
10.14 Patent Collateral Assignment and Security Agreement,
dated as of April 22, 1998, by and between the OSD
Envizion, Inc. and BankBoston, N.A., as Agent........ +
10.15 Patent Collateral Assignment and Security Agreement,
dated as of April 22, 1998, by and between American
Life Allsafe Company and BankBoston, N.A., as Agent.. +
10.16 Patent Collateral Assignment and Security Agreement,
dated as of April 22, 1998, by and between the
Silencio/Safety Direct, Inc. and BankBoston, N.A., as
Agent................................................ +
10.17 Patent Collateral Assignment and Security Agreement,
dated as of April 22, 1998, by and between the
Crystaloid Technologies, Inc. and BankBoston, N.A.,
as Agent............................................. +
10.18 Trademark Collateral Assignment and Security
Agreement, dated as of April 22, 1998, by and between
the Registrant and BankBoston, N.A., as Agent........ +
10.19 Trademark Collateral Assignment and Security
Agreement, dated as of April 22, 1998, by and between
the Flex-O-Lite, Inc. and BankBoston, N.A., as Agent. +
10.20 Trademark Collateral Assignment and Security
Agreement, dated as of April 22, 1998, by and between
the OSD Envizion, Inc. and BankBoston, N.A., as
Agent................................................ +
10.21 Trademark Collateral Assignment and Security
Agreement, dated as of April 22, 1998, by and between
American Allsafe Company and BankBoston, N.A., as
Agent................................................ +
10.22 Trademark Collateral Assignment and Security
Agreement, dated as of April 22, 1998, by and between
the Silencio/Safety Direct, Inc. and BankBoston,
N.A., as Agent....................................... +
10.23 Trademark Collateral Assignment and Security
Agreement, dated as of April 22, 1998, by and between
the Crystaloid Technologies, Inc. and BankBoston,
N.A., as Agent....................................... +
10.24 Form of Indemnification Agreement, dated as of August
16, 1995, between the Registrant and its directors... +
10.25 TJC Management Consulting Agreement, dated as of
August 16, 1995, by and among, the Registrant, Flex-
O-Lite, Inc. and TJC Management Corporation.......... +
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------- ----------- ------------
<C> <S> <C>
10.26 Employment and Non-Interference Agreement, dated as
of August 15, 1995, by and between the Registrant
and Robert H. Elkin................................. +
10.27 Amendment to Employment Agreement, dated as of April
22, 1998, by and between the Registrant and Robert
H. Elkin............................................ +
10.28 Employment and Non-Interference Agreement, dated as
of August 15, 1995, by and between the Registrant
and Christopher T. Paule............................ +
10.29 Amendment to Employment Agreement, dated as of April
22, 1998, by and between the Registrant and
Christopher T. Paule................................ +
10.30 Employment and Non-Interference Agreement, dated as
of August 16, 1995, by and between Flex-O-Lite, Inc.
and Allan Huning.................................... +
10.31 Employment and Non-Interference Agreement, dated as
of April 22, 1998, by and between the Registrant and
Mark R. Hefty....................................... +
10.32 Employment and Non-Interference Agreement, dated as
of April 22, 1998, by and between the Registrant,
Crystaloid Technologies, Inc. and Edward D. Surjan,
Jr.................................................. +
10.33 Employment and Non-Interference Agreement, dated as
of April 22, 1998, by between Registrant, Crystaloid
Technologies, Inc. and Edward M. Stiles............. +
10.34 Employment and Non-Interference Agreement, dated as
of April 22, 1998, by between Registrant, Crystaloid
Technologies, Inc. and Michael A. Fout.............. +
10.35 Employment and Non-Interference Agreement, dated as
of April 22, 1998, by between Registrant, Crystaloid
Technologies, Inc. and Gregory J. Putman............ +
10.36 Employment and Non-Interference Agreement, dated as
of April 22, 1998, by between American Allsafe
Company and Lincoln M. Kennedy...................... +
10.37 Stock Appreciation Rights Agreement, dated as of
April 22, 1998, between the Registrant and Robert H.
Elkin............................................... +
10.38 Stock Appreciation Rights Agreement, dated as of
April 22, 1998, between the Registrant and
Christopher T. Paule................................ +
10.39 Stock Appreciation Rights Agreement, dated as of
April 22, 1998, between the Registrant and Mark R.
Hefty............................................... +
10.40 Stock Appreciation Rights Agreement, dated as of
April 22, 1998, between the Registrant Crystaloid
Technologies, Inc. and Edward D. Surjan, Jr......... +
10.41 Stock Appreciation Rights Agreement, dated as of
April 22, 1998, between Registrant, Crystaloid
Technologies, Inc. and Edward M. Stiles............. +
10.42 Stock Appreciation Rights Agreement, dated as of
April 22, 1998, between Registrant, Crystaloid
Technologies, Inc. and Michael A. Fout.............. +
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------- ----------- ------------
<C> <S> <C>
10.43 Intercompany Management Consulting Agreement, dated as
of August 16, 1995, by and among the Registrant and its
subsidiaries...........................................
12 Statements regarding computation of ratios............. +
22 List of Subsidiaries of the Registrant................. +
23.1 Consent of Mayer, Brown & Platt (included in the
opinion filed as Exhibit 5)............................
23.2 Consent of KPMG Peat Marwick LLP (St. Louis office)....
23.3 Consent of KPMG Peat Marwick LLP (Dallas office).......
24 Power of Attorney (included on the signature page in
Part II of the Registration Statement).................
25 Statement on Form T-1 of eligibility of the Trustee
under the Trust Indenture Act .........................
27.1 Financial Data Schedule for period from January 1 to
December 31, 1997......................................
27.2 Financial Data Schedule for period from January 1 to
March 31, 1998.........................................
99.1 Form of Letter of Transmittal..........................
99.2 Form of Letter to Clients..............................
99.3 Form of Notice of Guaranteed Delivery..................
99.4 Form of Letter to Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees.....................
</TABLE>
- --------
* Schedules and exhibits not included, however, they will be provided upon
written request delivered to the address set forth on the cover of this
Registration Statement.
+ Filed previously.
<PAGE>
EXHIBIT 4.3
(Face of Note)
===============================================================================
CUSIP
----------
91/2% Senior Subordinated Notes due 2005
No. $
---- ----------
JACKSON PRODUCTS, INC.
promises to pay to or registered assigns, the principal sum of
-------- ----------
Dollars on April 15, 2005.
Interest Payment Dates: April 15 and October 15
Record Dates: April 1 and October 1
================================================================================
<PAGE>
Dated: ,1998
-----------
JACKSON PRODUCTS, INC.
By:
------------------
Name:
Title:
This is one of the Global
Notes referred to in the
within-mentioned Indenture:
State Street Bank and Trust Company,
as Trustee
By:
-----------------------------
Dated:
--------------------------
<PAGE>
(Back of Note)
9 1/2% Senior Subordinated Notes due 2005
THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL
OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES
EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED
PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE
EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE,
(III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT
TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO
A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY.
Capitalized terms used herein shall have the meanings assigned to them in
the Indenture referred to below unless otherwise indicated.
1. INTEREST. Jackson Products, Inc., a Delaware corporation (the
"Company"), promises to pay interest on the principal amount of this Note at
91/2% per annum from April 22, 1998 until maturity. The Company will pay
interest semi-annually on April 15 and October 15 of each year, or if any such
day is not a Business Day, on the next succeeding Business Day (each, an
"Interest Payment Date"). Interest on the Notes will accrue from the most recent
date to which interest has been paid or, if no interest has been paid, from
April 22, 1998; provided that if there is no existing Default in the payment of
interest, and if this Note is authenticated between a record date referred to on
the face hereof and the next succeeding Interest Payment Date, interest shall
accrue from such next succeeding Interest Payment Date; and provided further
that the first Interest Payment Date shall be October 15, 1998. The Company
shall pay interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue principal and premium, if any, from time to time on
demand at a rate that is 1% per annum in excess of the rate then in effect; it
shall pay interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest (without regard to any
applicable grace periods) from time to time on demand at the same rate to the
extent lawful. Interest will be computed on the basis of a 360-day year of
twelve 30-day months.
2. METHOD OF PAYMENT. The Company will pay interest on the Notes (except
defaulted interest) to the Persons who are registered Holders of Notes at the
close of business on the April 1 or October 1 next preceding the Interest
Payment Date, even if such Notes are cancelled after such record date and on or
before such Interest Payment Date, except as provided in Section 2.12 of the
Indenture with respect to defaulted interest. The Notes will be payable as to
principal, premium and interest at the office of the Paying Agent and Registrar.
Holders of Notes must surrender their Notes to the Paying Agent to collect
principal payments, and the Company may pay principal and interest by check and
may mail checks to a Holder's registered address; provided that all payments
with respect to Global Notes and Definitive Notes, the Holders of which have
given wire transfer instructions to the Company, will be required to be made by
wire transfer of immediately available funds to the accounts specified by the
Holders thereof. Such payment shall be in such coin or currency of the United
States of America as at the time of payment is legal tender for payment of
public and private debts.
<PAGE>
3. PAYING AGENT AND REGISTRAR. Initially, State Street Bank and Trust
Company, the Trustee under the Indenture, will act as Paying Agent and
Registrar. The Company may change any Paying Agent or Registrar without notice
to any Holder. The Company or any of its Subsidiaries may act in any such
capacity.
4. INDENTURE. The Company issued the Notes under an Indenture dated as of
April 22, 1998 ("Indenture") among the Company, the Guarantors and the Trustee.
The terms of the Notes include those stated in the Indenture and those made part
of the Indenture by reference to the Trust Indenture Act of 1939, as amended (15
U.S. Code (S)(S) 77aaa-77bbbb). The Notes are subject to all such terms, and
Holders are referred to the Indenture and such Act for a statement of such
terms. To the extent any provision of this Note conflicts with the express
provisions of the Indenture, the provisions of the Indenture shall govern and be
controlling. The Notes are obligations of the Company limited to $115.0 million
in aggregate principal amount.
5. OPTIONAL REDEMPTION.
a. Except as provided in subparagraph (b) of this Paragraph 5, the
Notes may not be redeemed at the option of the Company prior to April
15, 2001. During the 12-month period beginning on April 15 of the
years indicated below, the Notes will be redeemable, at the option of
the Company, in whole or in part, on at least 30 but not more than 60
days' notice to each Holder of Notes to be redeemed, at the redemption
prices in cash (expressed as percentages of the principal amount) set
forth below, plus any accrued and unpaid interest to the redemption
date:
Year Percentage
---- ----------
2001............................ 104.750%
2002............................ 103.167%
2003............................ 101.583%
2004 and thereafter............. 100.000%
b. Notwithstanding the provisions of subparagraph (a) of this
Paragraph 5, prior to April 15, 2001, the Company may (but shall not
have the obligation to) redeem up to one-third of the aggregate
principal amount of Notes ever issued under the Indenture at a
redemption price in cash of 109 1/2% of the principal amount thereof,
plus accrued and unpaid interest to the redemption date, with the net
proceeds of one or more Equity Offerings (as defined in the
Indenture); provided that at least two-thirds of the aggregate
principal amount of Notes ever issued under the Indenture remains
outstanding immediately after the occurrence of any such redemption;
and provided further that any such redemption shall occur within 60
days of the date of the closing of any such Equity Offering.
<PAGE>
6. MANDATORY REDEMPTION.
Except as set forth in paragraph 7 below, the Company shall not be required
to make mandatory redemption payments with respect to the Notes.
7. REPURCHASE AT OPTION OF HOLDER.
a. Upon the occurrence of a Change of Control (such date being the
"Change of Control Trigger Date"), each Holder of Notes shall have the
right to require the Company to purchase all or any part (equal to
$1,000 or an integral multiple thereof) of such Holder's Notes
pursuant to an Offer (as defined in the Indenture) pursuant to Section
3.08 of the Indenture at a purchase price in cash equal to 101% of the
aggregate principal amount thereof, plus any accrued and unpaid
interest to the date of purchase. Within 30 days following any Change
of Control Trigger Date, subject to the provisions of the Indenture,
the Company shall mail a notice to each Holder of Notes at such
Holder's registered address setting forth the procedures governing the
Offer as required by the Indenture.
b. When the aggregate amount of Excess Proceeds (as defined in the
Indenture) in connection with an Asset Sale exceeds $10,000,000 (such
date being an "Asset Sale Trigger Date"), the Company shall make an
Offer pursuant to Section 3.08 of the Indenture to all Holders of
Notes to purchase the maximum principal amount of the Notes then
outstanding that may be purchased out of Excess Proceeds, at an offer
price in cash equal to 100% of principal amount thereof, plus any
accrued and unpaid interest to the Purchase Date, in accordance with
the procedures set forth in the Indenture. Notwithstanding the
foregoing, to the extent that any or all of the Net Proceeds of an
Asset Sale is prohibited or delayed by applicable local law from being
repatriated to the United States, the portion of such Net Proceeds so
affected will not be required to be applied as described in this or
the preceding paragraph, but may be retained for so long, but only for
so long, as the applicable local law prohibits repatriation to the
United States. To the extent that any Excess Proceeds remain after
completion of an Offer, the Company may use such remaining amount for
general corporate purposes. If the aggregate principal amount of Notes
surrendered by Holders thereof exceeds the amount of Excess Proceeds,
the Trustee shall select the Notes to be purchased on a pro rata
basis. Holders of Notes that are subject to an offer to purchase will
receive an Asset Sale Offer from the Company prior to any related
purchase date and may elect to have such Notes purchased by completing
the form entitled "Option of Holder to Elect Purchase" on the reverse
side of this Note.
8. NOTICE OF REDEMPTION. Notice of any redemption or offer to purchase
will be mailed at least 30 days but not more than 60 days before the redemption
or purchase date to each Holder of Notes to be redeemed or purchased at such
Holder's registered address. Notes in denominations larger than $1,000 may be
redeemed in part but only in whole multiples of $1,000, unless all of the Notes
held by a Holder are to be redeemed. On and after the redemption date interest
will cease to accrue on Notes or portions thereof called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form
without coupons in denominations of $1,000 and integral multiples of $1,000. The
transfer of Notes may be registered and Notes may be exchanged as provided in
the Indenture. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Company may
<PAGE>
require a Holder to pay any taxes and fees required by law or permitted by the
Indenture. The Company need not exchange or register the transfer of any Note or
portion of a Note selected for redemption, except for the unredeemed portion of
any Note being redeemed in part. Also, the Company need not exchange or register
the transfer of any Notes for a period of 15 days before a selection of Notes to
be redeemed or during the period between a record date and the corresponding
Interest Payment Date.
10. PERSONS DEEMED OWNERS. The registered Holder of a Note may be treated
as its owner for all purposes.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions set
forth in the Indenture, the Indenture, the Note Guarantees or the Notes may be
amended or supplemented with the consent of the Holders of at least a majority
in principal amount of the Notes then outstanding under the Indenture voting as
a single class and any existing default (other than a payment default) or
compliance with any provision of the Indenture, the Note Guarantees or the Notes
may be waived with the consent of the Holders of a majority in principal amount
of the Notes then outstanding under the Indenture voting as a single class.
Without the consent of any Holder of Notes, the Company and the Trustee may
amend or supplement the Indenture, the Note Guarantees or the Notes to cure any
ambiguity, defect or inconsistency, to provide for uncertificated Notes in
addition to or in place of certificated Notes, to provide for the assumption by
a successor corporation of the Company's or Guarantors' obligations to Holders
of the Notes in case of a Disposition, to make any change that would provide any
additional rights or benefits to the Holders of the Notes or that does not
adversely affect the legal rights under the Indenture of any such Holder, to
comply with the requirements of the SEC in order to effect or maintain the
qualification of the Indenture under the Trust Indenture Act or to allow any
Guarantor to execute a supplemental indenture to the Indenture and/or a Note
Guarantee with respect to the Notes.
12. DEFAULTS AND REMEDIES. Events of Default include: (a) a default for 30
days in payment of interest on the Notes (whether or not prohibited by the
subordination provisions of the Indenture); (b) a default in payment when due of
principal or premium, if any, with respect to the Notes (whether or not
prohibited by the subordination provisions of the Indenture); (c) the failure of
the Company to comply with any of its other agreements or covenants in, or
provisions of, such Indenture or the Notes outstanding under such Indenture and
the Default continues for the period, if applicable, and after the notice
specified in the next paragraph; (d) a default by the Company or any Restricted
Subsidiary under any mortgage, indenture or instrument under which there may be
issued or by which there may be secured or evidenced any Indebtedness for money
borrowed by the Company or any Restricted Subsidiary (or the payment of which is
guaranteed by the Company or any Restricted Subsidiary), whether such
Indebtedness or guarantee now exists or shall be created hereafter, if (1)
either (A) such default results from the failure to pay principal of or interest
on any such Indebtedness at or after the final maturity thereof (after giving
effect to any extensions thereof) and such default continues for 30 days beyond
any applicable grace period, or (B) as a result of such default the maturity of
such Indebtedness has been accelerated prior to its expressed maturity, and (2)
the principal amount of such Indebtedness, together with the principal amount of
any other such Indebtedness in default for failure to pay principal or interest
thereon at final maturity, or, because of the acceleration of the maturity
thereof, aggregates in excess of $10,000,000; (e) a failure by the Company or
any Restricted Subsidiary to pay final judgments (not covered by insurance)
aggregating in excess of $5,000,000 which judgments a court of competent
jurisdiction does not rescind, annul or stay within 45 days after their entry
and the Default or an Event of Default continues for such period and after the
notice specified in the next paragraph; (f) certain events of bankruptcy or
insolvency involving the Company or any Significant Subsidiary; and (g) except
as permitted by the Indenture, any Note Guarantee shall be held in any judicial
proceeding unenforceable or invalid or shall cease for any reason to be in full
force and effect or any Guarantor, or any Person acting on
<PAGE>
behalf of any Guarantor, shall deny or disaffirm its obligations under its Note
Guarantee. A Default or Event of Default under clause (c) of this Paragraph 12
(other than an Event of Default arising pursuant to Section 5.01 of the
Indenture which shall be an Event of Default with the notice but without the
passage of time specified in this paragraph) is not an Event of Default under
the Indenture until the Trustee or the Holders of at least 25% in principal
amount of the Notes then outstanding notify the Company of the Default and the
Company does not cure the Default within 30 days after receipt of the notice. A
Default or Event of Default under clause (f) of this Paragraph 12 will result in
the Notes automatically becoming due and payable without further action or
notice. Upon the occurrence of an Event of Default (other than under clause (f)
of this Paragraph 12), the Trustee or the Holders of at least 25% in principal
amount of the then outstanding Notes may declare all Notes to be due and payable
by notice in writing to the Company and the Trustee as specified in the
Indenture, and, upon receipt by the Company of such notice, the principal of,
premium, if any, and any accrued and unpaid interest on, all Notes shall be due
and payable immediately; or (ii) if there are any amounts outstanding under the
Credit Agreement, to be due and payable immediately upon the first to occur of
(A) an acceleration under the Credit Agreement or (B) five business days after
receipt by the Company of such notice, but only if such Event of Default is then
continuing.
13. SUBORDINATION. The payment of principal of, premium, and interest
on the Notes will be subordinated in right of payment, as set forth in the
Indenture, to the prior payment in full in cash of all Senior Indebtedness,
whether outstanding on the date of the Indenture or thereafter incurred. The
Company agrees, and each Holder by accepting a Note agrees, that the payment of
principal of, premium and interest on the Notes is subordinated in right of
payment, to the extent and in the manner provided in the Indenture, to the prior
payment in full in cash of all Senior Indebtedness (whether outstanding on the
date hereof or thereafter created, incurred, assumed or guaranteed), and that
the subordination is for the benefit of the holders of Senior Indebtedness.
14. NOTE GUARANTEES. The payment of principal of, premium, and
interest on the Notes will be unconditionally guaranteed, jointly and severally,
on a senior subordinated basis by the Guarantors.
15. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not the Trustee.
16. No RECOURSE AGAINST OTHERS. A director, officer, employee,
incorporator or stockholder, of the Company, as such, shall not have any
liability for any obligations of the Company under the Notes or the Indenture or
for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of the Notes.
17. AUTHENTICATION. This Note shall not be valid until authenticated
by the manual signature of the Trustee or an authenticating agent.
18. ABBREVIATIONS. Customary abbreviations may be used in the name of
a Holder or an assignee, such as: TEN COM (=tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
19. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and
<PAGE>
the Trustee may use CUSIP numbers in notices of redemption as a convenience to
Holders. No representation is made as to the accuracy of such numbers either as
printed on the Notes or as contained in any notice of redemption and reliance
may be placed only on the other identification numbers placed thereon.
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to:
Jackson Products, Inc.
2997 Clarkson Road
Chesterfield, Missouri 63017
Attention: Chief Financial Officer
<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and transfer
this Note to
- --------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint
---------------------------------------------------------
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
Date:
-------------------
Your Signature:
-----------------------------
(Sign exactly as your name appears on the
face of this Note)
Signature Guarantee:
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company pursuant
to Section 4.10 or 4.15 of the Indenture, check the box below:
[ ] Section 4.10 [ ] Section 4.15
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state the
amount you elect to have purchased: $
------------------------------------------
Date: Your Signature:
------------------ -------------------------------
(Sign exactly as your name appears on the Note)
Tax Identification No:
---------------------------------
Signature Guarantee:
<PAGE>
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE
The following exchanges of a part of this Global Note for an interest
in another Global Note or for a Definitive Note, or exchanges of a part of
another Global Note or Definitive Note for an interest in this Global Note, have
been made:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Amount of Amount of
decrease in increase in Principal Amount Signature of
Principal Amount Principal of this Global Note authorized officer
of this Amount of this following such of Trustee or
Date of Exchange Global Note Global Note decrease (or increase) Note Custodian
- ---------------- ----------- ----------- --------------------- --------------
</TABLE>
<PAGE>
EXHIBIT 4.5
SUPPLEMENTAL INDENTURE
Supplemental Indenture (this "Supplemental Indenture"), dated as of April
24, 1998, among American Allsafe Company, a Delaware corporation ("Allsafe"),
successor by merger to Jackson Acquisition, Inc. and a wholly-owned subsidiary
of Jackson Products, Inc. (or its permitted successor), a Delaware corporation
(the "Company"), Silencio/Safety Direct, Inc., a Nevada corporation and wholly-
owned subsidiary of Allsafe ("Silencio" and, together with Allsafe, the "New
Guarantors"), the Company, the other Guarantors (as defined in the Indenture
referred to herein) and State Street Bank and Trust Company, as trustee under
the indenture referred to below (the "Trustee").
W I T N E S S E T H
WHEREAS, the Company has heretofore executed and delivered to the Trustee
an indenture (the "Indenture"), dated as of April 22, 1998 providing for the
issuance of an aggregate principal amount of up to $115,000,000 of 9 1/2% Senior
Subordinated Notes due 2005 (the "Notes");
WHEREAS, the Indenture provides that under certain circumstances the New
Guarantors shall execute and deliver to the Trustee a supplemental indenture
pursuant to which the New Guarantors shall unconditionally guarantee all of the
Company's Obligations under the Notes and the Indenture on the terms and
conditions set forth herein (the "Note Guarantee"); and
WHEREAS, pursuant to Section 9.06 of the Indenture, the Trustee is
authorized to execute and deliver this Supplemental Indenture.
NOW THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the New
Guarantors and the Trustee mutually covenant and agree for the equal and ratable
benefit of the Holders of the Notes as follows:
1. CAPITALIZED TERMS. Capitalized terms used herein without definition
shall have the meanings assigned to them in the Indenture. For the purposes of
this Agreement, where applicable, references to a Guarantor or the Guarantors
shall include the New Guarantors.
2. AGREEMENT TO GUARANTEE. The New Guarantors hereby agrees as follows:
(a) Along with all Guarantors named in the Indenture, to jointly and
severally Guarantee to each Holder of a Note authenticated and delivered by the
Trustee and to the Trustee and its successors and assigns, irrespective of the
validity and enforceability of the Indenture, the Notes or the obligations of
the Company hereunder or thereunder, that;
(i) the principal of and interest on the Notes will be promptly paid
in full when due, whether at maturity, by acceleration, redemption or
otherwise, and interest on the overdue principal of and interest on the
Notes, if any, if lawful, and all other obligations of the Company to the
Holders or the Trustee hereunder or thereunder will be promptly paid in
full or performed, all in accordance with the terms hereof and thereof; and
<PAGE>
(ii) in case of any extension of time of payment or renewal of any
Notes or any of such other obligations, that same will be promptly paid in
full when due or performed in accordance with the terms of the extension or
renewal, whether at stated maturity, by acceleration or otherwise. Failing
payment when due of any amount so guaranteed or any performance so
guaranteed for whatever reason, the Guarantors shall be jointly and
severally obligated to pay the same immediately.
(b) The obligations hereunder shall be unconditional, irrespective of the
validity, regularity or enforceability of the Notes or the Indenture, the
absence of any action to enforce the same, any waiver or consent by any Holder
of the Notes with respect to any provisions hereof or thereof, the recovery of
any judgment against the Company, any action to enforce the same or any other
circumstance which might otherwise constitute a legal or equitable discharge or
defense of a guarantor.
(c) The following is hereby waived: diligence, presentment, demand of
payment, filing of claims with a court in the event of insolvency or bankruptcy
of the Company, any right to require a proceeding first against the Company,
protest, notice and all demands whatsoever.
(d) This Note Guarantee shall not be discharged except by complete
performance of the obligations contained in the Notes and the Indenture.
(e) If any Holder or the Trustee is required by any court or otherwise to
return to the Company, the Guarantors, or any Custodian, Trustee, liquidator or
other similar official acting in relation to either the Company or the
Guarantors, any amount paid by either to the Trustee or such Holder, this Note
Guarantee, to the extent theretofore discharged, shall be reinstated in full
force and effect.
(f) The New Guarantors shall not be entitled to any right of subrogation in
relation to the Holders in respect of any obligations guaranteed hereby until
payment in full of all obligations guaranteed hereby.
(g) As between the Guarantors, on the one hand, and the Holders and the
Trustee, on the other hand, (x) the maturity of the obligations guaranteed
hereby may be accelerated as provided in Article 6 of the Indenture for the
purposes of this Note Guarantee, notwithstanding any stay, injunction or other
prohibition preventing such acceleration in respect of the obligations
guaranteed hereby, and (y) in the event of any declaration of acceleration of
such obligations as provided in Article 6 of the Indenture, such obligations
(whether or not due and payable) shall forthwith become due and payable by the
Guarantors for the purpose of this Note Guarantee.
(h) The Guarantors shall have the right to seek contribution from any non-
paying Guarantor so long as the exercise of such right does not impair the
rights of the Holders under the Guarantee.
(i) Pursuant to Section 12.03 of the Indenture, after giving effect to any
maximum amount and any other contingent and fixed liabilities that are relevant
under any applicable Bankruptcy or fraudulent conveyance laws, and after giving
effect to any collections from, rights to receive contribution from or payments
made by or on behalf of any other Guarantor in respect of the obligations of
such other Guarantor under Article 12 of the Indenture shall result in the
obligations of such Guarantor under its Note Guarantee not constituting a
fraudulent transfer or conveyance.
-2-
<PAGE>
3. EXECUTION AND DELIVERY. Each Guarantor agrees that the Note
Guarantees shall remain in full force and effect notwithstanding any failure to
endorse on each Note a notation of such Note Guarantee.
4. GUARANTOR MAY CONSOLIDATE, ETC., ON CERTAIN TERMS.
(a) No Guarantor may consolidate with or merge with or into (whether or not
such Guarantor is the surviving Person) another corporation, Person or entity
whether or not affiliated with such Guarantor unless:
(i) Subject to Section 12.06 of the Indenture, the Person formed by
or surviving any such consolidation or merger (if other than such
Guarantor) assumes all the obligations of such Guarantor pursuant to a
supplemental indenture in form and substance reasonably satisfactory to the
Trustee, under the Notes, this Indenture, the Note Guarantee and the
Registration Rights Agreement;
(ii) immediately after giving effect to such transaction, no Default
or Event of Default exists;
(iii) such Guarantor, or any Person formed by or surviving any such
consolidation or merger, would have Consolidated Net Worth (immediately
after giving effect to such transaction) equal to or greater than the
Consolidated Net Worth of such Guarantor immediately preceding such
transaction and
(iv) the Company would be permitted by virtue of the Company's pro
forma Cash Flow Coverage Ratio, immediately after giving effect to such
transaction, to incur at least $1.00 of additional Indebtedness pursuant to
the Cash Flow Coverage Ratio test set forth in Section 4.07 of the
Indenture;
provided that, the requirements of clauses (iii) and (iv) of this Section 4(a)
will not apply in the case of a consolidation with or merger with or into the
Company or another Guarantor.
(b) In case of any such consolidation, merger, sale or conveyance and upon
the assumption by the successor Person, by supplemental indenture, executed and
delivered to the Trustee in the form of Exhibit E to the Indenture or otherwise
---------
satisfactory in form to the Trustee, of the Note Guarantee endorsed upon the
Notes and the due and punctual performance of all of the covenants and
conditions of this Indenture to be performed by the Guarantor, such successor
Person shall succeed to and be substituted for the Guarantor with the same
effect as if it had been named herein as a Guarantor, Such successor Person
thereupon may cause to be signed any or all of the Note Guarantees to be
endorsed upon all of the Notes issuable hereunder which theretofore shall not
have been signed by the Company and delivered to the Trustee. All the Note
Guarantees so issued shall in all respects have the same legal rank and benefit
under this Indenture as the Note Guarantees theretofore and thereafter issued in
accordance with the terms of this Indenture as though all of such Note
Guarantees had been issued at the date of the execution hereof.
(c) Except as set forth in Articles 4 and 5 of the Indenture, and
notwithstanding clauses (a) and (b) above, nothing contained in this Indenture
or in any of the Notes shall prevent any consolidation or merger of a Guarantor
with or into the Company or another Guarantor, or shall prevent any sale or
conveyance of the property of a Guarantor as an entirety or substantially as an
entirety to the Company or another Guarantor.
-3-
<PAGE>
5. RELEASES.
(a) In the event of a sale or other disposition of all of the assets of any
Guarantor, by way of merger, consolidation or otherwise, or a sale or other
disposition of all of the capital stock of any Guarantor, then such Guarantor
(in the event of a sale or other disposition, by way of such a merger,
consolidation or otherwise, of all of the capital stock of such Guarantor) or
the corporation acquiring the property (in the event of a sale or other
disposition of all of the assets of such Guarantor) will be released and
relieved of any obligations under its Note Guarantee; provided that the Net
Proceeds of such sale or other disposition are applied in accordance with the
applicable provisions of this Indenture, including without limitation Sections
4.10 of the Indenture. Upon delivery by the Company to the Trustee of an
Officers' Certificate and an Opinion of Counsel to the effect that such sale or
other disposition was made by the Company in accordance with the applicable
provisions of the Indenture, including, without limitation, Section 4.10 of the
Indenture, the Trustee shall execute any documents reasonably required in order
to evidence the release of any Guarantor from its obligations under its Note
Guarantee.
(b) Any Guarantor not released from its obligations under its Note
Guarantee shall remain liable for the full amount of principal of and interest
on the Notes and for the other obligations of any Guarantor under the Indenture
as provided in Article 12 of the Indenture.
6. NO RECOURSE AGAINST OTHERS. No past, present or future director,
officer, employee, incorporator, stockholder or agent of the Guarantor, as such,
shall have any liability for any obligations of the Company or any Guarantor
under the Notes, any Note Guarantees, the Indenture or this Supplemental
Indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder of the Notes by accepting a Note
waives and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes. Such waiver may not be effective to
waive liabilities under the federal securities laws and it is the view of the
Commission that such a waiver is against public policy.
7. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW YORK
SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE BUT WITHOUT
GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT
THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
8. COUNTERPARTS. The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
9. EFFECT OF HEADINGS. The Section headings herein are for convenience
only and shall not affect the construction hereof
10. THE TRUSTEE. The Trustee shall not be responsible in any manner
whatsoever for or in respect of the validity or sufficiency of this Supplemental
Indenture or for or in respect of the recitals contained herein, all of which
recitals are made solely by the Guarantor and the Company.
[End of page]
-4-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed as of the date first above written.
SILENCIO/SAFETY DIRECT, INC.
By: /s/ Christopher T. Paule
--------------------------------------
Name: Christopher T. Paule
Title: Vice President
AMERICAN ALLSAFE COMPANY
(successor by merger to Jackson Acquisition, Inc.)
By: /s/ Christopher T. Paule
--------------------------------------
Name: Christopher T. Paule
Title: Vice President
JACKSON PRODUCTS, INC.
By: /s/ Christopher T. Paule
--------------------------------------
Name: Christopher T. Paule
Title: Vice President
CRYSTALOID TECHNOLOGIES, INC.
By: /s/ Christopher T. Paule
--------------------------------------
Name: Christopher T. Paule
Title: Vice President
OSD ENVIZION, INC.
By: /s/ Christopher T. Paule
--------------------------------------
Name: Christopher T. Paule
Title: Vice President
-5-
<PAGE>
FLEX-O-LITE, INC.
By: /s/ Christopher T. Paule
--------------------------------------
Name: Christopher T. Paule
Title: Vice President
STATE STREET BANK AND TRUST COMPANY,
as Trustee
By: /s/ Jacqueline Connor
---------------------------------------
Name: Jacqueline Connor
Title: Assistant Vice President
-6-
<PAGE>
EXHIBIT 4.6
JACKSON PRODUCTS, INC.
-------------------------------
STOCKHOLDERS AGREEMENT
------------------------------
Dated as of August 16, 1995
----------------------------------------------------
<PAGE>
STOCKHOLDERS AGREEMENT
----------------------
THIS STOCKHOLDERS AGREEMENT, dated as of August 16, 1995, (this
"Agreement") is by and among JACKSON PRODUCTS, INC., a Delaware corporation (the
"Company"), MCIT PLC, an investment trust organized under the laws of the United
Kingdom ("MCIT"), MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY, MASSMUTUAL
PARTICIPATION INVESTORS, MASSMUTUAL CORPORATE VALUE PARTNERS LIMITED, MASS
MUTUAL CORPORATE INVESTORS, THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY and
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY (collectively with MCIT, the
"Institutional Investors") and SAFETY PARTNERS, L.P. ("Safety Partners"), the
Jordan Investors (as hereinafter defined) that are signatories hereto, and the
management Stockholders referred to in the signature pages hereto (the
"Management Stockholders").
W I T N E S S E T H:
-------------------
WHEREAS, on the date hereof, the Company is authorized by its Certificate
of Incorporation to issue an aggregate of 16,200,000 shares of capital stock,
consisting of (i) 10,000,000 shares of Class A Common Stock, par value $0.01 per
share ("Class A Common Stock"); (ii) 4,500,000 shares of Class B Common Stock,
par value $0.01 per share ("Class B Common Stock"); (iii) 1,500,000 shares of
Class C Common Stock par value $0.01 per share ("Class C Common Stock") (the
Class A Common Stock, Class B Common Stock and Class C Common Stock being
hereinafter sometimes referred to as the "Common Stock"); (iv) 200,000 shares of
Serial Preferred Stock (the "Preferred Stock" and, collectively with the Common
Stock, the "Stock"); and each of the classes of Stock has the respective voting
powers, designations, preferences and relative, participating, optional and
other special rights and the qualifications, limitations and restrictions set
forth with respect thereto in such Certificate of Incorporation; and
WHEREAS, as of the date hereof and after giving effect to the transactions
contemplated hereby, the Stockholders will beneficially own the shares of Stock
as set forth in the Stockholder Schedule attached as Exhibit A hereto
---------
("Stockholder Schedule"); and
WHEREAS, Jackson Acquisition Corp. ("Acquisition") has entered into the
Jordan Investors Subscription Agreement, dated as of the date hereof, by and
among the Company and the Jordan Investors, in substantially the form of Exhibit
-------
B attached hereto (the "Jordan Investor Subscription Agreement"), pursuant to
- -
which the Jordan Investors are purchasing 2,905,172 shares of Class A Common
Stock; and
WHEREAS, Acquisition has entered into the Management Subscription
Agreement, as of the date hereof, by and among the
<PAGE>
Company and the Management Investors, in substantially the form of Exhibit C
---------
attached hereto (the "Management Subscription Agreement"), pursuant to which
certain Management Investors are purchasing 1,000,000 shares of Class C Common
Stock and options exercisable for 172,414 shares of Class C Common Stock (the
"Option Shares"); and
WHEREAS, Acquisition has entered into the Note Agreement (the "Note
Agreement"), dated as of the date hereof, with the Institutional Investors and
the Securities Purchase Agreement (together with the Note Agreement, the
"Purchase Agreements"), dated as of the date hereof, with the Institutional
Investors , pursuant to which the Institutional Investors have purchased an
aggregate of $34,000,000 in principal amount of 12.25% Senior Subordinated
Notes, 170,000 shares of Cumulative Exchangeable Preferred Stock, 750,000 shares
of Class A Common Stock, and warrants exercisable for 3,448,276 shares of Class
A Common Stock (the "Warrant Shares"); and
WHEREAS, Acquisition has entered into the Advisor Subscription Agreement,
dated as of the date hereof, in substantially the form of Exhibit D attached
---------
hereto (the "Advisor Subscription Agreement"), between Acquisition and Safety
Partners, pursuant to which Safety Partners is purchasing 344,828 shares of
Class A Common Stock; and
WHEREAS, the Company has entered into the Second Amended and Restated
Credit Agreement, dated as of the date hereof (the "Credit Agreement") by and
among Jackson Products, Inc., Jackson Holding Company, the Lenders parties
thereto and Heller Financial, Inc. ("Heller"), as Agent;
WHEREAS, the Company has entered into the Agreement and Plan of Merger,
dated as of the date hereof, (the "Merger Agreement") pursuant to which, among
other things, on the date hereof Jackson Acquisition Corp. ("Acquisition") is
merging with and into the Company with the Company being the surviving
corporation, which merger shall be followed by the merger of Jackson Products,
Inc. with and into the Company with the Company being the surviving corporation
and being renamed "Jackson Products, Inc." and the stockholders and other
security holders and creditors of Acquisition being the stockholders, security
holders and creditors of the Company;
WHEREAS, the parties hereto deem it in their best interests and in the best
interests of the Company to set forth their respective rights and obligations in
connection with their investment in the Company; and
WHEREAS, the parties hereto also desire to restrict the sale, assignment,
transfer, encumbrance or other disposition of certain shares of capital stock of
the Company, including issued
-2-
<PAGE>
and outstanding shares of Common Stock, and to provide for certain rights and
obligations in respect thereto as hereinafter provided;
NOW, THEREFORE, in consideration of the mutual agreements and
understandings set forth herein, the parties hereto hereby agree as follows:
ARTICLE I
Certain Definitions
-------------------
As used in this Agreement, the following terms shall have the following
respective meanings:
Acquisition Agreement shall mean the Agreement and Plan of Merger, dated as
---------------------
of August 14, 1995, among Jackson Holding Company, Jackson Acquisition Corp.,
Mills & Partners, Inc. and the stockholders named therein and the optionholders
named therein, including the Exhibits and Schedules thereto.
Affiliate shall mean with respect to any Person, (a) any Person which
---------
directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, such Person, or (b) any Person
who is a director or executive officer (i) of such Person, (ii) of any
Subsidiary of such Person, or (iii) of any Person described in clause (a) above,
or with respect to any Stockholder, the Company; provided, that any Affiliate of
a corporation shall be deemed an Affiliate of such corporation's stockholders.
For purposes of this definition, "control" of a Person shall mean the power,
direct or indirect, (i) to vote or direct the voting of more than 5% of the
outstanding shares of Voting Stock of such Person, or (ii) to direct or cause
the direction of the management and policies of such Person, whether by contract
or otherwise. Notwithstanding the foregoing to the contrary, (i) the Principals
and their respective Affiliate shall be deemed to be Affiliates of the Company
and (ii) none of Jefferies & Company, Inc., any of the Institutional Investors
nor any of their respective Affiliates shall be deemed to be Affiliates of the
Company, PROVIDED, that solely for purposes of Section 8.17 hereof, this clause
--------
(ii) shall not apply to MCIT.
Agreement shall mean this Agreement as in effect on the date hereof and
---------
as hereafter from time to time amended, modified or supplemented in accordance
with the terms hereof.
Board of Directors shall mean the Board of Directors of the Company, as
------------------
duly constituted in accordance with this Agreement, or any committee thereof
duly constituted in accordance with this
-3-
<PAGE>
Agreement, the By-laws and applicable law and duly authorized to make the
relevant determination or take the relevant action. To the extent that the Board
of Directors is required under this Agreement to authorize or approve, or make a
determination in respect of a transaction between the Company, on the one hand,
and a Stockholder, and/or a Stockholder's Affiliates, on the other hand, the
Board of Directors shall be deemed to exclude such Stockholder, any of its
Affiliates, and any of the directors, officers, employees, agents or
representatives of such Stockholder and/or its Affiliates, who are members of
the Board of Directors.
By-Laws shall mean the By-Laws of the Company as amended and in effect on
-------
the date hereof, substantially in the form of Exhibit E hereto, and as hereafter
---------
further amended or restated in accordance with the terms hereof and pursuant to
applicable law.
Certificate of Incorporation shall mean the Restated Certificate of
----------------------------
Incorporation of the Company as in effect on the date hereof (including the
Certificate of Designation relating to the Preferred Stock), substantially in
the form of Exhibit F hereto, and as hereafter from time to time amended,
---------
restated, modified or supplemented in accordance with the terms hereof and
pursuant to applicable law.
Class A Common Stock shall mean the Class A Common Stock, par value $0.01
--------------------
per share, of the Company.
Class B Common Stock shall mean the Class B Common Stock, par value $0.01
--------------------
per share, of the Company.
Class C Common Stock shall mean the Class C Common Stock, par value $0.01
--------------------
per share, of the Company.
Closing Date shall mean the date on which the transactions contemplated
------------
by the Merger Agreement shall be consummated.
Commission shall mean the Securities and Exchange Commission and any
----------
successor commission or agency having similar powers.
Common Stock shall mean the Class A Common Stock, the Class B Common
------------
Stock and the Class C Common Stock.
Credit Agreement shall mean the Second Amended and Restated Credit
----------------
Agreement, of even date herewith, by and among Jackson Products, Inc., Jackson
Holding Company, the Lenders parties thereto and Heller, as Agent, as it may be
amended, supplemented, refunded or replaced, from time to time.
-4-
<PAGE>
Exchange Act shall mean the Securities Exchange Act of 1934, as amended,
------------
or any similar Federal statute then in effect, and a reference to a particular
section thereof shall include a reference to the comparable section, if any, of
such similar Federal statute.
First Offer Price shall have the meaning specified in Section 5.1(a).
-----------------
GAAP shall mean the generally accepted accounting principles in the
----
United States of America in effect from time to time, applied on a consistent
basis both as to classification of items and amounts.
Holder shall mean a holder of Registrable Securities.
------
Indebtedness shall mean with respect to any Person any obligation of such
------------
Person for borrowed money, but in any event shall include (i) any obligation
incurred for all or any part of the purchase price of property or other assets
or for the cost of property or other assets constructed or of improvements
thereto, other than accounts payable included in current liabilities and
incurred in respect of property purchased in the ordinary course of business,
(ii) the face amount of all letters of credit issued for the account of such
Person and all drafts drawn thereunder, without duplication, (iii) obligations
(whether or not such Person has assumed or become liable for the payment of such
obligation) secured by liens, (iv) capitalized leases, and (v) all guarantees of
such Person; provided, that the term "capitalized lease" as used herein is as
--------
defined in the Credit Agreement as in effect on the date hereof.
Initial Public Offering shall mean the public offer and sale of Common
-----------------------
Stock of the Company, pursuant to the initial registration thereof under the
Securities Act.
Institutional Investors shall mean the parties as so defined in the first
-----------------------
paragraph of this Agreement and any transferee of any of them who becomes a
party in accordance with the terms hereof.
Jordan Investors shall mean JZCC and the Persons listed on the Schedule
----------------
of Jordan Investors including the signatories to the Jordan Investor
Subscription Agreement and Safety Partners, and any Permitted Transferee of any
of them who becomes a Stockholder in accordance with the terms hereof.
Jordan Party shall mean The Jordan Company and its Affiliates and, in
------------
addition:
-5-
<PAGE>
(a) with respect to The Jordan Company, each general partner, each
limited partner, nominee and employee thereof or any Affiliate thereof as
of the Closing Date;
(b) any 50% (or more) owned Subsidiary of any one (or jointly of more
than one of any) Person specified in clause (a); and
(c) the spouse or any immediate family member of any Person specified
in clause (a) or any trust solely for the benefit of any such Person or the
spouse or any immediate family member of such Person.
Notwithstanding the foregoing, the Company and any Subsidiary of the Company
shall not be Jordan Parties.
Jordan Pledge shall mean the pledge by each of the Jordan Investors other
-------------
than Safety Partners, of all of such Jordan Investor's Common Stock to the
Senior Creditor, pursuant to the terms and conditions of the Credit Agreement.
JZCC shall mean the Jordan/Zalaznick Capital Company, a New York general
----
partnership.
Management Agreement shall mean the TJC Management Consulting Agreement
--------------------
of even date herewith between TJC Management Corporation and the Company,
substantially in the form of Exhibit H hereto, as such agreement may from time
---------
to time hereafter be amended, modified or supplemented in accordance with the
terms hereof and thereof.
Management Investors shall mean any officer or managerial employee of the
--------------------
Company or any of its Subsidiaries who hereafter acquires any shares of Class C
Common Stock from the Company in accordance with the Management Subscription
Agreement and this Agreement, and any Permitted Transferee of any of such
Persons who becomes a Stockholder in accordance with the terms hereof.
Management Stockholders shall mean the management signatories to the
-----------------------
Management Subscription Agreement, and their Permitted Transferees.
Managing Underwriter shall have the meaning specified in Section 6.1(f).
--------------------
MCIT shall mean MCIT PLC, an investment trust organized under the laws of
----
the United Kingdom and its nominees.
Notice of Exercise shall have the meaning specified in Section 5.1(b).
------------------
-6-
<PAGE>
Notice of Intention shall have the meaning specified in Section 5.1(a).
-------------------
Offered Shares shall have the meaning specified in Section 5.1.
--------------
Option Agreement shall mean each of the Stock Option Agreements in the
----------------
form attached as Exhibit 1 to the Option Plan, dated as of the date hereof,
between each of the Management Stockholders and the Company.
Option Plan shall mean the 1995 Jackson Management Stock Option Plan, as
-----------
adopted by the Board of Directors in the form attached as Exhibit I as of the
date hereof and as may be amended from time to time.
Options shall mean options to acquire an aggregate of up to 172,414
-------
shares of Common Stock issued from time to time to management of the Company
pursuant to the Option Plan and the Option Agreements.
Permitted Transferee shall mean, (i) the Company OR ANY JORDAN INVESTOR
--------------------
and (ii) those Persons to whom transfers of Common Stock and Preferred Stock are
permitted to be made by them pursuant to Section 4.2 (including without
limitation the trusts referred to in Sections 4.2(a)(i) and (b)).
Person shall mean an individual or a corporation, association,
------
partnership, joint venture, organization, business, trust, or any other entity
or organization, including a government or any subdivision or agency thereof.
Preferred Stock shall mean the 13.25% Series A Cumulative Exchangeable
---------------
Preferred Stock, par value $0.01 per share, of the Company.
Principals shall mean The Jordan Company and Jordan/Zalaznick Capital
----------
Corporation and their respective Affiliates, principals, partners and employees,
family members of any of the foregoing and trusts for the benefit of any of the
foregoing, including, without limitation, Leucadia National Corporation and its
Subsidiaries. Notwithstanding the foregoing, MCIT shall not be deemed to be a
Principal or an Affiliate of a Principal.
"pro rata" as used herein shall assume the issuance of any Warrant Shares
--------
attributable to then outstanding exercisable Warrants.
Public Distribution shall mean a Public Offering of Common Stock, at the
-------------------
conclusion of which the aggregate number of shares of Common Stock that have
been sold to the public pursuant to one
-7-
<PAGE>
or more effective registration statements under the Securities Act equals at
least 25% of the shares of Common Stock then outstanding (on a fully diluted
basis) after giving effect to such sale and results in the Company receiving at
least $30 million in gross proceeds from such sale.
Public Offering shall mean a bona fide underwritten public offering and
---------------
sale of equity securities of the Company pursuant to an effective registration
statement under the Securities Act.
Registrable Securities shall mean the following:
----------------------
(a) all shares of Common Stock now or hereafter acquired or owned of
record by the Jordan Investors, or the Institutional Investors (including
Warrant Shares); and
(b) all shares of Class B Common Stock which may be issued to a
Stockholder who becomes a party hereto and all shares of Class A Common Stock
issued or issuable upon the conversion or exchange of outstanding shares of
Class B Common Stock in accordance with the applicable provisions of the
Certificate of Incorporation or this Agreement; provided, however, that no
-------- -------
holder of shares of Class B Common Stock shall have any registration rights
hereunder with respect to any shares of Class B Common Stock, but only with
respect to shares of Class A Common Stock into which such shares of Class B
Common Stock shall be so exchanged or converted in connection with an effective
registration and sale under the Securities Act of such shares of Class A Common
Stock; and, solely for purposes of Article VI of this Agreement, each holder of
shares of Class B Common Stock which are to be converted into shares of Class A
Common Stock to be sold in connection with such a registration shall be deemed
to be the holder of the shares of Class A Common Stock into which such shares of
Class B Common Stock shall be convertible; and
(c) all shares of Class C Common Stock acquired by the Management
Investors (including Option Shares), and all shares of Class A Common Stock
issued or issuable upon the conversion of outstanding shares of Class C Common
Stock in accordance with the applicable provisions of the Certificate of
Incorporation; provided, however, that no holder of shares of Class C Common
-------- -------
Stock shall have any registration rights hereunder with respect to any shares of
Class C Common Stock, but only with respect to shares of Class A Common Stock
into which such shares of Class C Common Stock shall be so exchanged or
converted in connection with an effective registration and sale under the
Securities Act of such shares of Class A Common Stock; and, solely for purposes
of Article VI of this Agreement, each holder of shares of Class C Common Stock
which are to be converted into shares of Class A Common Stock to be sold in
connection with such a registration shall be deemed to be the holder of the
shares of Class A Common
-8-
<PAGE>
Stock into which such shares of Class C Common Stock shall be convertible; and
(d) any shares of capital stock issued or issuable by the Company in
respect of any shares of Common Stock referred to in the foregoing clause (a),
(b) or (c) by way of a stock dividend or stock split or in connection with a
combination or subdivision of shares, reclassification, recapitalization,
merger, consolidation or other reorganization of the Company.
As to any particular Registrable Securities that have been issued, such
securities shall cease to be Registrable Securities when (i) a registration
statement with respect to the sale of such securities shall have become
effective under the Securities Act and such securities shall have been disposed
of under such registration statement, (ii) they shall have been distributed to
the public pursuant to Rule 144, (iii) they shall have been otherwise
transferred or disposed of, and new certificates therefor not bearing a legend
restricting further transfer shall have been delivered by the Company, and
subsequent transfer or disposition of them shall not require their registration
or qualification under the Securities Act or any similar state law then in
force, or (iv) they shall have ceased to be outstanding.
Registration Expenses All fees and expenses incident to the performance
---------------------
of or compliance with Article VI hereof, including, without limitation:
(i) all registration and filing fees (including, without
limitation, (a) fees with respect to filings required to be made with the
National Association of Securities Dealers, Inc. ("NASD"): and (B) fees and
expenses of compliance with state securities or Blue Sky laws (including,
without limitation, reasonable fees and disbursements of counsel in
connection with Blue Sky qualifications of the Registrable Securities);
(ii) printing expenses (including, without limitation,
expenses of printing certificates for Registrable Securities in a form
eligible for deposit with The Depositary Trust Company ("DTC") and of
printing prospectuses if the printing of prospectuses is requested by the
managing underwriters, if any);
(ii) reasonable messenger, telephone, duplication, word
processing and delivery expenses incurred by the Company in the performance
of its obligations hereunder;
-9-
<PAGE>
(iv) fees and disbursements of counsel for the Company;
(v) fees and disbursements of all independent certified
public accountants (including, without limitation, the expenses
of any special audit and "cold comfort" letters required by or
incident to such performance);
(vi) fees and expenses of any "qualified independent
underwriter" or other independent appraiser participating in an
offering pursuant to Section 3 of Schedule E to the By-laws of
the NASD, but only where the need for such a "qualified
independent underwriter" arises due to a relationship with the
Company;
(vii) Securities Act liability insurance, if the Company so
desires such insurance;
(viii) fees and expenses of all other Persons retained by the
Company; internal expenses of the Company (including, without
limitation, all salaries and expenses of officers and employees
of the Company performing legal or accounting duties); and the
expenses of any annual audit;
(ix) rating agency fees and the fees and expenses incurred in
connection with the listing of the securities to be registered on
any securities exchange; and
(x) the reasonable fees and disbursements (A) of not more
than two counsel (in addition to appropriate local counsel), one
each chosen by (1) the Holders of a majority of the Registrable
Securities owned by the Institutional Investors to be included in
any Registration Statement, and (2) the Holders of a majority of
the Registrable Securities to be included in any Registration
Statement (other than the Institutional Investors) and (B) for
other reasonable out-of-pocket expenses of the Holders of
Registrable Securities incurred in connection with the
registration of the Registrable Securities.
Requesting Holder shall have the meaning specified in Section 6.5.
-----------------
Safety Partners shall mean Safety Partners, L.P. and any Permitted
---------------
Transferee who becomes a stockholder in accordance with the terms hereof.
-10-
<PAGE>
Securities Act shall mean, as of any date, the Securities Act of 1933, as
--------------
amended, or any similar federal statute then in effect, and in reference to a
particular section thereof shall include a reference to the comparable section,
if any, of any such similar federal statute and the rules and regulations
thereunder.
Selling Investors shall have the meaning specified in Section 5.9.
-----------------
Selling Stockholder shall have the meaning specified in Section 5.1(a).
-------------------
Senior Creditor shall mean Heller, as Agent for the Lenders parties to
---------------
the Credit Agreement and any permitted assignee or transferee of the Senior
Creditor under the Credit Agreement.
Stock shall mean the Common Stock, the Option Shares, Warrant Shares and
-----
the Preferred Stock.
Stockholder shall mean any of the Jordan Investors, the Management
-----------
Investors and the Institutional Investors, and any Permitted Transferee of any
such Person who becomes a party to or bound by the provisions of this Agreement
in accordance with the terms hereof.
Subsidiary shall mean as to any Person a corporation of which outstanding
----------
shares of stock having ordinary voting power (other than stock having such power
only by reason of the happening of a contingency) to elect a majority of the
Board of Directors of such corporation are at the time owned, directly or
indirectly through one or more intermediaries, or both, by such Person.
Transaction Documents shall mean this Agreement, the Merger Agreement,
---------------------
the Management Agreement, the Purchase Agreements, the Credit Agreement, the
Jordan Investors Subscription Agreement, the Advisor Subscription Agreement, the
Management Subscription Agreement, each of the agreements that are exhibits
hereto and thereto, and all agreements, instruments and documents contemplated
thereby.
Underwritten Offering shall have the meaning given to it in Section
---------------------
6.1(b).
Voting Stock shall mean capital stock (other than Preferred Stock) of the
------------
Company of any class or classes, the holders of which are ordinarily, in the
absence of contingencies, entitled to vote for the election of corporate
directors (or Persons performing similar functions), including without
limitation, the Class A Common Stock and the Class C Common Stock.
-11-
<PAGE>
Voting Stockholder shall mean a Stockholder who holds Voting Stock or
------------------
retains, by proxy or otherwise, the power to vote Voting Stock.
Warrants shall mean the warrants to acquire 3,448,276 shares of Common
--------
Stock issued pursuant to the Securities Purchase Agreement.
ARTICLE II
Management
----------
Section 2.1 Registration of Common Stock. In the event of Public
----------------------------
Offering of the Company's Common Stock, each Voting Stockholder (other than an
Institutional Investor) shall, at a meeting convened for the purpose of amending
the Certificate of Incorporation, vote to increase or decrease the number of
authorized shares of Class A Common Stock and, if necessary, increase the number
of issued and outstanding shares of Class A Common Stock, whether by stock
split, stock dividend, reverse stock split or otherwise, or change in its par
value, as recommended by a majority of the members of the Board of Directors in
order to facilitate such Public Offering.
Section 2.2 No Conflict with Agreement. Each Voting Stockholder (other
--------------------------
than the Institutional Investors) shall vote his shares of Voting Stock, and
shall take all actions necessary, to ensure that the Certificate of
Incorporation and By-Laws do not, at any time, conflict with the provisions of
this Agreement.
ARTICLE III
Corporate Governance
--------------------
Section 3.1 Board of Directors.
------------------
(a) Promptly after the Closing Date, the Voting Stockholders (other than
the Institutional Investors) shall take all actions necessary to elect, or to
cause the Board of Directors to approve and appoint, the designees described
below to be members of the Board of Directors, and such other members as may be
selected by the holders of Voting Stock other than the Institutional Investors
from time to time outstanding:
(i) Four individuals designated by the beneficial owners of the
majority of the shares of Class A Common Stock beneficially owned by the
Jordan Investors or by the Senior Creditor upon foreclosure of the Jordan
Pledge (the "Jordan Directors"), which Jordan Directors initially shall be
-12-
<PAGE>
Jonathan F. Boucher, John W. Jordan, II, David W. Zalaznick and A. Richard
Caputo, Jr.; and
(ii) One individual designated by the holders of a majority of the
shares of Class C Common Stock; provided, that such individual has executed
--------
a subscription agreement with the Company, and that such subscription
agreement remains in full force and effect and such individual is and
remains a full time employee of the Company or of one of its Subsidiaries
("Management Director"), and which Management Director initially shall be
Robert H. Elkin.
(b) Each Voting Stockholder (other than the Institutional Investors)
hereby agrees to vote all shares of Voting Stock owned or held of record by such
Voting Stockholder at each annual or special meeting of Stockholders of the
Company at which directors of the Company are to be elected, in favor of, or to
take all actions by written consent in lieu of any such meeting as are necessary
to cause, the election as members of the Board of Directors of those individuals
described in Section 3.1(a) in accordance with, and to otherwise effect the
intent of, the provisions of Section 3.1(a).
(c) The Company and each member of the Board of Directors shall execute a
Directors Indemnification Agreement substantially in the form of Exhibit K
---------
hereto.
Section 3.2 Vacancies. In the event that a vacancy is created on the
---------
Board of Directors at any time by the death, disability, retirement, resignation
or removal of any member of the Board of Directors, or for any other reason
there shall exist or occur any vacancy on the Board of Directors, each Voting
Stockholder (other than the Institutional Investors) hereby agrees to take such
actions as will result in the election or appointment as a director of an
individual designated or elected to fill such vacancy and serve as a director by
the Stockholders that had designated or elected (pursuant to Section 3.1) the
director whose death, disability, retirement, resignation or removal resulted in
such vacancy on the Board of Directors (in the manner set forth in Section 3.1).
In the interim from the time the vacancy is created until a new director is
elected, if the vacancy is for a Jordan Director, the remaining Jordan Directors
may appoint a replacement to act as a director until a new director is duly
elected, and if the vacancy is for a Management Director, the remaining
Management Directors, if any, or if none, then a majority of the holders of
Class C Common Stock, may appoint a replacement to act as a director until a new
director is duly elected.
Section 3.3 Covenant to Vote. Each Voting Stockholder (other than the
----------------
Institutional Investors) hereby agrees to take all actions necessary to call, or
cause the Company and the
-13-
<PAGE>
appropriate officers and directors of the Company to call, an annual meeting
(and when circumstances so require, a special meeting) of Stockholders of the
Company and to vote all shares of Voting Stock owned or held of record by such
Voting Stockholder (other than the Institutional Investors) at any such meeting
and at any other annual or special meeting of stockholders in favor of, or take
all actions by written consent in lieu of any such meeting as may be necessary
to cause, the election as members of the Board of Directors of those individuals
so designated in accordance with, and to otherwise effect the intent of, this
Article III. In addition, each Voting Stockholder (other than an Institutional
Investor) agrees to vote the shares of Voting Stock owned by such Stockholder
upon any other matter arising under this Agreement submitted to a vote of the
Stockholders in such a manner as to implement the terms of this Agreement.
Section 3.4 No Voting Obligation of Institutional Investors.
-----------------------------------------------
Notwithstanding anything to the contrary in this Agreement, the Institutional
Investors shall be under no obligation under this Agreement with respect to
voting their respective shares of Stock.
ARTICLE IV
Transfers of Stock
------------------
Section 4.1 Restrictions on Transfer. Each Stockholder agrees that such
------------------------
Stockholder will not, directly or indirectly, offer, sell, transfer, assign or
otherwise dispose of (or make any exchange, gift, assignment or pledge of)
(collectively, for purposes of Articles IV and V hereof only, a "transfer") any
Stock except (a) as provided in Section 4.2; (b) in accordance with Article V;
(c) in an exchange or conversion of Common Stock of one class for Common Stock
of another class in accordance with the Certificate of Incorporation; (d) upon
the issuance of Option Shares upon the exercise of an Option or Options; (e)
upon the issuance of Warrant Shares upon the exercise of a Warrant or Warrants;
(f) with regard to any pledge, hypothecation or charge by MCIT. In addition to
the other restrictions noted in this Article IV, each Stockholder agrees that it
will not, directly or indirectly, transfer any of its Stock except as permitted
under the Securities Act and other applicable securities laws.
Section 4.2 Exceptions to Restrictions. The provisions of Section 4.1
--------------------------
and Article V (other than Section 5.8) shall not apply to any of the following
transfers:
(a) (i) From JZCC to the Jordan Investors or any Jordan Party, (ii) from
any of the Jordan Investors or any Jordan Party to any of the other Jordan
Investors, (iii) from any Jordan Investor or any Jordan Party to any trust
solely for such Jordan
-14-
<PAGE>
Investor's or such Jordan Party's benefit or the benefit of such Jordan
Investor's or such Jordan Party's spouse or children (as the case may be), or
(iv) from any of the Jordan Investors or any Jordan Party to any corporation,
partnership or other entity that is controlled by and whose owners or
beneficiaries are Jordan Investors or Jordan Parties or a trust created solely
for the benefit of a Jordan Investor, Jordan Party or the spouse or children of
a Jordan Investor or Jordan Party; provided, that with respect to clause (iii)
--------
such Jordan Investor or such Jordan Party acts as trustee and retains the sole
power to direct the voting and disposition of such shares; and
provided, further, that in the case referred to in clauses (i), (iii) and (iv),
- -------- -------
each such Person including any such entity shall execute a counterpart of and
become a party to this Agreement and shall agree in a writing in form and
substance satisfactory to the Company to be bound and becomes bound by the terms
of this Agreement.
(b) From any Management Investor to any trust solely for such Management
Investor's benefit or the benefit of such Management Investor's spouse or
children, provided, that, in each case referred to above, such Management
--------
Investor acts as trustee and retains the sole power to direct the voting and
disposition of such Stock; and provided, further that each such Person including
-------- -------
any such trust shall execute a counterpart of and become a party to this
Agreement and shall agree in a writing in form and substance satisfactory to the
Company to be bound and becomes bound by the terms of this Agreement as a
Stockholder.
(c) From any Management Investor or Permitted Transferee of a Management
Investor to the Company pursuant to Section 8 of the Management Subscription
Agreement.
(d) [Intentionally Omitted].
(e) Pursuant to a Public Offering.
(f) Pursuant to the terms of the Jordan Pledge, including any transfer to
the Senior Creditor and resale by the Senior Creditor of Stock upon the
foreclosure of the Jordan Pledge.
(g) From any Institutional Investor to any Person, provided that, unless
such transfer is pursuant to Rule 144 promulgated under the Securities Act (or
any successor provision), the provisions of Section 4.3(a) and the first
sentence of Section 4.3(b) shall apply to such transfers.
Section 4.3 Endorsement of Certificates.
---------------------------
(a) Upon the execution of this Agreement, in addition to any other legend
which the Company may deem advisable under the Securities Act and certain state
securities laws, all certificates representing shares of issued and outstanding
Common
-15-
<PAGE>
Stock and Preferred Stock shall be endorsed at all times prior to any Public
Offering of such shares as follows:
THIS CERTIFICATE IS SUBJECT TO, AND IS TRANSFERABLE ONLY UPON
COMPLIANCE WITH, THE PROVISIONS OF A STOCKHOLDERS AGREEMENT, DATED
AUGUST 16, 1995, AMONG THE COMPANY AND ITS STOCKHOLDERS [AND THE
SUBSCRIPTION AGREEMENTS, DATED AUGUST 16, 1995, AMONG THE COMPANY AND
CERTAIN INVESTORS THEREIN]. REFERENCE ALSO IS MADE TO THE RESTRICTIVE
PROVISIONS OF THE CERTIFICATE OF INCORPORATION AND BY-LAWS OF THE
CORPORATION. A COPY OF THE ABOVE REFERENCED AGREEMENTS ARE ON FILE AT
THE OFFICE OF THE COMPANY AT THE JORDAN COMPANY, 9 WEST 57TH STREET,
NEW YORK, NEW YORK 10019.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE TRANSFERRED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT, OR AN
EXEMPTION FROM REGISTRATION, UNDER SAID ACT.
(b) Except as otherwise expressly provided in this Agreement, all
certificates representing shares of Stock hereafter issued to or acquired by any
of the Stockholders or their successors hereto (including, without limitation,
all certificates representing shares of Class A Common Stock hereafter issued
upon conversion of shares of Class B or C Common Stock) shall bear the legends
set forth above, and the shares of Stock represented by such certificates shall
be subject to the applicable provisions of this Agreement. The rights and
obligations of each party hereto shall inure to and be binding upon each
transferee to whom Stock is transferred by any party hereto, whether or not such
transfer is permitted under the terms of this Agreement, except for transfers
described in Section 4.2(e). Prior to consummation of any transfer, except for
transfers described in Section 4.2(e), such party shall cause the transferee to
execute an agreement in form and substance reasonably satisfactory to the other
parties hereto, providing that such transferee shall fully comply with the terms
of this Agreement. Prompt notice shall be given to the Company by the
transferor of any transfer (whether or not to a Permitted Transferee) of any
Stock and the Company shall promptly notify the Institutional Investors in
writing of such transfer.
Section 4.4 Improper Transfer. Any attempt to transfer or encumber any
-----------------
shares of Stock not in accordance with this Agreement shall be null and void and
neither the Company nor any transfer agent of such securities shall give any
effect to such attempted transfer or encumbrance in its stock records.
-16-
<PAGE>
ARTICLE V
Rights of First Offer;
----------------------
New Securities; Tag Along Sales
-------------------------------
Section 5.1 Transfers by a Stockholder.
--------------------------
(a) Except for sales of securities contemplated by Article VI hereof and
transfers permitted by Sections 4.1 and 4.2, if at any time any Stockholder
shall desire to sell any Stock owned by him or it (such Stockholder desiring to
sell shares of such Stock being referred to herein as a "Selling Stockholder"),
then such Selling Stockholder shall deliver written notice of its desire to sell
such Stock (a "Notice of Intention"), accompanied by a copy of a proposal
relating to such sale (the "Sale Proposal"), to each of the other Stockholders
and to the Company, setting forth such Selling Stockholder's desire to make such
sale (which shall be for cash only), the number and class of shares of Stock
proposed to be transferred (the "Offered Securities") and the price at which
such Selling Stockholder proposes to sell the Offered Securities (the "First
Offer Price") and other terms applicable thereto.
(b) Upon receipt of the Notice of Intention, the Company and the other
Stockholders shall then have the right to purchase at the First Offer Price and
on the other terms specified in the Sale Proposal all or, subject to Section
5.1(d), any portion of the Offered Securities in the following order of
priority: (i) if the Selling Stockholder is a Management Investor, the other
Management Investors shall have the first right to purchase the Offered
Securities pro rata among those Management Investors so electing on the basis of
the respective number of shares of Common Stock owned or held as trustee by such
Management Investors (or in such other proportions as such Management Investors
may agree), then the Company shall have the second right to purchase the Offered
Securities, and thereafter, the Jordan Investors and the Institutional Investors
shall have the right to purchase the Offered Securities pro rata among those of
the Institutional Investors and the Jordan Investors so electing (or in such
other proportion as the Institutional Investors and the Jordan Investors may
agree) and thereafter the Company shall have the right to purchase the Offered
Securities, the other Stockholders shall have the right to purchase the Offered
Securities pro rata among the Stockholders so electing (or in such other
proportion as such other Stockholders may agree); and (ii) if the Selling
Stockholder is a Jordan Investor, the other Jordan Investors shall have the
first right to purchase the Offered Securities pro rata among those of the
Jordan Investors so electing (or in such other proportion as such Jordan
Investors may agree), and thereafter, the Institutional Investors pro rata among
those of the Institutional Investors so electing (or in such other proportion as
such Institutional Investors may agree)
-17-
<PAGE>
and thereafter, the Company shall have the right to purchase the Offered
Securities and thereafter, all other Stockholders shall have the right to
purchase the Offered Securities pro rata among the Stockholders so electing to
purchase (or in such other percentages as such other Stockholders may agree).
The rights of the Stockholders and the Company pursuant to this Section 5.1(b)
shall be exercisable by the delivery of notice to the Selling Stockholder (the
"Notice of Exercise"), within 30 calendar days from the date of delivery of the
Notice of Intention. The Notice of Exercise shall state the total number of
shares of the Offered Securities such Stockholder (or the Company) is willing to
purchase without regard to whether or not other Stockholders purchase any shares
of the Offered Securities. A copy of such Notice of Exercise shall also be
delivered by each Stockholder to the Company and each other Stockholder. The
rights of the Stockholders and the Company pursuant to this Section 5.1(b) shall
terminate if unexercised 30 calendar days after the date of delivery of the
Notice of Intention.
In the event that a Management Investor exercises the Management Investor's
right to purchase any or all Offered Securities, such purchase will be deemed to
be of Class C Common Stock, notwithstanding that the Offered Securities are of a
different class of Common Stock. Upon a purchase of Common Stock other than
Class C Common Stock, the Management Investor will present the certificates of
the Common Stock to the Company and the Company will promptly exchange such
certificates for Class C Common Stock, all in order to confirm the foregoing.
(c) In the event that the Stockholders or the Company exercise their
rights to purchase any or all of the Offered Securities in accordance with
Section 5.1(b), then the Selling Stockholder must sell the Offered Securities to
such Stockholders (or, as the case may be, the Company) within 30 calendar days
from the date of delivery of the Notice of Exercise received by the Selling
Stockholder.
(d) Notwithstanding the foregoing provisions of this Section 5.1, unless
the Selling Stockholder shall have consented to the purchase of less than all of
the Offered Securities, no Stockholder or Stockholders nor the Company may
purchase any Offered Securities hereunder unless all of the Offered Securities
are to be so purchased.
(e) For purposes of this Article V, any Person who has failed to give
notice of the election of an option hereunder within the specified time period
will be deemed to have waived its rights on the day after the last day of such
period.
(f) Each Stockholder (other than the Institutional Investor) in its
capacity only as a stockholder (i) agrees and acknowledges that the Company may
purchase or acquire Common
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<PAGE>
Stock pursuant to Section 5.1(b) hereof, and (ii) approves such purchases and
acquisitions, and waives any objection or claim relating thereto, whether
against the Company, the Board of Directors or otherwise.
Section 5.2 Transfer of Offered Shares to Third Parties. If all notices
-------------------------------------------
required to be given pursuant to Section 5.1 have been duly given and the
Stockholders and the Company do not exercise their respective options to
purchase all of the Offered Securities at the First Offer Price and the Selling
Stockholder does not desire to sell less than all the Offered Securities or if
with the consent of the Selling Stockholder, the other Stockholders and the
Company purchase less than all of the Offered Securities pursuant to the
provisions hereof, then in either such event the Selling Stockholder shall have
the right, subject to compliance by the Selling Stockholder with the provisions
of Section 4.3(b) hereof, for a period of 120 calendar days from the earlier of
(i) the expiration of the option period pursuant to Section 5.1 with respect to
such Sale Proposal or (ii) the date on which such Selling Stockholder receives
notice from the other Stockholders and the Company that they will not exercise
in whole or in part the options granted pursuant to Section 5.1, to sell to any
third party which is not an Affiliate of, or related by consanguinity or
marriage to, the Selling Stockholder the Offered Securities remaining unsold at
a price of not less than 95% of the First Offer Price, and on the other terms
specified in the Sale Proposal.
Section 5.3 Purchase of Offered Shares. The consummation of any purchase
--------------------------
and sale pursuant to Section 5.1 shall take place on such date, not later than
30 calendar days after the expiration of the option period pursuant to Section
5.1 with respect to such option, as the Selling Stockholder shall select. Prior
to the consummation of any sale pursuant to Section 5.1, the Selling Stockholder
shall comply with Section 4.3(b) hereof. Upon the consummation of any such
purchase and sale, the Selling Stockholder shall deliver certificates evidencing
the Offered Securities sold duly endorsed, or accompanied by written instruments
of transfer in form satisfactory to the purchaser duly executed by the Selling
Stockholder free and clear of any liens, against delivery of the First Offer
Price, payable in the manner specified in Section 5.1(a).
Section 5.4 Waiting Period with Respect to Subsequent Transfers. In the
---------------------------------------------------
event that the Stockholders and the Company do not exercise their options to
purchase all of the Offered Securities, and the Selling Stockholder shall not
have sold the remaining Offered Securities to a third party for any reason
before the expiration, as applicable, of the 120-day period described in Section
5.2, then such Selling Stockholder shall not give another Notice of Intention
pursuant to Section 5.1 for a
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<PAGE>
period of 90 calendar days after the last day of such 120-day period.
Section 5.5 Right of First Refusal for New Securities.
-----------------------------------------
(a) The Company hereby grants to each of the Stockholders a right of first
refusal to purchase shares of any New Securities (as defined below) which the
Company may, from time to time, propose to issue and sell. Such right of first
refusal shall allow each Stockholder to purchase a pro rata portion of the New
Securities proposed to be issued, determined with reference to the aggregate
number of outstanding shares of Common Stock held by such Stockholder before the
proposed issuance of New Securities. In the event a Stockholder does not
purchase any or all of its pro rata portion of New Securities, the remaining
Stockholders shall have the right to purchase such unpurchased New Securities or
respective pro rata portion until all of the New Securities are purchased or
until no other Stockholder desires to purchase any more New Securities. The
right of first refusal granted hereunder shall terminate if unexercised within
30 calendar days after receipt of the notice described in Section 5.5(c) below.
(b) "New Securities" shall mean any authorized but unissued shares, and
any treasury shares, of capital stock of the Company and all rights, options or
warrants to purchase capital stock, and securities of any type whatsoever that
are, or may become, convertible into capital stock; provided, however, that the
-------- -------
term "New Securities" does not include (i) securities issued upon conversion of
shares of Class B Common Stock or Class C Common Stock into Class A Common
Stock, in accordance with the Certificate of Incorporation and this Agreement;
(ii) securities issued upon conversion of shares of Class A Common Stock to
Class B Common Stock or Class C Common Stock; (iii) securities issued by the
Company pursuant to the acquisition of another corporation by the Company by
merger, purchase of all or substantially all of the assets or other
reorganization whereby the Company shall become the owner of more than 50% of
the voting power of such corporation, other than any such securities issued to
any Jordan Party, any of the Jordan Investors or any of their Affiliates; (iv)
shares of Common Stock issued in connection with any stock split or stock
dividend of the Company; (v) capital stock (including warrants, options or other
rights to purchase capital stock, or that are convertible into or exchangeable
for capital stock of the Company) issued directly in connection with any
borrowings or the incurrence of any indebtedness by the Company or its
Subsidiaries, other than such indebtedness on borrowings provided by or
securities issued to a Jordan Party, Jordan Investor or any of their respective
Affiliates; (vi) shares of Class A Common Stock issued pursuant to any Public
Distribution; (vii) Warrant Shares issuable upon exercise of the Warrants;
(viii) Option Shares issuable upon exercise of the Options or
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<PAGE>
(ix) Exchange Notes issued pursuant to and as defined in the Certificate of
Incorporation.
(c) In the event the Company proposes to undertake an issuance of New
Securities, it shall give each Stockholder written notice of its intention,
describing the class and number of shares of Common Stock or Preferred Stock (as
the case may be) it intends to issue as New Securities, the purchase price
therefor (which shall be payable solely in cash) and the terms upon which the
Company proposes to issue the same. Each Stockholder shall have 30 calendar
days from the date such notice is given to determine whether to purchase all or
any portion of the Stockholder's pro rata share of such New Securities for the
purchase price and upon the terms specified in the notice by giving written
notice to the Company and stating therein the quantity of New Securities to be
purchased.
Section 5.6 Legally Binding Obligation; Power of Attorney; Personal
-------------------------------------------------------
Rights.
- ------
(a) Subject to Section 5.1(a), making a written offer, giving or failing
to give written notice within the stated period, accepting an offer or making a
decision or election, in each case as provided in Section 5.1 or 5.2, shall
create a legally binding obligation to buy or sell, or an obligation not to buy
or sell, as the case may be, the subject Common Stock as provided in such
Section 5.1 or 5.2.
(b) Subject to Section 5.1(a), each holder of Common Stock (other than the
Institutional Investors hereby appoints JZCC as an attorney-in-fact for such
holder with the power to execute such documents and take such other actions to
provide for the transfer of Common Stock owned by such holder in accordance with
this Article V. JZCC is hereby authorized (i) to transfer such Common Stock on
the books of the Company at the direction and without regard to the surrender of
certificates or instruments representing such Common Stock held by such holder,
and (ii) to place on all certificates or instruments representing Common Stock a
legend reflecting this authority to transfer such Common Stock.
Section 5.7 Right to Join in Sale.
---------------------
(a) Anything in this Agreement to the contrary notwithstanding, if any
Stockholder or group of Stockholders, (other than the Institutional Investors)
proposes to sell, dispose of or otherwise transfer, in a single transaction or a
series of transactions during any eighteen-month period (other than transfers
pursuant to Section 4.2, transactions pursuant to Section 8 of the Management
Subscription Agreement or transfers to the Company) 5% or more of the
outstanding Common Stock or, if less, in the case of any Stockholder that owns
Common Stock on
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<PAGE>
the date hereof, 50% or more of its initial holdings (each a "Disposing
Stockholder"), such person or group shall refrain from effecting such
transaction or transactions unless, prior to the consummation thereof, each
other Stockholder shall have been afforded the opportunity to join in such
transaction or transactions on a pro rata basis, as hereinafter provided. For
purposes hereof, "group of Stockholders" shall mean (i) any "group" within the
meaning of Rule 13d-5 under the Exchange Act, (ii) all Stockholders that are
Affiliates of each other other than by reason of their ownership of stock in the
Company, (iii) the Jordan Investors and (iv) any other group of Stockholders
acting in concert in connection with the actions contemplated hereby.
(b) Prior to consummation of any proposed sale, disposition or transfer of
shares of Common Stock described in Section 5.7(a), the Disposing Stockholder or
Stockholders shall cause the person or group that proposes to acquire such
shares (the "Proposed Purchaser") to offer (the "Purchase Offer") in writing to
each other Stockholder to purchase shares of Common Stock owned by such
Stockholder (regardless of whether the shares of Common Stock proposed to be
sold by the Disposing Stockholders are the same class as the shares of Common
Stock owned by such Stockholders), such that the number of shares of such Common
Stock so offered to be purchased from such Stockholder shall be equal to the
product of (i) the total number of shares of such Common Stock then owned times
by such Stockholder times (ii) a fraction, the numerator of which is the
aggregate number of shares of Common Stock proposed to be purchased by the
Proposed Purchaser from all Stockholders and the denominator of which is the
aggregate number of shares of Common Stock then outstanding. Such purchase shall
be made at the highest price per share and on such other terms and conditions as
the Proposed Purchaser has offered to purchase shares of Common Stock to be sold
by the Disposing Stockholder or Stockholders. Each Stockholder shall have 20
calendar days from the date of receipt of the Purchase Offer to accept such
Purchase Offer, and the closing of such purchase shall occur within 30 calendar
days after such acceptance or at such other time as such Stockholder and the
Proposed Purchaser may agree. The number of shares of Common Stock to be sold
to the Proposed Purchaser by the Disposing Stockholder or Stockholders shall be
reduced by the aggregate number of shares of Common Stock purchased by the
Proposed Purchaser from the other Stockholders pursuant to the provisions of
this Section 5.7(b). In the event that a sale or other transfer subject to this
Section 5.7 is to be made to a Proposed Purchaser that is not a Stockholder, the
Disposing Stockholder shall notify the Proposed Purchaser that the sale or other
transfer is subject to this Section 5.7 and shall ensure that no sale or other
transfer is consummated without the Proposed Purchaser first complying with this
Section 5.7. It shall be the responsibility of each Disposing Stockholder to
determine whether
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<PAGE>
any transaction to which it is a party is subject to this Section 5.7.
Section 5.8 Retention and Sale of Control.
-----------------------------
Notwithstanding any other provisions of this Agreement to the contrary, but
subject to the last sentence of this Section 5.8, prior to the completion of a
Public Distribution, without the written consent of at least 66-2/3% of the
outstanding shares of Common Stock (with Warrant Shares underlying any
unexercised Warrants counted as if such Warrants had been exercised) the Jordan
Investors shall not effect or permit any sale or other disposition of Common
Stock, or cause or permit any merger, consolidation or other transaction
involving the Company to take place or enter into or permit the Company to enter
into any agreement, arrangement, commitment or understanding with respect to the
foregoing, if immediately after giving effect to such sale, disposition, merger,
consolidation or other transaction, a "Change of Control" (as defined in the
Purchase Agreements) would occur. For purposes of this Section 5.8, the term
"Jordan Investors" shall not include any Permitted Transferee of any such
Persons other than Permitted Transferees referred to in Section 4.2(a) hereof.
ARTICLE VI
Registration Rights
-------------------
Section 6.1 Demand Registrations.
--------------------
(a) At any time and from time to time after the earlier of the fourth
anniversary of the Closing Date or the first anniversary of an Initial Public
Offering by the Company, the Institutional Investors (the party making such
request, a "Requesting Stockholder") shall have the right to make a request in
writing that the Company effect the registration under the Securities Act of all
or part of such Holders' Registrable Securities, specifying in the request the
number and type of Registrable Securities to be registered by each such holder
and the intended method of disposition thereof (such notice is hereinafter
referred to as a "Holder Request"). The number of such requests under this
Section 6.1 shall not exceed three. Upon receipt of such Holder Request, the
Company will promptly give written notice of such requested registration to all
other Holders of Registrable Securities, which other Holders shall have the
right to include the Registrable Securities held by them in such registration
and thereupon the Company will, as expeditiously as possible, use its best
efforts to effect the registration under the Securities Act of:
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(i) the Registrable Securities which the Company has been so
requested to register by such Requesting Stockholders; and
(ii) all other Registrable Securities which the Company has been
requested to register by any other holder thereof by written request given
to the Company within 15 calendar days after the giving of such written
notice by the Company (which request shall specify the intended method of
disposition of such Registrable Securities), all to the extent necessary to
permit the disposition (in accordance with the intended methods thereof as
aforesaid) of the Registrable Securities so to be registered;
provided, however, that the Company shall not be obligated to file a
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registration statement relating to any Holder Request under this Section 6.1(a):
(x) unless the Company shall have received requests for such
registration with respect to at least 20% of the shares of Common Stock
then outstanding with respect to the first Holder Request, and unless the
aggregate purchase price of the Registrable Securities to be included in
requested registration (determined by reference to the offering price on
the cover of the registration statement proposed to be filed) is greater
than or equal to $15 million; provided, further, that the Company shall
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notify all holders of Registrable Securities of the receipt of a Holder
Request; and
(y) within a nine-month period immediately following the effective
date of a registration previously effected by the Company pursuant to this
Section 6.1;
provided, further, however, that the Company may postpone for not more than 90
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calendar days, on one occasion only with respect to each request for
registration made under this Section 6.1(a), the filing or effectiveness of a
registration statement under this Section 6.1(a) if the Company and a majority
of the Jordan Investors agree that such registration could reasonably be
expected to have a material adverse effect on any proposal or plan by the
Company to engage in any acquisition of assets (other than in the ordinary
course of business) or any merger, consolidation, tender offer of similar
transaction then under consideration; provided, that in such event, the holders
--------
of Registrable Securities initiating the request for such registration will be
entitled to withdraw such request, and if such request is withdrawn such
registration will not count as one of the permitted registrations under this
Section 6.1. In any event, the Company will pay all Registration Expenses in
connection with any registration initiated under this Section 6.1.
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(b) If the Company proposes to effect a registration requested pursuant to
this Section 6.1 by the filing of a registration statement on Form S-3 (or any
similar short-form registration statement), the Company will comply with any
request by the Managing Underwriter (as defined in Subsection (f), below) to
effect such registration on another permitted form if such Managing Underwriter
advises the Company that, in its opinion, the use of another form of
registration statement is of material importance of such proposed offering.
(c) A registration requested pursuant to Section 6.1(a) will not be deemed
to have been effected unless it has become effective; provided, that if after it
--------
has become effective, the offering of Registrable Securities pursuant to such
registration is interfered with by any stop order, injunction or other order or
requirement of the Commission or other governmental agency or court, such
registration will be deemed not to have been effected.
(d) The Company will pay all Registration Expenses in connection with each
of the registrations of Registrable Securities effected by it pursuant to this
Section 6.1.
(e) The Requesting Stockholders shall have the right, with the approval of
the Company, to select the investment banker (or investment bankers) that shall
manage the offering (collectively, the "Managing Underwriter").
(f) In connection with any offering pursuant to this Section 6.1, the only
shares that may be included in such offering are (i) Registrable Securities, and
(ii) shares of authorized but unissued Class A Common Stock that the Company
elects to include in such offering ("Company Securities").
(g) If in connection with any Underwritten Offering pursuant to this
Section 6.1 the Managing Underwriter shall advise the Company that, in its
judgment, the number of shares proposed to be included in such offering is such
as to materially and adversely affect the success of the offering, then the
Company will promptly so advise each Holder of Registrable Securities that has
requested registration, and shares shall be excluded from such offering in the
following order until the number of shares to be included in such offering has
been reduced to a level acceptable to the Managing Underwriter: any Company
Securities requested to be registered, if any, shall be excluded until all such
Registrable Securities have been excluded; and thereafter the Registrable
Securities requested to be registered by the Management Stockholders, if any,
shall be excluded pro rata until all such Registrable Securities have been
excluded; and thereafter the Registrable Securities requested by any other
holders of Registrable Securities to be included in such offering shall be
excluded pro rata, based on the respective number of
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Registrable Securities as to which registration has been so requested by such
Persons; provided, that, the registration of any of the Registrable Securities
of the Institutional Investors shall count as one of the permitted requests for
registration pursuant to this Section 6.1 only if the Institutional Investors
making requests are able to register and sell all of the Registrable Securities
requested to be included in such registration by such Institutional Investors.
(h) If any shares of Class A Common Stock requested to be included in a
sale pursuant to this Section 6.1 shall not be outstanding but shall be issuable
upon conversion of shares of Class B Common Stock or the exercise of Warrants
which are outstanding, then the holders thereof and the Company shall take all
actions necessary in order to convert such shares of Class B Common Stock into,
or exercise such Warrants for, shares of Class A Common Stock in order to effect
such sale. If any shares of Class A Common Stock requested to be included in a
sale pursuant to this Section 6.1 shall not be outstanding but shall be issuable
upon conversion of shares of Class C Common Stock which are outstanding, then
the Management Investors and the Company shall take all actions necessary in
order to convert such shares of Class C Common Stock into shares of Class A
Common Stock in order to effect such sale.
Section 6.2 Piggyback Registrations.
-----------------------
(a) If the Company at any time proposes to register any of its equity
securities under the Securities Act (other than a registration on Form S-4 or S-
8 or any successor forms thereto and other than pursuant to a registration under
Section 6.1), whether or not for sale for its own account, on a form and in a
manner that would permit registration of Registrable Securities for sale to the
public under the Securities Act, it will give prompt written notice to all
holders of Registrable Securities of its intention to do so, describing such
securities and specifying the form and manner and the other relevant facts
involved in such proposed registration (including, without limitation, (x)
whether or not such registration will be in connection with an underwritten
offering of Registrable Securities and, if so, the identity of the Managing
Underwriter and whether such offering will be pursuant to a "best efforts" or
"firm commitment" underwriting and (y) the price (net of any underwriting
commissions, discounts and the like) at which the Registrable Securities are
reasonably expected to be sold). Upon the written request of any such holder
delivered to the Company within 30 calendar days after the receipt of any such
notice (which request shall specify the Registrable Securities intended to be
disposed of by such holder and the intended method of disposition thereof), the
Company will use best efforts to effect the registration under the Securities
Act of all of the Registrable
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Securities that the Company has been so requested to register; provided,
--------
however, that:
- -------
(i) If, at any time after giving such written notice of its intention
to register any securities and prior to the effective date of the
registration statement filed in connection with such registration, the
Company shall determine for any reason not to register such securities, the
Company may, at its election, give written notice of such determination to
each holder of Registrable Securities who made a request as hereinabove
provided and thereupon the Company shall be relieved of its obligation to
register any Registrable Securities in connection with such registration
(but not from its obligation to pay the Registration Expenses in connection
therewith), without prejudice, however, to the rights, of the Institutional
Investors to request that such registration be effected as a registration
under Section 6.1.
(ii) If such registration involves an Underwritten Offering, all
holders of Registrable Securities requesting to be included in the
Company's registration must sell their Registrable Securities to the
underwriters selected by the Company on the same terms and conditions as
apply to the Company.
No registration effected under this Section 6.2 shall relieve the Company of its
obligation to effect registration upon request under Section 6.1.
(b) The Company shall not be obligated to effect any registration of
Registrable Securities under this Section 6.2 incidental to the registration of
any of its securities solely in connection with mergers, acquisitions, exchange
offers, dividend reinvestment plans or stock option or other employee benefit
plans.
(c) If the Company registers any of its equity securities, it shall use a
form (other than Form S-4 or S-8, or any successor form) that would permit
holders of Registrable Securities to exercise their rights set forth in this
Section 6.2 unless (i) the failure to use another form would create a material
disadvantage to the Company or (ii) the transaction contemplated by the Company
is a transaction for which Form S-4, Form S-8 or any such successor form is
specifically applicable.
(d) The Registration Expenses incurred in connection with each
registration of Registrable Securities requested pursuant to this Section 6.2
shall be paid by the Company.
(e) If a registration pursuant to this Section 6.2 involves an
Underwritten Offering and the Managing Underwriter advises the
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issuer that, in its opinion, the number of securities proposed to be included in
such registration is such as to materially and adversely affect the success of
such offering, then the Company will include in such registration (i) first, the
securities the Company proposes to sell, (ii) second, the number of Registrable
Securities requested by the Institutional Investors to be included in such
registration that, in the opinion of such Managing Underwriter, can be sold,
such amount to be allocated among all such Institutional Investors pro rata on
the basis of the respective number of Registrable Securities each such holder
has requested to be included in such registration and (iii) third, the number of
Registrable Securities requested by the other holders thereof to be included in
such registration that, in the opinion of such Managing Underwriter can be sold,
such amount to be allocated among all such holders pro rata on the basis of the
respective number of Registrable Securities each such holder has requested to be
included in such registration; provided, however, that no securities (other than
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securities being sold by the Company and Registrable Securities) shall be
included in such offering unless and until all Registrable Securities have been
included.
(f) In connection with any Underwritten Offering with respect to which
holders of Registrable Securities shall have requested registration pursuant to
this Section 6.2, the Company shall have the right to select the Managing
Underwriter with respect to the offering; provided, that such Managing
--------
Underwriter is reasonably acceptable to the holders of a majority of the
Registrable Securities requested to be sold in such Underwritten Offering.
(g) If any shares of Class A Common Stock requested to be included in a
sale pursuant to this Section 6.2 shall not be outstanding but shall be issuable
upon conversion of shares of Class B Common Stock or the exercise of Warrants
which are outstanding, then the Holders thereof and the Company shall take all
actions necessary in order to convert such shares of Class B Common Stock into
or exercise of Warrants for shares of Class A Common Stock in order to effect
such sale. If any shares of Class A Common Stock requested to be included in a
sale pursuant to this Section 6.2 shall not be outstanding but shall be issuable
upon conversion of shares of Class C Common Stock which are outstanding, then
the Management Investors and the Company shall take all actions necessary in
order to convert such shares of Class C Common Stock into shares of Class A
Common Stock in order to effect such sale.
Section 6.3 Registration Procedures.
-----------------------
(a) If and whenever the Company is required to effect the registration of
any Registrable Securities under the Securities
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<PAGE>
Act as provided in this Agreement, the Company will, as expeditiously as
possible:
(i) Prepare and, in any event within 90 calendar days after the end
of the period within which requests for registration may be given to the
Company (or, in the event that the Company has postponed a registration
statement pursuant to Section 6.1(a), not later than 30 days after the date
to which the Company postponed such registration statement), file with the
Commission a registration statement with respect to such Registrable
Securities and use its best efforts to cause such registration statements
to become and remain effective; provided, that before filing a registration
--------
statement or prospectus or any amendments or supplements thereof, the
Company will furnish to (i) the counsel selected by the holders of a
majority of the number of shares of Registrable Securities owned by the
Institutional Investors and (ii) the counsel selected by holders of a
majority of the number of shares of the Registrable Securities to be
included in such registration (other than those held by the Institutional
Investors), copies of all such documents proposed to be filed, which
documents will be subject to the review of such counsel (and the Company
shall not file any document to which such counsel reasonably object).
(ii) Prepare and file with the Commission such amendments (including
post-effective amendments) and supplements to such registration statement
and the prospectus used in connection therewith as may be necessary to keep
such registration statement effective and to comply with the provisions of
the Securities Act with respect to the disposition of all equity securities
covered by such registration statement until such time as all of such
equity securities have been disposed of in accordance with the intended
methods of disposition by the seller or sellers thereof set forth in such
registration statement.
(iii) Furnish to each holder of Registrable Securities to be included
in such registration, without charge, (A) a copy of the order of the SEC
declaring such registration statement and any post-effective amendment
thereto effective, (B) such reasonable number of conformed copies of such
registration statement and of each such amendment and supplement thereto
(in each case including any documents incorporated therein by reference and
all exhibits), (C) such reasonable number of copies of the prospectus
included in such registration statement (including such preliminary
prospectus and any summary prospectus), in conformity with the requirements
of the Securities Act, and (D) such other documents as such seller may
reasonably request in order to
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facilitate the disposition of the Registrable Securities owned by such
holder.
(iv) Use its best efforts to register or qualify such Registrable
Securities covered by such registration statement under such other
securities or blue sky laws of such jurisdictions as each seller shall
reasonably request, keep each such registration or qualification (or
exemption therefrom) effective until such time as all of such equity
securities have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof set forth on such registration
statement and do any and all other acts and things that may be reasonably
necessary or advisable to enable such seller to consummate the disposition
of the Registrable Securities owned by such seller, in such jurisdictions,
except that the Company shall not for any such purpose be required (A) to
qualify to do business as a foreign corporation in any jurisdiction where
it is not then so qualified, or (B) to take any action that would subject
it to general or unlimited service of process in any such jurisdiction
where it is not then so subject.
(v) Use its best efforts to cause such Registrable Securities
covered by such registration statement to be registered with or approved by
such other governmental agencies or authorities as may be necessary to
enable the seller or sellers thereof to consummate the disposition of such
Registrable Securities and keep each such registration or approval
effective until such time as all of such equity securities have been
disposed of in accordance with the intended methods of disposition by the
seller or sellers thereof set forth in such registration statement.
(vi) Immediately notify each seller of Registrable Securities covered
by such registration statement, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act of any event
the happening of which results in the prospectus included in such
registration statement, including an untrue statement of a material fact or
omitting to state any material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances then existing, and, at the request of any such seller,
prepare and deliver a reasonable number of copies of an amended or
supplemental prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus
shall not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
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(vii) Otherwise comply with all applicable rules and regulations of
the Commission and make generally available to its security holders, in
each case as soon as practicable, but not later than 45 calendar days after
the close of the period covered thereby (90 calendar days in case the
period covered corresponds to a fiscal year of the Company), an earnings
statement of the Company which will satisfy the provisions of Section 11(a)
of the Securities Act.
(viii) Use its best efforts in cooperation with the underwriters to
list such Registrable Securities on each securities exchange of which
equity securities of the Company are listed or as the underwriters may
reasonably designate.
(ix) Provide a transfer agent and registrar for all such
Registrable Securities not later than the effective date of such
registration statement.
(x) Make available for inspection by any seller of Registrable
Securities, any underwriter participating in any disposition pursuant to
such registration statement and any attorney, accountant or other agent
retained by any such seller or underwriter, all financial and other
records, pertinent corporate documents and properties of the Company and
its Subsidiaries, and cause the Company's officers, directors, employees
and independent accountants to supply all information reasonably requested
by any such seller, underwriter, attorney, accountant or agent in
connection with such registration statement.
(xi) Permit any holder of Registrable Securities which holder, in
its sole and exclusive judgment, might be deemed to be an underwriter or a
controlling person of the Company, to participate in the preparation of
such registration or comparable statement and to require the insertion
therein of material, furnished to the Company in writing, that in the
reasonable judgment of such holder and its counsel should be included.
(xii) Use its best efforts to prevent the issuance of any stop order
suspending the effectiveness of such registration statement, or of any
order suspending or preventing the use of any related prospectus or
suspending the qualification (or exemption from qualification) of any
equity securities included in such registration statement for sale in any
jurisdiction, and, if such order is issued, use its best efforts to obtain
the withdrawal of such order at the earliest possible moment.
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(xiii) In the event the offering is an Underwritten Offering, use its
best efforts to obtain a "cold comfort" letter from the independent public
accountants for the Company in customary form and covering such matters of
the type customarily covered by such letters as (i) the Institutional
Investors participating in such offering or (ii) the sellers of a majority
(by number of shares) of any class of such Registrable Securities
(excluding shares being sold by the Institutional Investors) reasonably
request.
(xiv) Enter into such agreements (including an underwriting
agreement in form, scope and substance as is customary in underwritten
offerings) and take all such other actions in connection therewith
(including those reasonably requested by the holders of a majority of the
Registrable Securities being sold) in order to expedite or facilitate the
disposition of such securities and in such connection, whether or not the
registration is an underwritten registration, (a) make such representations
and warranties to the holders of such Registrable Securities in form,
substance and scope as are customarily made by issuers to underwriters in
underwritten offerings and confirm the same if and when requested; and (b)
deliver such documents and certificates as may be requested by the holders
of a majority of the Registrable Securities being sold, to evidence the
continued validity of the representations and warranties of the Company and
its Subsidiaries made pursuant to clause (a) above and to evidence
compliance with any customary conditions contained in the underwriting
agreement or other agreement entered into by the Company.
(xv) Furnish to each seller a signed counterpart, addressed to the
sellers, of
(A) an opinion of counsel for the Company, dated the effective
date of the registration statement, and
(B) subject to the accountants obtaining the necessary
representations as specified in Statement on Auditing Standards No.
72, a "comfort" letter signed by the independent public accountants
who have certified the Company's financial statements included in the
registration statement,
covering substantially the same matters with respect to the registration
statement (and the prospectus included therein) and, in the case of such
accountants' letter, with respect to changes subsequent to the date of such
financial statements, as are customarily covered in opinions of issuer's
counsel and in accountants' letter delivered to the underwriters in
underwritten public offerings of securities.
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(xvi) On or before the effective date of a shelf registration (A)
provide a CUSIP number for each such security and (B) provide the transfer
agent with printed certificates for the Registrable Securities, which are
in a form eligible for deposit with DTC.
If any such registration or comparable statement refers to any holder
by name or otherwise as the holder of any securities of the Company and if
in its sole and exclusive judgment, such holder is or might be deemed to be
a controlling person of the Company, such holder shall have the right to
require (i) the insertion therein of language, in form and substance
satisfactory to such holder and presented to the Company in writing, to the
effect that the holding by such holder of such securities is not to be
construed as a recommendation by such holder of the investment quality of
the Company's securities covered thereby and that such holding does not
imply that such holder will assist in meeting any future financial
requirements of the Company, or (ii) in the event that such reference to
such holder by name or otherwise is not required by the Securities Act or
any similar Federal statute then in force, the deletion of the reference to
such holder; provided that with respect to this clause (ii) such holder
shall furnish to the Company an opinion of counsel to such effect, which
opinion and counsel shall be reasonably satisfactory to the Company.
(b) Each holder of Registrable Securities will, upon receipt of any notice
from the Company of the happening of any event of the kind described in Section
6.3(a)(vi), forthwith discontinue disposition of the Registrable Securities
pursuant to the registration statement covering such Registrable Securities
until such holder's receipt of the copies of the supplemented or amended
prospectus contemplated by Section 6.3(a)(vi).
(c) If a registration pursuant to Section 6.1 or 6.2 involves an
Underwritten Offering, each holder of Registrable Securities agrees, whether or
not such holder's Registrable Securities are included in such registration, not
to effect any public sale or distribution, other than a sale pursuant to Rule
144 under the Securities Act, of any Registrable Securities, or of any security
convertible into or exchangeable or exercisable for any Registrable Securities
(other than as part of such Underwritten Offering), without the consent of the
Managing Underwriter, during a period commencing seven calendar days before and
ending 90 calendar days (or such lesser number as the Managing Underwriter shall
designate) after the effective date of such registration.
(d) If a registration pursuant to Section 6.1 or 6.2 involves an
Underwritten Offering, the Company agrees, if so
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required by the Managing Underwriter, not to effect any public sale or
distribution of any of its equity or debt securities, as the case may be, or
securities convertible into or exchangeable or exercisable for any of such
equity or debt securities, as the case may be, during a period commencing seven
calendar days before and ending 90 calendar days after the effective date of
such registration, except for such Underwritten Offering or except in connection
with a stock option plan, stock purchase plan, savings or similar plan, or an
acquisition, merger or exchange offer.
(e) If a registration pursuant to Section 6.1 or 6.2 involves an
Underwritten Offering, any holder of Registrable Securities requesting to be
included in such registration may elect, in writing, prior to the effective date
of the registration statement filed in connection with such registration, not to
register such securities in connection with such registration, unless such
holder has agreed with the Company or the Managing Underwriter to limit its
rights under this Section 6.3.
(f) It is understood that in any Underwritten Offering in addition to any
shares of Common Stock (the "initial shares") the underwriters have committed to
purchase, the underwriting agreement may grant the underwriters an option to
purchase up to a number of additional shares of authorized but unissued shares
of Common Stock (the "option shares") equal to 15% of the initial shares (or
such other maximum amount as the NASD may then permit), solely to cover over-
allotments. Shares of Common Stock proposed to be sold by the Company and the
other sellers shall be allocated between initial shares and option shares as
agreed or, in the absence of agreement, pursuant to Section 6.1(h) or 6.2(c), as
the case may be. The number of initial shares and option shares to be sold by
requesting holders shall be allocated pro rata among all such holders on the
basis of the relative number of shares of Registrable Securities included in
such registration for each such Holder subject to any reduction in the number of
shares to be sold pursuant to the terms of this Agreement.
(g) Notwithstanding anything in this Article VI to the contrary, in lieu of
converting any share of Class B Common Stock or Class C Common Stock into Class
A Common Stock or exercising Warrants for Common Stock prior to or
simultaneously with the filing or the effectiveness of any registration
statement filed pursuant to this Article VI, the holder of such Class B Common
Stock, Class C Common Stock or Warrants may sell such Class B Common Stock,
Class C Common Stock or Warrants to the underwriter of the offering being
registered upon the undertaking of such underwriter to convert such Class B
Common Stock, Class C Common Stock or exercise such Warrants before making any
distribution pursuant to such registration statement and to include the Class
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A Common Stock issued upon such conversion among the securities being offered
pursuant to such registration statement. The Company agrees to cause such Class
A Common Stock to be included among the securities being offered pursuant to
such registration statement to be issued within such time as will permit the
underwriter to make and complete the distribution contemplated by the
underwriting.
Section 6.4 Indemnification.
---------------
(a) In the event of any registration of any securities of the Company under
the Securities Act pursuant to Section 6.1 or 6.2, the Company will, and it
hereby agrees to, indemnify and hold harmless, to the extent permitted by law,
each seller of any Registrable Securities covered by such registration
statement, its directors and officers, employees, agents or general and limited
partners, each other Person who participates as an underwriter in the offering
or sale of such securities and each other Person, if any, who controls such
seller or any such underwriter within the meaning of the Securities Act, as
follows:
(i) against any and all loss, liability, claim, damage or expense
whatsoever including, without limitation, expenses contemplated by clause
(a)(iii) below (collectively, "Losses") arising out of or based upon an
untrue statement or alleged untrue statement of a material fact contained
in any registration statement (or any amendment or supplement thereto),
including all documents incorporated therein by reference, or the omission
or alleged omission therefrom of a material fact required to be stated
therein or necessary to make the statements therein not misleading, or
arising out of an untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus or prospectus (or any
amendment or supplement thereto) or the omission or alleged omission
therefrom of a material fact necessary in order to make the statements
therein not misleading;
(ii) against any and all Losses to the extent of the aggregate amount
paid in settlement of any litigation, or investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, if such settlement is effected with
the written consent of the Company; and
(iii) against any and all expense reasonably incurred by them in
connection with investigating, preparing or defending against any
litigation, or investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
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untrue statement or omission, or any such alleged untrue statement or
omission, to the extent that any such expense is not paid under
subparagraph (i) or (ii) above;
provided, however, that this indemnity does not apply to any Loss, to the extent
- -------- -------
arising out of an untrue statement or alleged untrue statement or omission or
alleged omission made in reliance upon and in conformity with written
information furnished to the Company by or on behalf of any such seller or
underwriter expressly for use in the preparation of any registration statement
(or any amendment thereto) or any preliminary prospectus or prospectus (or any
amendment or supplement thereto); and provided, further, that the Company will
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not be liable to any Person who participates as an underwriter in the offering
or sale of Registrable Securities or any other Person, if any, who controls such
underwriter within the meaning of the Securities Act, under the indemnity
agreement in this Section 6.4(a) with respect to any preliminary prospectus or
final prospectus or final prospectus as amended or supplemented, as the case may
be, to the extent that any such Loss of such underwriter or controlling Person
results from the fact that such underwriter sold Registrable Securities to a
Person to whom there was not sent or given, at or prior to the written
confirmation of such sale, a copy of the final prospectus or of the final
prospectus as then amended or supplemented, whichever is most recent, if the
Company has previously furnished copies thereof to such underwriter. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of such seller or any such director, officer, general or
limited partner, investment advisor or agent, underwriter or controlling Person
and shall survive the transfer of such securities by such seller.
(b) The Company may require, as a condition to including any Registrable
Securities in any registration statement filed in accordance with Section 6.1 or
6.2, that the Company shall have received an undertaking reasonably satisfactory
to it from the prospective seller of such Registrable Securities or any
underwriter, to indemnify and hold harmless (in the same manner and to the same
extent as set forth in Section 6.4(a)) the Company with respect to any statement
or alleged statement in or omission or alleged omission from such registration
statement, any preliminary, final or summary prospectus contained therein, or
any amendment or supplement, if such statement or alleged statement or omission
or alleged omission was made in reliance upon and in conformity with written
information furnished to the Company by or on behalf of such seller or
underwriter specifically stating that it is for use in the preparation of such
registration statement, preliminary, final or summary prospectus or amendment or
supplement. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of the Company or any such director,
officer
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<PAGE>
or controlling Person and shall survive the transfer of such securities by such
seller. In that event, the obligations of the Company and such sellers pursuant
to this Section 6.4 are to be several and not joint; provided, however, that
-------- -------
with respect to each claim pursuant to this Section, the Company shall be liable
for the full amount of such claim, and each such seller's liability under this
Section 6.4 shall be limited to an amount equal to the net proceeds (after
deducting the underwriting discount and expenses) received by such seller from
the sale of Registrable Securities held by such seller pursuant to this
Agreement.
(c) Promptly after receipt by an indemnified party hereunder of written
notice of the commencement of any action or proceeding involving a claim
referred to in this Section 6.4, such indemnified party will, if a claim in
respect thereof is to be made against an indemnifying party, give written notice
to such indemnifying party of the commencement of such action; provided,
--------
however, that the failure of any indemnified party to give notice as provided
- -------
herein shall not relieve the indemnifying party of its obligations under this
Section 6.4, except to the extent (but only to the extent) that a court of
competent jurisdiction determines (which determination is not subject to appeal)
(not including any such notice of an underwriter) that the indemnifying party
has been materially prejudiced by such failure to give notice. In case any such
action is brought against an indemnified party, unless in such indemnified
party's reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist in respect of such claim (in which case the
indemnifying party shall not be liable for the fees and expenses of more than
two firms of counsel in addition to appropriate local counsel, one each chosen
by (1) the Holders of a majority (by number of shares) of the Registerable
Securities owned by the Institutional Investors to be included in any
Registration Statement and (2) a majority (by number of shares) of the sellers
of Registrable Securities (other than the Institutional Investors), or more than
one firm of counsel for the underwriters in connection with any one action or
separate but similar or related actions), the indemnifying party will be
entitled by giving written notice of its intention to do so within 20 days of
the date it receives motion of such claim from the indemnified party to
participate in and to assume the defense thereof, jointly with any other
indemnifying party similar notified, to the extent that it may wish with counsel
reasonably satisfactory to such indemnified party, and after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party will not be liable to such indemnified
party for any legal or other expenses subsequently incurred by such indemnifying
party in connection with the defense thereof unless: (i) the Company agrees to
pay such fees and expenses; or (ii) the Company fails promptly to assume the
defense of such Proceeding or fails to employ counsel
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<PAGE>
satisfactory to such indemnified party; or (iii) the named parties to any such
proceeding (including any impleaded parties) include both such indemnified party
and the Company or an Affiliate of the Company, and there may be one or more
defenses available to such indemnified party that are in addition to, or in
conflict with, those available to the Company or such affiliate or controlling
person (in which case, if such indemnified party notifies the Company in writing
that it elects to employ separate counsel at the expense of the Company, the
Company shall not have the right to assume the defense of such Proceeding on
behalf of such indemnified party), it being understood, however, that the
Company shall not, in connection with any one such proceeding or separate but
substantially similar or related proceedings in the same jurisdiction arising
out of the same general allegations or circumstances, be liable for the fees and
expenses of more than one separate firm of attorneys (together with appropriate
local counsel) at any time for such indemnified party unless, in the reasonable
judgment of an indemnified party, a conflict of interest may exist between such
indemnified party and any other indemnified party with respect to such
proceeding, in which event the Company shall be liable for the fees and expenses
of such additional counsel.
(d) The Company and each seller of Registrable Securities shall provide for
the foregoing indemnity (with appropriate modifications) in any underwriting
agreement with respect to any required registration or other qualification of
securities under any federal or state law or regulation of any governmental
authority.
Section 6.5 Contribution. In order to provide for just and equitable
------------
contribution in circumstances under which the indemnity contemplated by Section
6.4 is for any reason not available (or not sufficient to hold such indemnified
party harmless), the parties required to indemnify by the terms thereof shall
contribute to the aggregate Losses incurred by the indemnified party. In
determining the amounts which the respective parties shall contribute, there
shall be considered the relative benefits received by each party from the
offering of the Registrable Securities (taking into account the portion of the
proceeds of the offering realized by each) or if such allocation is not
permitted by applicable law, the relative fault of the Company on the one hand,
and of the indemnified Holder, on the other hand, in connection with the
actions, statements or omissions that resulted in such Losses, the parties'
relative knowledge and access to information concerning the matter with respect
to which the claim was asserted, the opportunity to correct and prevent any
statement or omission and any other equitable considerations appropriate under
the circumstances. The relative fault of the Company, on the one hand, and of
the indemnified party, on the other hand, shall be determined by reference to,
among other things, whether any action in question, including any untrue or
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<PAGE>
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact has been taken by, or relates to information supplied by,
the Company or by the indemnified party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent any such
action, statement or omission; provided, that no seller of Registrable
--------
Securities shall be required to contribute any amount in excess of the amount
such seller would have been required to pay to an indemnified party if the
indemnity under Section 6.4(b) were available. The Company and each such seller
agree with each other and the underwriters of the Registrable Securities, if
requested by such underwriters, that it would not be equitable if the amount of
such contribution were determined by pro rata or per capita allocation (even if
the underwriters were treated as one entity for such purpose) or for the
underwriters' portion of such contribution to exceed the percentage that the
underwriting discount bears to the initial public offering price of the
Registrable Securities or any other method that does not take account of the
equitable considerations referred to in this paragraph. For purposes of this
Section 6.5, each Person, if any, who controls an underwriter within the meaning
of Section 15 of the Securities Act shall have the same rights to contribution
as such underwriter, and each director and each officer of the Company who
signed the registration statement, and each Person, if any, who controls the
Company or a seller of Registrable Securities within the meaning of Section 15
of the Securities Act shall have the same rights to contribution as the Company
or a seller of Registrable Securities, as the case may be.
Section 6.6 Rule 144 and 144A. If the Company shall have filed a
-----------------
registration statement pursuant to the requirements of Section 12 of the
Exchange Act or a registration statement pursuant to the requirements of the
Securities Act, the Company covenants that it will file the reports required to
be filed by it under the Securities Act and the Exchange Act and the rules and
regulations adopted by the Commission thereunder (or, if the Company is not
required to file such reports, it will, upon the request of any holder of
Registrable Securities, make publicly available other information), and it will
take such further action as any holder of Registrable Securities may reasonably
request, all to the extent required from time to time to enable such holder to
sell shares of Registrable Securities without registration under the Securities
Act within the limitation of the exemptions provided by (i) Rule 144 under the
Securities Act, as such Rule may be amended from time to time, or (ii) any
similar rule or regulation hereafter adopted by the Commission. Upon the request
of any holder of Registrable Securities, the Company will deliver to such holder
a written statement as to whether it has complied with such requirements.
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<PAGE>
Upon the request of a holder of Registrable Securities, the Company
covenants and agrees to provide the information required by Rule 144A(d)(4)
under the Securities Act.
Section 6.7 Registration Expenses. All Registration Expenses shall be
---------------------
borne by the Company (and, if paid or incurred by any Holder shall be promptly
reimbursed by the Company.)
Section 6.8 Other Provisions Regarding Registration Rights.
----------------------------------------------
(a) Except as provided in this Agreement as it may be amended from time to
time in accordance with the express terms hereof, and until the consummation of
a Public Distribution, the Company will not grant to any Person the right to
request that the Company register any equity securities of the Company, or any
securities convertible or exchangeable into or exercisable for such securities.
(b) Notwithstanding anything to the contrary in any previous agreement or
security, the Company shall have no obligations to any Stockholder with respect
to the registration of any shares of Stock, except as provided in this
Agreement.
ARTICLE VII
Termination
-----------
Section 7.1 Certain Terminations.
--------------------
(a) The provisions of Articles III, IV and V (other than the provisions of
Section 5.7) shall terminate on the date on which any of the following events
first occurs: (i) a merger or consolidation of the Company with or into another
Person that is not an Affiliate of the Company, as a result of which the
Stockholders own less than 51% of the outstanding shares of Voting Stock of the
surviving or resulting corporation, (ii) the sale or other disposition in
compliance with Section 5.8 of all or substantially all the assets of the
Company to a Person that is not an Affiliate of the Company, or (iii) ten years
from the date of this Agreement.
(b) Notwithstanding the foregoing, this Agreement shall in any event
terminate other than with respect to Sections 5.7, 6.4 and 6.5 with respect to
any Stockholder when such Stockholder no longer owns any Stock.
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<PAGE>
ARTICLE VII
Miscellaneous
-------------
Section 8.1 Other Covenants.
---------------
For so long as any Institutional Investor holds in the aggregate 2.5% or
more of the outstanding Common Stock, such Institutional Investor may upon
reasonable prior written notice, visit and inspect the properties of the Company
and each Subsidiary of the Company and examine and copy (at their own expense)
the books of record and account, of the Company or Subsidiary, and discuss the
affairs of the Company or Subsidiary with the officers and the current and prior
independent public accountants of the Company or Subsidiary all at such
reasonable times as the Institutional Investor may desire. For so long as any
other Stockholder or Stockholders holds individually or in the aggregate 10% or
more of the Common Stock then outstanding, such Stockholder or Stockholders may
upon reasonable prior notice visit and inspect the properties of the Company and
each Subsidiary of the Company and examine and copy (at their own expense) the
books of record and account of the Company or Subsidiary, and discuss the
affairs of the Company or Subsidiary, finances and accounts of the Company or
Subsidiary with the officers and the current and prior independent public
accountants of the Company or Subsidiary all at such reasonable times as such
Stockholder or Stockholders may desire. All materials and information obtained
pursuant to this Section 8.1 shall be kept confidential by the Stockholders and
shall not be disclosed to any third party (other than to their Affiliates) other
than (i) as expressly agreed to by the Company, (ii) as required pursuant to
applicable law, (iii) in connection with judicial or arbitral proceedings or
upon request of any governmental or regulatory authority or (iv) in the case of
any Institutional Investor, if such disclosure would be permitted pursuant to
Section 5.16 of the Note Agreement dated as of August 16, 1995, among the
Company and the Institutional Investors.
Section 8.2 Financial Information; List of Stockholders.
-------------------------------------------
(a) The Company agrees to furnish to each Stockholder, for so long as such
Stockholder holds any Common Stock or Preferred Stock as soon as available the
following financial statements and other information:
(i) copies of the consolidated balance sheets of the Company and its
Subsidiaries as of the end of each fiscal year, and of the related
consolidated statements of income and retained earnings and cash flows for
such fiscal year, all in reasonable detail and stating in comparative form
beginning the fiscal year ended December 31, 1996, the respective
consolidated figures as of the end of and for the
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previous fiscal year, and, in the case of such consolidated statements,
accompanied by a report thereon of independent certified public accountants
of recognized national standing selected by the Company (the
"Accountants"), which report shall state that such consolidated financial
statements present fairly the consolidated financial position of the
Company and its Subsidiaries as at the dates indicated and their
consolidated income and retained earnings and cash flows for the periods
indicated in conformity with GAAP applied on a basis consistent with prior
years (except for such changes with which the Accountants shall concur) and
that the examination by such Accountants in connection with such
consolidated financial statements has been made in accordance with
generally accepted auditing standards; and
(ii) copies of any proxy statements, financial statements and reports
as the Company or its Subsidiaries shall send or make available generally
to any of their security holders, and copies of all regular and periodic
reports and of all registration statements (other than on Form S-8 or Form
701 or a similar form) which the Company or its Subsidiaries may file with
the Securities and Exchange Commission or with any securities exchange.
(b) The Company agrees to provide all information and make any filings
reasonably requested by any Stockholder that are required by Section 1202 of the
Internal Revenue Code of 1986, as amended, so long as such information and
filings do not have an adverse effect in respect of the Company's business,
operations, results, tax positions, conditions or prospects; provided, that the
Company makes no representation as to the availability of Section 1202.
Section 8.3 Successors and Assigns. Except as otherwise provided herein,
----------------------
all of the terms and provisions of this Agreement shall be binding upon, shall
inure to the benefit of and shall be enforceable by the respective successors
and assigns of the parties hereto. No Stockholder may assign any of its rights
hereunder to any Person other than a transferee that has complied with the
requirements of Section 4.2 (if applicable) as provided therein in all respects.
The Company may not assign any of its rights hereunder other than by operation
of law. If any transferee of any Stockholder shall acquire any Securities, in
any manner, whether by operation of law or otherwise, such shares shall be held
subject to all of the terms of this Agreement, and by taking and holding such
shares such Person shall be entitled to receive the benefits of and be
conclusively deemed to have agreed to be bound by and to comply with all of the
terms and provisions of this Agreement.
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<PAGE>
Section 8.4 Amendment and Modification; Waiver of Compliance; Conflicts.
-----------------------------------------------------------
(a) This Agreement may be amended only by a written instrument duly
executed by (i) a majority (by number of shares of Common Stock) of the Jordan
Investors, (ii) the holders of at least 66 2/3% of the shares of Common Stock
(with the Warrant Shares underlying any unexercised Warrants counted as if the
Warrants had been exercised) held by the Institutional Investors, and (iii) to
the extent that such proposed amendment would materially adversely affect the
rights of the Management Investors under this Agreement as a group, the holders
of a majority of the shares of Voting Stock owned by the Management Investors.
In the event of the amendment or modification of this Agreement in accordance
with its terms, the Stockholders shall cause the Board of Directors of the
Company to meet within 30 calendar days following such amendment or modification
or as soon thereafter as is practicable for the purpose of adopting any
amendment to the Certificate of Incorporation and By-Laws of the Company that
may be required as a result of such amendment or modification to this Agreement,
and, if required, proposing such amendments to the Stockholders entitled to vote
thereon, and the Stockholders agree to vote in favor of such amendments.
(b) Except as otherwise provided in this Agreement, any failure of any of
the parties to comply with any obligation, covenant, agreement or condition
herein may be waived by the party entitled to the benefits thereof only by a
written instrument signed by the party granting such waiver, but such waiver or
failure to insist upon strict compliance with such obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure.
Section 8.5 Notices. Any notice, request, claim, demand, document and
-------
other communication hereunder to any party shall be effective upon receipt (or
refusal of receipt) and shall be in writing and delivered personally or sent by
telex or telecopy (with such telex or telecopy confirmed promptly in writing
sent by first class mail), or first class mail, or other similar means of
communication, as follows:
(i) If to the Company or any Jordan Investor (other than MCIT and
Safety Partners), addressed to the Company or to such Jordan Investor c/o
The Jordan Company, 9 West 57th Street, New York, New York 10019,
Attention: A. Richard Caputo, Jr.; or
(ii) If to MCIT, addressed to MCIT, 9 West 57th Street, New York, New
York 10019, Attention: James E. Jordan.
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<PAGE>
(iii) If to a Stockholder other than the Jordan Investors, to the
address of such Stockholder set forth in the stock records of the Company.
or, in each case, to such other address or telex or telecopy number as such
party may designate in writing to each Stockholder and the Company by written
notice given in the manner specified herein.
All such communications shall be deemed to have been given, delivered or
made when so delivered by hand or sent by telex (answer back received) or
telecopy, or five business days after being so mailed.
Section 8.6 Entire Agreement. The provisions of Sections 4, 5 and 6 of
----------------
this Agreement and the other writings referred to therein or delivered pursuant
thereto which form a part hereof contain the entire agreement among the parties
hereto with respect to the subject transactions contemplated thereby and
supersede all prior oral and written agreements and memoranda and undertakings
among the parties hereto with regard to such subject matter. The Company
represents to the Stockholders that the rights granted to the holders hereunder
do not in any way conflict with and are not inconsistent with the rights granted
or obligations accepted under any other agreement (including the Certificate of
Incorporation) to which the Company is a party. Neither the Company nor any
Subsidiary of the Company will hereafter enter into any agreement with respect
to its equity or debt securities which is inconsistent with the rights granted
to the holders of Registrable Securities or any Stockholder under this Agreement
without obtaining the prior written consent of the Stockholder or holder of
Registrable Securities whose rights would be thereby affected.
Section 8.7 Injunctive Relief. The Stockholders acknowledge and agree
-----------------
that a violation of any of the terms of this Agreement will cause the
Stockholders irreparable injury for which an adequate remedy at law is not
available. Therefore, the Stockholders agree that each Stockholder shall be
entitled to an injunction, restraining order or other equitable relief from any
court of competent jurisdiction, restraining any Stockholder from committing any
violations of the provisions of this Agreement.
Section 8.8 Inspection. For so long as this Agreement shall be in
----------
effect, this Agreement shall be made available for inspection by any Stockholder
at the principal executive offices of the Company.
Section 8.9 Headings. The section and paragraph headings contained in
--------
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
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<PAGE>
Section 8.10 Recapitalizations, Exchanges, Etc., Affecting the Common
--------------------------------------------------------
Stock; New Issuances.
- --------------------
(a) The provisions of this Agreement shall apply, to the full extent set
forth herein with respect to the Common Stock and the Preferred Stock and to any
and all equity or debt securities of the Company or any successor or assign of
the Company (whether by merger, consolidation, sale of assets, or otherwise)
which may be issued in respect of, in exchange for, or in substitution of, such
equity or debt securities and shall be appropriately adjusted for any stock
dividends, splits, reverse splits, combinations, reclassifications,
recapitalizations, reorganizations and the like occurring after the date hereof.
(b) In the event that the Company enters into an agreement providing for
the merger or consolidation of the Company with another entity or for an
exchange of the equity securities of such entities pursuant to which
Stockholders of the Company would be entitled to receive equity securities of
the surviving or any other corporation, the Company shall cause such agreement
to provide that any holder of shares of Class B Common Stock shall be entitled
to receive non-voting equity securities of such surviving or other corporation
convertible into voting equity securities in the same manner as the Class B
Common Stock.
Section 8.11 Ratification of Prior Acts of Board of Directors of Company;
------------------------------------------------------------
Right to Negotiate. Each of the Stockholders (other than the Institutional
- ------------------
Investors) hereby (i) adopts, ratifies and confirms all of the actions
heretofore taken by the Board of Directors in all respects, including, without
limitation, in respect of the Merger Agreement and the transactions contemplated
thereby and (ii) agrees that nothing in this Agreement (apart from Article V
hereof) shall be deemed to restrict or prohibit the Company from purchasing
Stock from any Stockholder at any time upon such terms and conditions and at
such price as may be mutually agreed upon between the Company and such
Stockholder, whether or not at the time of such purchase, circumstances exist
which specifically grant the Company the right to purchase, or such Stockholder
the right to sell, Stock pursuant to the terms of this Agreement.
Section 8.12 LITIGATION. THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED,
----------
APPLIED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. EACH
OF THE PARTIES HERETO ACKNOWLEDGES AND AGREES THAT IN THE EVENT OF ANY BREACH OF
THIS AGREEMENT, THE NON-BREACHING PARTY WOULD BE IRREPARABLY HARMED AND COULD
NOT BE MADE WHOLE BY MONETARY DAMAGES, AND THAT, IN ADDITION TO ANY OTHER REMEDY
TO WHICH THEY MAY BE ENTITLED AT LAW OR IN EQUITY, THE PARTIES SHALL BE ENTITLED
TO SUCH EQUITABLE OR INJUNCTIVE RELIEF AS MAY BE APPROPRIATE. EACH PARTY AGREES
THAT JURISDICTION AND VENUE WILL BE PROPER IN THE SOUTHERN DISTRICT OF NEW YORK
AND WAIVES ANY OBJECTIONS BASED UPON FORUM NON
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<PAGE>
CONVENIENS. EACH PARTY WAIVES PERSONAL SERVICE OF PROCESS AND AGREES THAT A
SUMMONS AND COMPLAINT COMMENCING AN ACTION OR PROCEEDING SHALL BE PROPERLY
SERVED AND SHALL CONFER PERSONAL JURISDICTION IF SERVED BY REGISTERED OR
CERTIFIED MAIL TO THE PARTY AT THE ADDRESS SET FORTH IN THIS AGREEMENT, OR AS
OTHERWISE PROVIDED BY THE LAWS OF THE STATE OF NEW YORK OR THE UNITED STATES.
THE CHOICE OF FORUM SET FORTH IN THIS SECTION 8.12 SHALL NOT BE DEEMED TO
PRECLUDE THE ENFORCEMENT OF ANY JUDGMENT OBTAINED IN ANY OTHER FORUM OR THE
TAKING OF ANY ACTION UNDER THIS AGREEMENT TO ENFORCE SAME IN ANY OTHER
APPROPRIATE JURISDICTION.
Section 8.13 ARBITRATION. THE STOCKHOLDERS AFTER CONSULTING WITH COUNSEL
-----------
WAIVE THEIR RIGHTS, IF ANY, TO JURY TRIAL IN RESPECT TO ANY DISPUTE OR CLAIMS
BETWEEN OR AMONG THE PARTIES TO THIS AGREEMENT RELATING TO OR IN RESPECT OF THIS
AGREEMENT, ITS NEGOTIATION, EXECUTION, PERFORMANCE, SUBJECT MATTER, OR ANY
COURSE OF CONDUCT OR DEALING OR ACTIONS UNDER OR IN RESPECT OF THIS AGREEMENT,
INCLUDING, WITHOUT LIMITATION ANY CLAIM UNDER THE SECURITIES ACT, THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED, ANY OTHER STATE OR FEDERAL LAW RELATING TO
SECURITIES OR FRAUD OR BOTH, THE RACKETEER INFLUENCED AND CORRUPT ORGANIZATIONS
ACT, AS AMENDED, OR FEDERAL OR STATE COMMON LAW, AND ANY SUCH DISPUTE OR CLAIMS
SHALL BE SUBMITTED TO, AND RESOLVED EXCLUSIVELY PURSUANT TO, ARBITRATION IN
ACCORDANCE WITH THE COMMERCIAL ARBITRATION RULES OF THE AMERICAN ARBITRATION
ASSOCIATION. SUCH ARBITRATION SHALL TAKE PLACE IN NEW YORK, NEW YORK, AND SHALL
BE SUBJECT TO THE SUBSTANTIVE LAW OF THE STATE OF NEW YORK. DECISIONS AS TO
FINDINGS OF FACT AND CONCLUSIONS OF LAW PURSUANT TO SUCH ARBITRATION SHALL BE
FINAL, CONCLUSIVE AND BINDING ON THE PARTIES, SUBJECT TO CONFIRMATION,
MODIFICATION OR CHALLENGE PURSUANT TO 9 U.S.C. (S)(S) 1 ET SEQ. ANY FINAL AWARD
SHALL BE ENFORCEABLE AS A JUDGMENT OF A COURT OF RECORD.
Section 8.14 No Strict Construction. The language used in this Agreement
----------------------
will be deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rule of strict construction will be applied against any
person.
Section 8.15 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 8.16 Termination of Previous Purchase and Stockholder Agreements.
-----------------------------------------------------------
Each of Robert H. Elkin, Wayne C. Bircher, Ronald C. Boeger, John L.
Bortle, Kathleen M. Caselton, Michael C. Taylor, Allan A. Huning, Robert J.
Mills, John M. Pappas, Darold G. Oltjenbruns, Christopher T. Paule, Robert J.
Sandner and the Company acknowledge and accept that, each of their Purchase and
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<PAGE>
Stockholder Agreements is terminated and shall cease to be of any force or
effect.
Section 8.17 Affiliate Transactions. The parties hereto agree that, after
----------------------
the date hereof, the Company shall not enter into, or permit any of it
Subsidiaries to enter into, with respect to any person, any single transaction
or series of related transactions, pursuant to which such person sells, leases,
transfers or otherwise disposes of any of its properties or assets to, or
purchases or leases any property or assets from, or enters into any contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate of such person or of the Company or any of its Subsidiaries
(each of the foregoing an "Affiliate Transaction") other than a Permitted
Affiliate Transaction. As used herein, "Permitted Affiliate Transaction" shall
mean (a) any Affiliate Transaction of aggregate value less than $2 million that
is conducted in good faith on terms that are no less favorable to the Company or
the relevant Subsidiary of the Company than those that would have been obtained
in a comparable transaction by the Company or such Subsidiary with an unrelated
person, (b) any Affiliate Transactions for which the Company delivers to the
parties hereto an opinion as to the fairness to the Company or such Subsidiary
from a financial point of view issued by an investment banking firm of national
standing, (c) any employment agreement entered into by the Company or any of its
Subsidiaries in the ordinary course of business with the approval of the Board
of Directors of the Company, including the employment agreements entered into by
the Company on the date hereof, (d) transactions between or among the Company
and/or its wholly owned Subsidiaries, (e) transactions pursuant to, and in
accordance with, the terms of the Acquisition Agreement as in effect on the date
hereof, including the payment of "performance" bonus and "sale of the company"
bonuses to management investors pursuant to such Acquisition Agreement, (f)
Restricted Payments permitted by Section 5.11 of the Note Agreement and
Restricted Investments permitted by Section 5.12 of the Note Agreement, (g)
payments pursuant to the Management Consulting Agreement, dated as of August 16,
1995, by and among TJC Management and the Company, as in effect on the date
hereof, (h) reasonable directors' fees not to exceed $100,000 in the aggregate
per year, reimbursements for reasonable and customary out-of-pocket expenses
incurred in the performance of a director's duties, and Options issued pursuant
to the existing Option Plan as in effect on the date hereof to Persons other
than the Principals and their Affiliates, (i) payments to directors and officers
of the Company or any of its Subsidiaries pursuant to customary rights of
indemnification provided in the charter documents of, or indemnification
agreements with, the Company or any of its Subsidiaries, provided that such
indemnification is otherwise consistent with applicable law, (j) transactions
made from time to time pursuant to, and in accordance with, the terms of (i) the
Note Agreement and the
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Company's 12 1/4% Senior Subordinated Notes issued thereunder, (ii) the Purchase
Agreement, (iii) the Preferred Stock and the Certificate of Incorporation and
the Company's subordinated notes which may be issued at the Company's option in
exchange for shares of Preferred Stock in accordance therewith or (iv) the
Warrants issued as contemplated by the Purchase Agreement, (k) arm's-length
purchases or sales of goods made in the ordinary course of business, (l)
management share and option repurchases pursuant to Section 8 of the Management
Subscription Agreement as in effect at the date hereof, and (m) loans of up to
$500,000 by the Company to management investors pursuant to the Management
Subscription Agreement as in effect at the date hereof.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
duly executed as of the date first above written.
JACKSON PRODUCTS, INC.
By: /s/ Christopher T. Paule
------------------------------
Name: Christopher T. Paule
Title: Vice President
Leucadia Investors, Inc.
By: /s/ Ruth Klindtworth
------------------------------
Name: Ruth Klindtworth
Title: Vice President
John W. Jordan, II Revocable Trust
/s/ John W. Jordan, II
---------------------------------
John W. Jordan, II
Trustee
/s/ David W. Zalaznick
---------------------------------
David W. Zalaznick
/s/ Jonathan F. Boucher
---------------------------------
Jonathan F. Boucher
/s/ John R. Lowden
---------------------------------
John R. Lowden
/s/ Adam E. Max
---------------------------------
Adam E. Max
/s/ John M. Camp, III
---------------------------------
John M. Camp, III
-49-
<PAGE>
John M. Camp, III
Profit Sharing Plan DTD
1/1/88
/s/ John M. Camp, III
---------------------------------
John M. Camp, III, Trustee
/s/ A. Richard Caputo, Jr.
---------------------------------
A. Richard Caputo, Jr.
James E. Jordan, Jr. Profit Sharing Plan
and Trust
By: /s/ James E. Jordan, Jr.
------------------------------
James E. Jordan, Jr.
Trustee
/s/ Paul R. Rodzevik
---------------------------------
Paul R. Rodzevik
-50-
<PAGE>
MANAGEMENT STOCKHOLDERS:
/s/ Wayne C. Bircher
-------------------------------
Wayne C. Bircher
/s/ Ronald C. Boeger
-------------------------------
Ronald C. Boeger
/s/ John L. Bortle
-------------------------------
John L. Bortle
/s/ Kathleen M. Caselton
-------------------------------
Kathleen M. Caselton
/s/ Michael C. Taylor
-------------------------------
Michael C. Taylor
/s/ Robert H. Elkin
-------------------------------
Robert H. Elkin
/s/ Allan A. Huning
-------------------------------
Allan A. Huning
/s/ Robert J. Mills
-------------------------------
Robert J. Mills
/s/ John M. Pappas
-------------------------------
John M. Pappas
/s/ Darold G. Oltjenbruns
-------------------------------
Darold G. Oltjenbruns
/s/ Christopher T. Paule
-------------------------------
Christopher T. Paule
/s/ Robert J. Sandner
-------------------------------
Robert J. Sandner
-51-
<PAGE>
MCIT PLC
By: /s/ James E. Jordan, Jr.
------------------------------
Name:
Title:
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
By: /s/ Clifford M. Noreen
------------------------------
Name: Clifford M. Noreen
Title: Vice President
MASSMUTUAL PARTICIPATION INVESTORS
c/o Massachusetts Mutual Life Insurance Company
By: /s/ Clifford M. Noreen
------------------------------
Name: Clifford M. Noreen
Title: Vice President
MASSMUTUAL CORPORATE VALUE PARTNERS
LIMITED
By Massachusetts Mutual Life Insurance Company,
its Investment Manager
By: /s/ Clifford M. Noreen
------------------------------
Name: Clifford M. Noreen
Title: Vice President
-52-
<PAGE>
MASSMUTUAL CORPORATE INVESTORS
c/o Massachusetts Mutual Life Insurance Company
By: /s/ Clifford M. Noreen
------------------------------
Name: Clifford M. Noreen
Title: Vice President
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
By: /s/ Gary A. Poliner
------------------------------
Name: Gary A. Poliner
Title: Vice President
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
By: /s/ Dana Donovan
------------------------------
Name: Dana Donovan
Title: Senior Investment Officer
SAFETY PARTNERS, L.P.
By: /s/ Andrew R. Whittaker
------------------------------
Name: A. R. Whittaker
Title: Managing Director
-53-
<PAGE>
ADDITIONAL STOCKHOLDERS
-----------------------
Date: March 1, 1996 /s/ Mark A. Kolmer
---------------------------------
Mark A. Kolmer
Date: December 1, 1996 /s/ John L. Garavaglia
---------------------------------
John L. Garavaglia
-54-
<PAGE>
EXHIBIT A
---------
Stockholder Schedule
<PAGE>
EXHIBIT B
---------
Jordan Investor Subscription Agreement
<PAGE>
EXHIBIT C
---------
Management Subscription Agreement
<PAGE>
EXHIBIT D
---------
Advisor Subscription Agreement
<PAGE>
EXHIBIT E
---------
By-Laws of the Company
<PAGE>
EXHIBIT F
---------
Certificate of Incorporation of the Company
<PAGE>
EXHIBIT G
---------
[Intentionally Omitted]
<PAGE>
EXHIBIT H
---------
TJC Management Consulting Agreement
<PAGE>
EXHIBIT I
---------
1995 Jackson Management Stock Option Plan
<PAGE>
EXHIBIT J
---------
Director Indemnification Agreement
<PAGE>
TABLE OF CONTENTS
(Not Part of Agreement)
Page
RECITALS ................................................................... 1
ARTICLE I
Certain Definitions
-------------------
Affiliate ........................................................ 3
Agreement ........................................................ 3
Board of Directors ............................................... 4
By-Laws .......................................................... 4
Certificate of Incorporation ..................................... 4
Class A Common Stock ............................................. 4
Class B Common Stock ............................................. 4
Class C Common Stock ............................................. 4
Closing Date ..................................................... 4
Commission ....................................................... 4
Common Stock ..................................................... 4
Credit Agreement ................................................. 4
Exchange Act ..................................................... 5
First Offer Price ................................................ 5
GAAP ............................................................. 5
Indebtedness ..................................................... 5
Initial Public Offering .......................................... 5
Institutional Investors .......................................... 5
Safety Partners .................................................. 5
Jordan Investors ................................................. 6
Jordan Party ..................................................... 6
Jordan Pledge .................................................... 6
JZCC ............................................................. 6
Management Agreement ............................................. 6
Management Investors ............................................. 6
Management Stockholders .......................................... 6
Managing Underwriter ............................................. 7
MCIT ............................................................. 7
Notice of Exercise ............................................... 7
Notice of Intention .............................................. 7
Offered Shares ................................................... 7
Option Agreement ................................................. 7
Option Plan ...................................................... 7
Options .......................................................... 7
Permitted Transferee ............................................. 7
Person ........................................................... 7
Preferred Stock .................................................. 7
Public Distribution .............................................. 8
Public Offering .................................................. 8
Registrable Securities ........................................... 8
<PAGE>
TABLE OF CONTENTS
-----------------
(continued)
Page
----
Registration Expenses ............................................ 9
Requesting Holder ................................................ 10
Securities ....................................................... 11
Securities Act ................................................... 11
Selling Investors ................................................ 11
Selling Stockholder .............................................. 11
Senior Creditor .................................................. 11
Stock ............................................................ 11
Stockholder ...................................................... 11
Subsidiary ....................................................... 11
Transaction Documents ............................................ 11
Underwritten Offering ............................................ 11
Voting Stock ..................................................... 12
Voting Stockholder ............................................... 12
Warrants ......................................................... 12
ARTICLE II
Management
----------
2.1 Registration of Common Stock ........................................... 12
2.2 No Conflict with Agreement ............................................. 12
ARTICLE III
Corporate Governance
--------------------
3.1 Board of Directors ..................................................... 12
3.2 Vacancies .............................................................. 13
3.3 Covenant to Vote ....................................................... 14
ARTICLE IV
Transfers of Stock
------------------
4.1 Restrictions on Transfer ............................................... 14
4.2 Exceptions to Restrictions ............................................. 14
4.3 Endorsement of Certificates ............................................ 16
4.4 Improper Transfer ...................................................... 17
-ii-
<PAGE>
TABLE OF CONTENTS
-----------------
(continued)
Page
----
ARTICLE V
Rights of First Offer;
----------------------
New Securities; Tag Along Sales
-------------------------------
5.1 Transfers by a Stockholder ............................................. 17
5.2 Transfer of Offered Shares to Third Parties ............................ 19
5.3 Purchase of Offered Shares ............................................. 19
5.4 Waiting Period with Respect to Subsequent Transfers .................... 20
5.5 Right of First Refusal for New Securities .............................. 20
5.6 Legally Binding Obligation; Power of Attorney; Personal Rights ......... 21
5.7 Right to Join in Sale .................................................. 22
5.8 Retention and Sale of Control .......................................... 23
ARTICLE VI
Registration Rights
-------------------
6.1 Demand Registrations ................................................... 24
6.2 Piggyback Registrations ................................................ 27
6.3 Registration Procedures ................................................ 29
6.4 Indemnification ........................................................ 36
6.5 Contribution ........................................................... 39
6.6 Rule 144 and 144A ...................................................... 40
6.7 Registration Expenses .................................................. 40
6.8 Other Provisions Regarding Registration Rights ......................... 41
ARTICLE VII
Termination
-----------
7.1 Certain Terminations ................................................... 41
ARTICLE VIII
Miscellaneous
-------------
8.1 Other Covenants ........................................................ 41
8.2 Financial Information; List of Stockholders ............................ 42
8.3 Successors and Assigns ................................................. 43
8.4 Amendment and Modification; Waiver of Compliance; Conflicts ............ 43
8.5 Notices ................................................................ 44
8.6 Entire Agreement ....................................................... 45
-iii-
<PAGE>
TABLE OF CONTENTS
-----------------
(continued)
Page
----
8.7 Injunctive Relief ..................................................... 45
8.8 Inspection ............................................................ 45
8.9 Headings .............................................................. 45
8.10 Recapitalizations, Exchanges, Etc., Affecting the
Common Stock; New Issuances ........................................ 45
8.11 Ratification of Prior Acts of Board of Directors
of Company; Right to Negotiate ..................................... 46
8.12 Litigation ............................................................ 46
8.13 Arbitration ........................................................... 47
8.14 No Strict Construction ................................................ 47
8.15 Counterparts .......................................................... 47
8.16 Termination of Previous Purchase and Stockholder
Agreements ......................................................... 47
8.17 Affiliate Transactions ................................................ 47
EXHIBITS
Exhibit A Stockholder Schedule
Exhibit B Jordan Investor Subscription Agreement
Exhibit C Management Subscription Agreement
Exhibit D Advisor Subscription Agreement
Exhibit E By-Laws of the Company
Exhibit F Certificate of Incorporation of the Company
Exhibit G-1 Intercompany Management Consulting Agreement
Exhibit G-2 Tax Sharing Agreement
Exhibit H TJC Management Consulting Agreement
Exhibit I 1995 Jackson Management Stock Option Plan
Exhibit J Director Indemnification Agreement
-iv-
<PAGE>
EXHIBIT 4.7
JACKSON PRODUCTS, INC.
FIRST AMENDMENT TO STOCKHOLDERS AGREEMENT
THIS FIRST AMENDMENT TO STOCKHOLDERS AGREEMENT, dated as of March 1, 1996
(this "Amendment"), is made by and among JACKSON PRODUCTS INC., a Delaware
---------
corporation (together with its subsidiaries, unless otherwise indicated by the
context, the "Company"), MCIT PLC, a corporation organized under the laws of the
-------
United Kingdom ("MCIT"), MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY, MASSMUTUAL
----
LIMITED, MASSMUTUAL CORPORATE INVESTORS, THE NORTHWESTERN MUTUAL LIFE INSURANCE
COMPANY AND JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY (collectively with MCIT,
the "Institutional Investors"), SAFETY PARTNERS, L.P. ("Safety Partners"), the
----------------------- ---------------
Jordan Investors, the Management Stockholders and MARK A. KOLMER (the
"Stockholder"). Capitalized terms used herein and not otherwise defined herein
-----------
shall have the meanings ascribed to them in the Agreement.
WHEREAS, a Stockholders Agreement (the "Agreement"), was entered into on
---------
August 16, 1995 by and among the Company, MCIT, the Institutional Investors,
Safety Partners, the Jordan Investors and the Management Stockholders;
WHEREAS, the Stockholder as of the date hereof has subscribed for shares of
the Company's Class C Common Stock, pursuant to the Management Subscription
Agreement, as amended by the First Amendment to Management Subscription
Agreement of even date herewith;
WHEREAS, the parties desire to amend this Agreement to set forth their
respective rights and obligations in connection with the Stockholder's
investment in the Company;
WHEREAS, the parties hereto also desire to restrict the sale, assignment,
transfer, encumbrance or other disposition of the shares of capital stock of the
Company and to provide for certain rights and obligations in respect thereto as
hereinafter provided;
NOW, THEREFORE, in consideration of the mutual agreements and
understandings set forth herein, the parties hereto mutually agree as follows:
1. The following Definitions in the Agreement are amended and
revised to read in their entirety as follows:
<PAGE>
Management Investors shall mean any officer or managerial employee of the
--------------------
Company or any of its Subsidiaries who hereafter acquires any shares of Class C
Common Stock from the Company in accordance with the Management Subscription
Agreement or other subscription agreement presented by the Company to an officer
or managerial employee of the Company and this Agreement (including execution of
a counterpart to this Agreement), and any Permitted Transferee of any such
Persons who becomes a Stockholder in accordance with the terms hereof (including
execution of a counterpart to this Agreement).
Management Stockholders shall mean the management signatories to the
-----------------------
Management Subscription Agreement or other subscription agreement presented by
the Company to an officer or managerial employee of the Company and their
Permitted Transferees.
2. Section 8.15 is amended by the addition of the following sentence
to the end of such Section:
"If the requirements of this Agreement otherwise have been met,
new holders of Stock may become parties to this Agreement by executing
a counterpart to this Agreement at which time the Company shall revise
the Stockholders Schedule as may be necessary or appropriate."
3. Except as herein amended, the Agreement shall remain in full
force and effect and is ratified in all respects. On and after the effectiveness
of this Amendment, each reference in the Agreement to "this Agreement,"
"hereunder," "hereof, " "herein" or words of like import, and each reference to
the Agreement in any other agreements, documents or instruments executed and
delivered pursuant to the Agreement, shall mean and be a reference to the
Agreement, as amended by this Amendment.
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
duly executed as of the date first above written.
JACKSON PRODUCTS, INC.
By: /s/ Christopher T. Paule
--------------------------------
Name: Christopher T. Paule
Title: V.P. & C.F.O.
Leucadia Investors, Inc.
By: /s/ Ruth Klindtwort
-------------------------------
Name: Ruth Klindtwort
Title: Vice President & Secretary
John W. Jordan, II Revocable Trust
/s/ John W. Jordan, II
-----------------------------------
John W. Jordan, II
Trustee
/s/ David W. Zalaznick
-----------------------------------
David W. Zalaznick
/s/ Jonathan F. Boucher
-----------------------------------
Jonathan F. Boucher
/s/ John R. Lowden
-----------------------------------
John R. Lowden
/s/ Adam E. Max
-----------------------------------
Adam E. Max
/s/ John M. Camp, III
-----------------------------------
John M. Camp, III
3
<PAGE>
John M. Camp, III
Profit Sharing Plan DTD
1/1/88
/s/ John M. Camp, III,
-----------------------------------
John M. Camp, III, Trustee
/s/ A. Richard Caputo, Jr.
-----------------------------------
A. Richard Caputo, Jr.
James E. Jordan, Jr. Profit Sharing Plan and Trust
By: /s/ James E. Jordan, Jr.
--------------------------------
James E. Jordan, Jr.
Trustee
/s/ Paul R. Rodzevik
-----------------------------------
Paul R. Rodzevik
<PAGE>
MANAGEMENT STOCKHOLDERS:
/s/ Wayne C. Bircher
-----------------------------------
Wayne C. Bircher
/s/ Ronald C. Boeger
-----------------------------------
Ronald C. Boeger
/s/ John L. Bortle
-----------------------------------
John L. Bortle
/s/ Kathleen M. Caselton
-----------------------------------
Kathleen M. Caselton
/s/ Michael C. Taylor
-----------------------------------
Michael C. Taylor
/s/ Robert H. Elkin
-----------------------------------
Robert H. Elkin
/s/ Allan A. Huning
-----------------------------------
Allan A. Huning
/s/ Robert J. Mills
-----------------------------------
Robert J. Mills
/s/ John M. Pappas
-----------------------------------
John M. Pappas
/s/ Darold G. Oltjenbruns
-----------------------------------
Darold G. Oltjenbruns
/s/ Christopher T. Paule
-----------------------------------
Christopher T. Paule
/s/ Robert J. Sandner
-----------------------------------
Robert J. Sandner
5
<PAGE>
MCIT PLC
By: /s/ James E. Jordan, Jr.
--------------------------------
Name: James E. Jordan Jr.
Title: Director
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
By: /s/ Michael L. Klofas
--------------------------------
Name: Michael L. Klofas
Title: Managing Director
MASSMUTUAL PARTICIPATION INVESTORS
c/o Massachusetts Mutual Life Insurance Company
By: /s/ Michael L. Klofas
--------------------------------
Name: Michael L. Klofas
Title: Investment Officer
MASSMUTUAL CORPORATE VALUE PARTNERS
By Massachusetts Mutual Life Insurance Company,
its Investment Manager
By: /s/ Michael L. Klofas
--------------------------------
Name: Michael L. Klofas
Title: Investment Manager
MASSMUTUAL CORPORATE INVESTORS
c/o Massachusetts Mutual Life Insurance Company
By: /s/ Michael L. Klofas
--------------------------------
Name: Michael L. Klofas
Title: Investment Officer
6
<PAGE>
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
By: /s/ J. Thomas Christofferson
---------------------------------
Name: J. Thomas Christofferson
Title: Vice President
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
By: /s/ Dana Donovan
--------------------------------
Name: Dana Donovan
Title: Sr. Investment Manager
SAFETY PARTNERS, L.P.
By: /s/ Andrew R. Whittaker
--------------------------------
Name: Andrew R. Whittaker
Title: Managing Director
NEW STOCKHOLDERS:
/s/ Mark A. Kolmer
-----------------------------------
Date: March 1, 1996 Mark A. Kolmer
-------------
/s/ John L. Garavaglia
-----------------------------------
Date: December 1, 1996 John L. Garavaglia
----------------
7
<PAGE>
EXHIBIT 4.8
JACKSON PRODUCTS, INC.
SECOND AMENDMENT TO STOCKHOLDERS AGREEMENT
THIS SECOND AMENDMENT TO STOCKHOLDERS AGREEMENT, dated as of July 1, 1996
(this "Amendment"), is made by and among JACKSON PRODUCTS, INC., a Delaware
---------
corporation (together with its subsidiaries, unless otherwise indicated by the
context, the "Company"), whose address is 101 S. Hanley Road, St. Louis,
-------
Missouri 63105, MCIT PLC, an investment trust organized under the laws of the
United Kingdom ("MCIT"), MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY, MASSMUTUAL
----
PARTICIPATION INVESTORS, MASSMUTUAL CORPORATE VALUE PARTNERS LIMITED, MASSMUTUAL
CORPORATE INVESTORS, THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY and the JOHN
HANCOCK MUTUAL LIFE INSURANCE COMPANY (collectively with MCIT, the
"Institutional Investors") and SAFETY PARTNERS, L.P. ("Safety Partners"), the
- ------------------------ ---------------
Jordan Investors (as defined therein) that are signatories hereto (the "Jordan
------
Investors") and the management Stockholders referred to in the signature pages
- ---------
hereto (the "Management Stockholders").
-----------------------
WHEREAS, a Stockholders Agreement was entered into on August 16, 1995 and
amended on March 1, 1996 (as amended, the "Agreement"), by and among the
---------
Company, the Institutional Investors, Safety Partners, the Jordan Investors and
the Management Stockholders. Capitalized terms used herein and not otherwise
defined herein shall have the meanings ascribed to them in the Agreement.
WHEREAS, the Company desires to effect a 100-to-1 Reverse Stock Split (the
"Stock Split") to reduce its total authorized number of shares of capital stock
-----------
from 16,200,000 to 162,000;
WHEREAS, the parties desire to amend this Agreement to set forth their
respective ownership interests in connection with the reduction in the total
authorized number of shares of capital stock;
<PAGE>
NOW, THEREFORE, in consideration of the mutual agreements and
understandings set forth herein, the parties hereto mutually agree as follows:
1. The Stockholder Schedule attached to the Agreement in the form
attached hereto as Exhibit A is hereby amended and revised to read in its
---------
entirety in the form attached hereto as Exhibit B; provided, that no individual
--------- --------
stockholder's share ownership shall be deemed reduced unless all stockholders'
share ownership are proportionately and simultaneously reduced. All references
in the Agreement to numbers of shares should be read in conjunction with the
Stockholder Schedule attached hereto as Exhibit B. By way of example,
---------
references to Options in the Agreement consisting of 172,414 shares of Common
Stock shall, following the date hereof, be read as consisting of 1724.14 shares
of Common Stock as set forth on the Stockholder Schedule attached hereto as
Exhibit B. As a result, the respective ownership percentages (but not the
- ---------
number of shares held) of the Company's stockholders prior to the date hereof as
set forth on the Stockholder Schedule attached hereto as Exhibit A will remain
---------
unchanged following the Stock Split.
2. Except as herein amended, the Agreement shall remain in full force and
effect and is ratified in all respects. On and after the effectiveness of this
Amendment, each reference in the Agreement to "this Agreement," "hereunder,"
"hereof, " "herein" or words of like import, and each reference to the Agreement
in any other agreements, documents or instruments executed and delivered
pursuant to the Agreement, shall mean and be a reference to the Agreement, as
amended by this Amendment.
3. By executing and delivering this Amendment, each Stockholder hereby
consents to the Stock Split and hereby authorizes the officers of the Company to
do or cause to be done all acts necessary to effectuate the Stock Split
including, but not limited to, any filings with the Secretary of State of the
State of Delaware and the payment of any fees incident thereto.
4. This Amendment may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
duly executed as of the date first above written.
JACKSON PRODUCTS, INC.
By: /s/ Christopher T. Paule
-------------------------------
Name: Christopher T. Paule
Title: Vice President
Leucadia Investors, Inc.
By: /s/ Ruth Klindtwort
--------------------------------
Name: Ruth Klindtwort
Title: Vice President
John W. Jordan, II Revocable Trust
/s/ John W. Jordan, II
----------------------------------
John W. Jordan, II
Trustee
/s/ David W. Zalaznick
-----------------------------------
David W. Zalaznick
/s/ Jonathan F. Boucher
-----------------------------------
Jonathan F. Boucher
/s/ John R. Lowden
-----------------------------------
John R. Lowden
<PAGE>
/s/ Adam E. Max
-----------------------------------
Adam E. Max
/s/ John M. Camp, III
-----------------------------------
John M. Camp, III
John M. Camp, III
Profit Sharing Plan DTD
1/1/88
/s/ John M. Camp, III
-----------------------------------
John M. Camp, III, Trustee
/s/ A. Richard Caputo, Jr.
-----------------------------------
A. Richard Caputo, Jr.
James E. Jordan, Jr. Profit Sharing
Plan and Trust
By: /s/ James E. Jordan, Jr.
-------------------------------
James E. Jordan, Jr.
Trustee
/s/ Paul R. Rodzevik
-----------------------------------
Paul R. Rodzevik
MANAGEMENT STOCKHOLDERS:
/s/ Wayne C. Bircher
-----------------------------------
Wayne C. Bircher
/s/ Ronald C. Boeger
-----------------------------------
Ronald C. Boeger
<PAGE>
/s/ John L. Bortle
-----------------------------------
John L. Bortle
/s/ Michael C. Taylor
-----------------------------------
Michael C. Taylor
/s/ Robert H. Elkin
-----------------------------------
Robert H. Elkin
<PAGE>
/s/ Allan A. Huning
-----------------------------------
Allan A. Huning
/s/ Mark A. Kolmer
-----------------------------------
Mark A. Kolmer
/s/ Robert J. Mills
-----------------------------------
Robert J. Mills
/s/ John M. Pappas
-----------------------------------
John M. Pappas
/s/ Darold G. Oltjenbruns
-----------------------------------
Darold G. Oltjenbruns
/s/ Christopher T. Puale
-----------------------------------
Christopher T. Paule
/s/ Robert J. Sandner
-----------------------------------
Robert J. Sandner
MCIT PLC
By: /s/ James E. Jordan, Jr.
--------------------------------
Name: James E. Jordan, Jr.
Title: Director
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
By: /s/ Michael L. Klofas
--------------------------------
Name: Michael L. Klofas
Title: Managing Director
<PAGE>
MASSMUTUAL PARTICIPATION INVESTORS
The name MassMutual Participation Investors is the
designation of the Trustees under a Declaration of
Trust dated April 7, 1988, as amended from time to
time. The obligations of such Trust are not
binding upon, nor shall resort be had to the
property of, any of the Trustees, shareholders,
officers, employees or agents of such Trust
individually, but the Trust's assets and property
only shall be bound.
By: /s/ John B. Joyce
--------------------------------
Name: John B. Joyce
Title: Vice President
MASSMUTUAL CORPORATE INVESTORS
The foregoing is executed on behalf of MassMutual
Corporate Investors, organized under a Declaration
of Trust, dated September 13, 1988, as amended
from time to time. The obligations of such Trust
are not personally binding upon, nor shall resort
be had to the property of, any of the Trustees,
shareholders, officers, employees or agents of
such Trust, but the Trust's property only shall be
bound.
By: /s/ John B. Joyce
--------------------------------
Name: John B. Joyce
Title: Vice President
<PAGE>
MASSMUTUAL CORPORATE VALUE PARTNERS
By: /s/ Michael L. Klofas
--------------------------------
Name: Michael L. Klofas
Title: Managing Director
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
By: /s/ A. Kipp Koester
--------------------------------
Name: A. Kipp Koester
Title: Vice President
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
By: /s/ Dana Donovan
--------------------------------
Name: Dana Donovan
Title: Sr. Investment Officer
SAFETY PARTNERS, L.P.
By: /s/ Andrew R. Whittaker
--------------------------------
Name: Andrew R. Whittaker
Title: Managing Director
NEW STOCKHOLDERS:
/s/ John L. Garavaglia
-----------------------------------
Date: December 1, 1996 John L. Garavaglia
----------------
<PAGE>
EXHIBIT A
---------
Pre-Stock Split Stockholders Schedule
-------------------------------------
<PAGE>
EXHIBIT B
---------
Post-Stock Split
Stockholders Schedule
---------------------
<PAGE>
EXHIBIT 4.9
JACKSON PRODUCTS, INC.
THIRD AMENDMENT TO STOCKHOLDERS AGREEMENT
THIS THIRD AMENDMENT TO STOCKHOLDERS AGREEMENT, dated as of June 1, 1997
(this "Amendment"), is made by and among JACKSON PRODUCTS, INC., a Delaware
---------
corporation (together with its subsidiaries, unless otherwise indicated by the
context, the "Company"), whose address is 101 S. Hanley Road, St. Louis,
-------
Missouri 63105, MCIT PLC, an investment trust organized under the laws of the
United Kingdom ("MCIT"), MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY, MASSMUTUAL
----
PARTICIPATION INVESTORS, MASSMUTUAL CORPORATE VALUE PARTNERS LIMITED, MASSMUTUAL
CORPORATE INVESTORS, THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY and the JOHN
HANCOCK MUTUAL LIFE INSURANCE COMPANY (collectively with MCIT, the
"Institutional Investors") and SAFETY PARTNERS, L.P. ("Safety Partners"), the
- ------------------------ ---------------
Jordan Investors (as defined therein) that are signatories hereto (the "Jordan
------
Investors") and the management Stockholders referred to in the signature pages
- ---------
hereto (the "Management Stockholders" and, together with MCIT, the Institutional
-----------------------
Investors, Safety Partners and the Jordan Investors, the "Stockholders").
------------
WHEREAS, a Stockholders Agreement was entered into on August 16, 1995 and
amended on March 1, 1996 (as amended, the "Agreement"), by and among the Company
---------
and the Stockholders. Capitalized terms used herein and not otherwise defined
herein shall have the meanings ascribed to them in the Agreement;
WHEREAS, the Agreement was amended on July 1, 1996, in order to effectuate
a 100-to-1 Reverse Stock Split of the Company's authorized capital stock;
WHEREAS, the Company wishes to issue additional options under the Company's
1995 Management Stock Option Plan (the "Plan") which issuance will not effect
----
any change in the relative ownership percentages of the Stockholders on a fully
diluted basis;
WHEREAS, the parties desire to amend this Agreement to reflect the
increased number of shares reserved for issuance under the Company's 1995
Management Stock Option Plan and to permit future issuances of options under the
Plan without the consent of the Stockholders if such issuances do not effect any
change upon the relative ownership percentages of the Stockholders on a fully
diluted basis;
<PAGE>
NOW, THEREFORE, in consideration of the mutual agreements and
understandings set forth herein, the parties hereto mutually agree as follows:
1. The definition of "Options" in Article I of the Agreement is hereby
amended by deleting the number "1724.14" and substituting therefor "3198.04."
2. The definition of "Options" in Article I of the Agreement is hereby
further amended by adding the following parenthetical immediately after the
words "shares":
"(as the same may be adjusted, from time to time, by the Company's
Board of Directors without the consent of the Stockholders; provided,
--------
that any such adjustment which would effect any change in the relative
ownership percentages of the Stockholders on a fully diluted basis as
set forth in the Stockholder Schedule attached hereto must be
consented to by the Stockholders as provided in Section 8.4)"
3. The Stockholder Schedule attached to the Agreement in the form
attached hereto as Exhibit A is hereby amended and revised to read in its
---------
entirety in the form attached hereto as Exhibit B.
---------
4. Except as herein amended, the Agreement shall remain in full force
and effect and is ratified in all respects. On and after the effectiveness of
this Amendment, each reference in the Agreement to "this Agreement,"
"hereunder," "hereof, " "herein" or words of like import, and each reference to
the Agreement in any other agreements, documents or instruments executed and
delivered pursuant to the Agreement, shall mean and be a reference to the
Agreement, as amended by this Amendment.
5. By executing and delivering this Amendment, each Stockholder hereby
consents to the reservation of shares under the Plan and hereby authorizes the
officers of the Company to do or cause to be done all acts necessary to
effectuate the foregoing.
6. This Amendment may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
duly executed as of the date first above written.
JACKSON PRODUCTS, INC.
By: /s/ Christopher T. Paule
--------------------------------
Name: Christopher T. Paule
Title: Vice President
Leucadia Investors, Inc.
By: /s/ Mark Hornstein
--------------------------------
Name: Mark Hornstein
Title: Assistant V.P.
John W. Jordan, II Revocable Trust
By: /s/ John W. Jordan, II,
--------------------------------
John W. Jordan, II, Trustee
/s/ David W. Zalaznick
-----------------------------------
David W. Zalaznick
/s/ Jonathan F. Boucher
-----------------------------------
Jonathan F. Boucher
/s/ John R. Lowden
-----------------------------------
John R. Lowden
/s/ Adam E. Max
-----------------------------------
Adam E. Max
<PAGE>
/s/ John M. Camp, III
-----------------------------------
John M. Camp, III
John M. Camp, III Profit Sharing Plan
DTD 1/1/88
By: /s/ John M. Camp, III, Trustee
------------------------------
John M. Camp, III, Trustee
/s/ A. Richard Caputo, Jr.
-----------------------------------
A. Richard Caputo, Jr.
James E. Jordan, Jr. Profit Sharing
Plan and Trust
By: /s/ James E. Jordan, Jr.,
--------------------------------
James E. Jordan, Jr., Trustee
/s/ Paul R. Rodzevik
-----------------------------------
Paul R. Rodzevik
MANAGEMENT STOCKHOLDERS:
/s/ Ronald C. Boeger
-----------------------------------
Ronald C. Boeger
/s/ John L. Bortle
-----------------------------------
John L. Bortle
/s/ Robert H. Elkin
-----------------------------------
Robert H. Elkin
/s/ John L. Garavaglia
-----------------------------------
John L. Garavaglia
/s/ Allan A. Huning
-----------------------------------
Allan A. Huning
<PAGE>
/s/ Mark A. Kolmer
-----------------------------------
Mark A. Kolmer
/s/ Darold G. Oltjenbruns
-----------------------------------
Darold G. Oltjenbruns
/s/ John M. Pappas
-----------------------------------
John M. Pappas
/s/ Christopher T. Paule
-----------------------------------
Christopher T. Paule
/s/ Michael C. Taylor
-----------------------------------
Michael C. Taylor
MCIT PLC
By: /s/ James E. Jordan, Jr.
--------------------------------
Name: James E. Jordan, Jr.
Title: Director
MASSACHUSETTS MUTUAL LIFE INSURANCE
COMPANY
By: /s/ Michael L. Klofas
--------------------------------
Name: Michael L. Klofas
Title: Managing Director
<PAGE>
MASSMUTUAL PARTICIPATION INVESTORS
The name MassMutual Participation
Investors is the designation of the
Trustees under a Declaration of Trust
dated April 7, 1988, as amended from time
to time. The obligations of such Trust are
not binding upon, nor shall resort be had
to the property of, any of the Trustees,
shareholders, officers, employees or
agents of such Trust individually, but the
Trust's assets and property only shall be
bound.
By: /s/ Michael L. Klofas
------------------------------
Name: Michael L. Klofas
Title: Investment Officer
MASSMUTUAL CORPORATE INVESTORS
The foregoing is executed on behalf of
MassMutual Corporate Investors, organized
under a Declaration of Trust, dated
September 13, 1988, as amended from time
to time. The obligations of such Trust are
not personally binding upon, nor shall
resort be had to the property of, any of
the Trustees, shareholders, officers,
employees or agents of such Trust, but the
Trust's property only shall be bound.
By: /s/ Michael L. Klofas
------------------------------
Name: Michael L. Klofas
Title: Investment Officer
<PAGE>
MASSMUTUAL CORPORATE VALUE PARTNERS
By: Massachusetts Mutual Life Insurance
Company, as Investment Adviser
By: /s/ Michael L. Klofas
------------------------------
Name: Michael L. Klofas
Title: Managing Director
THE NORTHWESTERN MUTUAL LIFE INSURANCE
COMPANY
By: /s/ J. Thomas Christofferson
--------------------------------
Name: J. Thomas Christofferson
Title: Vice President
JOHN HANCOCK MUTUAL LIFE INSURANCE
COMPANY
By: /s/ Dana Donovan
--------------------------------
Name: Dana Donovan
Title: Sr. Investment Manager
SAFETY PARTNERS, L.P.
By: /s/ Jerry M. Gluck
--------------------------------
Name: Jerry M. Gluck
Title: Executive Vice President
<PAGE>
EXHIBIT A
---------
Stockholders Schedule as of 12/1/96
-----------------------------------
<PAGE>
EXHIBIT B
_________
Stockholders Schedule as of 6/1/97
----------------------------------
<PAGE>
EXHIBIT 4.10
1995 JACKSON MANAGEMENT STOCK OPTION PLAN
-----------------------------------------
(August 16, 1995)
1. Purpose
-------
The purpose of this 1995 Jackson Management Stock Option Plan (the "Plan")
----
is to aid Jackson Products, Inc. (the "Company"), and its sudsidiaries, in
-------
attracting and retaining key officers, managers and employees by providing a
means to offer them increased incentives to promote the well-being of the
Company through ownership of the Company's shares ("Shares") of Common Stock,
------
$.01 par value.
2. Administration
--------------
(a) The Plan shall be administered by the Board of Directors of the
Company or any properly constituted committee of the Board of Directors,
provided that such Committee shall have in all events a majority of Jordan
Directors as defined in and provided pursuant to the Company's Stockholders
Agreement, dated as of August 16, 1995, by and among the Company and certain
investors in the Company (as amended and modified, from time to time, the
"Stockholders Agreement") (the Board of Directors or such Committee, as so
----------------------
constituted, is referred to as the "Board"). Subject to the limitations and
-----
conditions hereinafter set forth, the Board shall have the authority, to make
all determinations with regard to granting stock options and the number of
Shares of the Company for which each stock option shall be granted.
(b) Nonqualified stock options will be granted on the date hereof to those
persons for the Years (as defined in paragraph 5(b)(iv)), and in the amounts,
listed on Schedule I hereto. Despite being granted at the date hereof, these
----------
granted stock options will be required to be earned in respect of the applicable
Year indicated on Schedule I, as if issued on the first day of such Year as
----------
indicated on Schedule I, and vested from and after the end of such Year, all in
----------
accordance with the provisions of paragraph 4 of this Plan. Any options granted,
-----------
but not yet vested pursuant to paragraph 4 shall automatically vest upon a Sale
-----------
of the Company or an initial public offering of the Company's Common Stock.
3. Shares Subject to the Plan; Other Agreements
--------------------------------------------
(a) The Shares to be sold or transferred pursuant to the exercise of
options granted under the Plan shall be authorized shares of Common Stock of the
Company, and may be newly issued shares or treasury shares. Subject to
adjustment as provided in paragraph 6 hereof, the aggregate number of Shares
-----------
which shall be delivered upon the exercise of stock options granted
<PAGE>
under the Plan shall be 172,414 Shares. Subject to adjustment as provided in
paragraph 6, the stock option price per Share of Common Stock issuable upon
- -----------
exercise of stock options granted under the Plan will be $1.00 per Share (the
"Exercise Price").
--------------
(b) As a condition of the issuance of stock options being issued or
awarded under the Plan, the recipient or holder of such stock option must
execute, deliver and enter into (i) a Stock Option Agreement substantially in
the form of Exhibit 1, modified, as necessary, by the Board to reflect the
---------
specific grant (the "Stock Option Agreement"), provided that no modification
----------------------
will be inconsistent with the provisions of this Plan of the Management
Subscription Agreement ("Management Subscription Agreement") of even date
---------------------------------
herewith by and among the Company and the Stockholders (as defined therein),
(ii) the Management Subscription Agreement, and (iii) the Company's Stockholder
Agreement (collectively, the "Company Agreements"), so that the Shares issuable
------------------
upon exercise of the stock options will be subject to the Company Agreements.
The terms and conditions of the Company Agreements are part of the Plan, are
incorporated herein by reference, and will be applicable to the Shares issuable
upon exercise of those stock options (but not the stock option themselves), with
the same force and effect as if part of the Plan.
(c) Stock options issued or awarded under the Plan will be evidenced by
such instruments, and will be subject to such further agreements, instruments,
documents and actions, as the Board shall determine, from time to time,
provided that they will not be inconsistent with the provisions of this Plan.
4. Eligibility for Exercise; Vesting
---------------------------------
(a) The provisions described in this paragraph 4 govern the ability of
-----------
the holder to exercise the stock options, and do not affect, or supersede, the
repurchase rights, transfer restrictions and other provisions described in the
Company Agreements which apply to the Shares issuable upon exercise of the stock
option if such exercise is permitted by this paragraph 4.
-----------
(b) In connection with this paragraph 4, the following definitions are
-----------
used:
(i) "Sale of the Company" means the sale of the Company to an
-------------------
independent third party or group of third parties not affiliated with any
of the Company's stockholders as of the date hereof pursuant to which such
party or parties acquire (i) capital stock of the Company possessing the
voting power under normal circumstances to elect a majority of the
Company's Board of Directors (whether by merger, consolidation or sale or
transfer of the Company's capital stock) or (ii) all or substantially all
of the Company's assets determined on a consolidated basis.
(ii) "Year" means twelve months ending on August 16, 1996, 1997,
----
1998, 1999 and 2000.
-2-
<PAGE>
(c) Stock options granted under the Plan in respect of any particular Year
can only be exercised if, and only if, both (A) paragraph 4(d) has been
---- --------------
satisfied so that the stock option will be earned for such Year, and (B)
paragraph 4(e) has been satisfied, so that from and after the end of such Year,
the stock option, or the portion thereof to be exercised, is at the time of
exercise "vested".
(d) As a condition to the earning of any stock option, in whole or in
part, the holder must have been employed during the entire Year, and
continuously commencing with the commencement of the initial Year applicable to
such stock options.
(e) As a condition to the exercise of any earned stock option, in whole or
in part, the portion of the stock option to be exercised must not only be
"earned" pursuant to paragraph 4(d), but also must be "vested", as provided in
--------------
this paragraph 4(e). With regard to any stock options granted in respect of any
--------------
particular Year, vesting will commence as of the first day (the "Earned Date")
-----------
immediately following the end of such Year, assuming that stock options
applicable to such Year are earned pursuant to paragraph 4(d). So long as the
--------------
holder of the stock option is continuously employed by the Company through:
(i) the Earned Date, 50% of the stock option will "vest" on the
Earned Date; and
(ii) the remaining 50% of the stock option will "vest" on the
date six months after of the Earned Date.
(f) Any unearned or unvested stock options held by any person who ceases
to be employed by the Company or its subsidiaries for any reason will
automatically terminate and expire, without any payment, and will be cancelled.
(g) An option holder whose employment with the Company terminates for any
reason, other than Cause or Material Breach (each as defined in the Management
Subscription Agreement), may at any time within 90 days after the effectiveness
of such termination exercise his option to the extent that such option was
exercisable by him on the date his employment terminated; provided that any
Shares issued upon the exercise thereof shall be subject to the Repurchase
Provisions of Section 8 of the Management Subscription Agreement. In the event
of the permanent and total disability of an option holder (as determined by the
Board), stock options exercisable by him at the time of disability may be
exercised within twelve months thereafter. In the event of the death of a stock
option holder, stock options, if any, exercisable by him at the time of his
death may be exercised within twelve months thereafter by the person or persons
to whom the option holder's rights under the stock option, if any, shall pass by
will or by the applicable law of descent and distribution. Notwithstanding the
foregoing, in no event may any stock option be exercised by anyone after the
final date upon which the holder of the stock option could have exercised it
under the Plan had such person continued in the employment of the Company until
such date.
-3-
<PAGE>
(h) For an option holder whose employment is terminated for Material
Breach or for Cause, all of such holder's stock options will upon his
termination be considered unvested, irrespective of being previously vested, and
the stock options of such holder will automatically terminate and expire,
without any payment, and will be cancelled.
(i) Notwithstanding anything to the contrary in this Plan, the Company
may, as to any particular option holder, provide for more favorable earning and
vesting requirements and provisions, from the perspective of the option holder,
than provided in this paragraph 4 and this Plan if and to the extent expressly
-----------
provided in any Stock Option Agreement herewith with such option holder.
5. Option Period
-------------
Each stock option granted under the Plan shall be exercisable only if
earned and vested under paragraph 4, and all rights to purchase Shares shall
-----------
cease as of the date established by the Board at the time of the award in a
manner consistent with the Plan (after ten years from the date hereof, subject
to any earlier termination in accordance with the terms of the Plan).
6. Changes in Common Shares
------------------------
The aggregate number of Shares for which stock options shall be granted or
exercised, the maximum number of Shares which at any time may be subject to but
not delivered under outstanding stock options granted to any option holder and
the number of Shares subject to each outstanding option and the stock option
prices per share which shall be granted to or exercised by any option holder,
shall be subject to appropriate adjustment by the Board to equitably reflect any
changes in the number of outstanding Shares resulting from recapitalization,
stock splits, stock dividends or other change in the corporate structure of the
Company.
7. Transferability of Stock Options
--------------------------------
The stock options granted are non-assignable and are not transferable
except by will or by the laws of descent and distribution.
8. Amendment and Discontinuance
----------------------------
The Board may, by majority vote of the members thereof, alter, amend,
suspend, or discontinue the Plan. No alteration, amendment, suspension or
discontinuance of the Plan may, without the consent of the holder of any
outstanding stock option, adversely affect the rights of such holder under such
option.
-4-
<PAGE>
9. Duration
--------
The Plan shall remain in effect until all awards made under the Plan have
either been satisfied by the issuance of shares of Common Stock or been
terminated in accordance with the terms of the Plan or the award.
10. Compliance with Applicable Law and Withholding
----------------------------------------------
(a) Notwithstanding any other provision of the Plan, the Company shall
have no obligation to issue any shares of Common Stock under the Plan if such
issuance would violate any applicable law or any applicable regulation or
requirement of any securities exchange or similar entity.
(b) Prior to the issuance of any shares of Common Stock under the Plan,
the Company may require a written statement that the recipient is acquiring the
shares for investment and not for the purpose or with the intention of
distributing the shares and will not dispose of them in violation of the
registration requirements of the Securities Act of 1933.
(c) If, at any time, the Company, in its reasonable discretion, determines
that the listing, registration or qualification (or any updating of any such
document) of any award, or the shares of Common Stock issuable pursuant thereto,
is necessary on any securities exchange or under any federal or state securities
or blue sky law, or that the consent or approval of any governmental regulatory
body is necessary or desirable as a condition of, or in connection with, any
award or the issuance of shares of Common Stock pursuant to any award, such
award shall not be made and the shares of Common Stock shall not be issued or
such restrictions shall not be removed, as the case may be, in whole or in part,
unless such listing, registration, qualification, consent or approval shall have
been effected or obtained free of any conditions not acceptable to the Company.
The Company will use its best efforts to effect such listing, registration or
qualification.
(d) A holder may exercise an option by giving written notice thereof prior
to the option's expiration date to the Secretary of the Company at the principal
executive offices of the Company. Contemporaneously with the delivery of notice
with respect to the exercise of an option, the full purchase price of the Shares
purchased pursuant to the exercise of an option, together with any required
state or federal withholding taxes, shall be paid (i) in cash or (ii) if the
exercise occurs after an initial public offering of the Company's Common Stock,
by tender of stock certificates in proper form for transfer to the Company
representing shares of Common Stock having a Market Price equal to the Exercise
Price of the Shares by combination of the provisions of (i) or (ii) or with any
other consideration.
For purposes of the Plan, and except as otherwise determined by the Board,
the "Market Price" of a share of Common Stock as of any date shall be equal to
------------
the closing sale price of a share of Common Stock as reported on the NASDAQ
National Market System (or if the
-5-
<PAGE>
Common Stock is not traded on the NASDAQ National Market System, the closing
sale price on the exchange on which it is traded or as reported by an applicable
automated quotation system) (the "Composite Tape") on the applicable date or, if
no sales of Common Stock are reported on such date, the closing sale price of a
share of Common Stock on the date the Common Stock was last reported on the
Composite Tape (or such other exchange or automated quotation system, if
applicable), or, in all other cases, the fair market value per share of Common
Stock as determined by the Board, taking into account all considerations deemed
relevant by the Board.
(e) All awards and payments under the Plan which are made to employees of
the Company are subject to withholding of all applicable taxes and the Company
shall have the right to withhold from any such award under the Plan or to
collect as a condition of any payment under the Plan, as applicable, any taxes
required by law to be withheld. To the extent provided by the Board, a holder
may elect to have any distribution otherwise required to be made under the Plan
to be withheld or to surrender to the Company shares of Common Stock already
owned by the holder to fulfill any tax withholding obligation.
11. No Continued Employment
-----------------------
The Plan does not constitute a contract of employment or continued service,
and does not otherwise alter or limit the Company's rights in respect of
modifying or terminating such employment or service. Participation in the Plan
will not give any holder the right to be retained in the employ of the Company
or the right to continue as a director of the Company or any right or claim to
any benefit under the Plan unless such right or claim has specifically accrued
under the terms of the Plan or the terms of any award under the Plan.
12. Treatment as a Stockholder
--------------------------
Any grant to a holder of stock options under the Plan shall not create any
rights in such holder as a stockholder of the Company until shares of Common
Stock have been issued in the name of the holder.
13. Other Agreements
----------------
All stock options, and shares of Common Stock issued in respect thereof,
will be subject to the Company Agreements.
-6-
<PAGE>
14. Applicable Laws
---------------
The Plan shall be administered in accordance with the laws of the State of
New York to the extent that such laws are not preempted by the laws of the
United States of America.
Dated: August 16, 1995
JACKSON PRODUCTS, INC.
By: /s/ A. Richard Caputo, Jr.
-------------------------------
Its: Vice President
-------------------------------
-7-
<PAGE>
SCHEDULE I TO STOCK OPTIONS
VESTING SCHEDULE FOR OPTIONS
----------------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
NO. OF OPTIONS NO. OF OPTIONS NO. OF OPTIONS NO. OF OPTIONS NO. OF OPTIONS
ALLOCATED FOR ALLOCATED FOR ALLOCATED FOR ALLOCATED FOR ALLOCATED FOR
VESTING FOR THE VESTING FOR THE VESTING FOR THE VESTING FOR THE VESTING FOR THE
TWELVE MONTHS TWELVE MONTHS TWELVE MONTHS TWELVE MONTHS TWELVE MONTHS
OPTIONS GRANTED AS ENDED ENDED ENDED ENDED ENDED
STOCKHOLDER OF AUGUST 16, 1995 AUGUST 16, 1996 AUGUST 16, 1997 AUGUST 16, 1998 AUGUST 16, 1999 AUGUST 16, 2000
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Wayne C. Bircher 1,000 200 200 200 200 200
- ----------------------------------------------------------------------------------------------------------------------------------
Ronald C. Boeger 1,000 200 200 200 200 200
- ----------------------------------------------------------------------------------------------------------------------------------
John L. Bortle 1,000 200 200 200 200 200
- ----------------------------------------------------------------------------------------------------------------------------------
Kathleen M. Caselton 1,000 200 200 200 200 200
- ----------------------------------------------------------------------------------------------------------------------------------
Michael C. Taylor 1,000 200 200 200 200 200
- ----------------------------------------------------------------------------------------------------------------------------------
Robert H. Elkin 125,000 25,000 25,000 25,000 25,000 25,000
- ----------------------------------------------------------------------------------------------------------------------------------
Allan A. Huning 2,500 500 500 500 500 500
- ----------------------------------------------------------------------------------------------------------------------------------
Robert J. Mills 1,000 200 200 200 200 200
- ----------------------------------------------------------------------------------------------------------------------------------
John M. Pappas 1,000 200 200 200 200 200
- ----------------------------------------------------------------------------------------------------------------------------------
Darold G. Oltjenbruns 1,000 200 200 200 200 200
- ----------------------------------------------------------------------------------------------------------------------------------
Christopher T. Paul 35,914 7,182 7,182 7,182 7,182 7,186
- ----------------------------------------------------------------------------------------------------------------------------------
Robert J. Sander 1,000 200 200 200 200 200
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL 172,414 34,482 34,482 34,482 34,482 34,486
==================================================================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NO. OF OPTIONS NO. OF OPTIONS NO. OF OPTIONS NO. OF OPTIONS
ALLOCATED FOR ALLOCATED FOR ALLOCATED FOR ALLOCATED FOR
VESTING FOR THE VESTING FOR THE VESTING FOR THE VESTING FOR THE
TWELVE MONTHS TWELVE MONTHS TWELVE MONTHS TWELVE MONTHS
OPTIONS GRANTED AS ENDED ENDED ENDED ENDED
STOCKHOLDER OF AUGUST 16, 1995 AUGUST 16, 1996 AUGUST 16, 1997 AUGUST 16, 1998 AUGUST 16, 1999
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Wayne C. Bircher 1,000 200 200 200 200
Ronald C. Boeger 1,000 200 200 200 200
John L. Bortle 1,000 200 200 200 200
Kathleen M. Caselton 1,000 200 200 200 200
Michael C. Taylor 1,000 200 200 200 200
Robert H. Elkin 125,000 25,000 25,000 25,000 25,000
Allan A. Huning 2,500 500 500 500 500
Robert J. Mills 1,000 200 200 200 200
John M. Pappas 1,000 200 200 200 200
Darold G. Oltjenbruns 1,000 200 200 200 200
Christopher T. Paul 39,914 7,182 7,182 7,182 7,182
Robert J. Sandner 1,000 200 200 200 200
<CAPTION>
NO. OF OPTIONS
ALLOCATED FOR
VESTING FOR THE
TWELVE MONTHS
ENDED
STOCKHOLDER AUGUST 16, 2000
=========================================
<S> <C>
Wayne C. Bircher 200
Ronald C. Boeger 200
John L. Bortle 200
Kathleen M. Caselton 200
Michael C. Taylor 200
Robert H. Elkin 25,000
Allan A. Huning 500
Robert J. Mills 200
John M. Pappas 200
Darold G. Oltjenbruns 200
Christopher T. Paul 7,182
Robert J. Sandner 200
</TABLE>
<PAGE>
EXHIBIT 4.11
JACKSON PRODUCTS, INC.
FIRST AMENDMENT TO 1995 MANAGEMENT STOCK OPTION PLAN
This First Amendment (this "Amendment") to 1995 Management Stock Option
---------
Plan (the "Plan") of Jackson Products, Inc. (the "Company") is dated as of June
---- -------
1, 1997.
WHEREAS, the Board of Directors (the "Board") of the Company adopted the
-----
Plan on August 16, 1995 to advance the interests of the Company and its
subsidiaries, to strengthen the Company's ability to attract and retain its
directors and employees and to provide such directors and employees with an
opportunity to acquire an equity interest in the Company;
WHEREAS, pursuant to Section 6 of the Plan and by virtue of the Company's
100-to-1 reverse stock split on July 1, 1996, the number of shares of the
Company's Common Stock, par value $.01 per share (the "Common Stock") reserved
------------
for issuance under the Plan, as set forth in Section 3(a), was automatically
reduced from 172,414 to 1,724.14; and
WHEREAS, the Board approved this Amendment, by unanimous written consent,
in order to correct and properly memorialize the vesting terms of options
granted under the Plan and to increase the number of shares of Common Stock
reserved for issuance under the Plan from 1,724.14 to 3,198.04 to retain
flexibility in awarding shares of Common Stock under the Plan;
NOW, THEREFORE, in consideration of the mutual agreements and
understandings set forth herein, the Plan is hereby amended as follows:
1. Section 3(a) of the Plan is hereby amended by deleting the number
"1,724.14" and substituting therefor "3,198.04."
2. Section 3(a) of the Plan is hereby further amended by deleting the
amount "$1.00" and substituting therefor "$100.00."
3. Section 4(b)(ii) is hereby amended to read in its entirety as follows:
(ii) "Year" means twelve months ending on August 16, 1996, 1997, 1998,
----
1999 and 2000, or, in the case of holders who are granted options subsequent to
August 16, 1995, twelve months ending on each anniversary of the date of the
grant.
4. Section 4(e) of the Plan is hereby amended to read in its entirety as
follows:
<PAGE>
(e) As a condition to the exercise of any earned stock option, in whole or
in part, the portion of the stock option to be exercised must not only be
"earned" pursuant to paragraph 4(d), but also must be "vested", as provided in
--------------
this paragraph 4(e). With regard to any stock options granted in respect of any
--------------
particular Year, vesting will commence as of the first day (the "Earned Date")
-----------
immediately following the end of such Year, assuming that stock options
applicable to such Year are earned pursuant to paragraph 4(d). So long as the
--------------
holder of the stock option is continuously employed by the Company through:
(i) the Earned Date, 20% of the stock option will "vest" on the
Earned Date;
(ii) the first anniversary of the Earned Date, an additional 20% of
the stock option will "vest" on such date;
(iii) the second anniversary of the Earned Date, an additional 20% of
the stock option will "vest" on such date;
(iv) the third anniversary of the Earned Date, an additional 20% of
the stock option will "vest" on such date; and
(v) the fourth anniversary of the Earned Date, the remaining 20% of
the stock option will "vest" on such date.
5. Except as herein amended, the Plan shall remain in full force and
effect and is ratified in all respects. On and after the effectiveness of this
Amendment, each reference in the Plan to "this Plan," "hereunder," "hereof,"
"herein" or words of like import, and each reference to the Plan in any other
agreements, documents or instruments executed and delivered pursuant to the
Plan, shall mean and be a reference to the Plan, as amended by this Amendment.
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Amendment as of the
date first above written.
JACKSON PRODUCTS, INC.
By: /s/ Christopher T. Paule
------------------------------------
Name: Christopher T. Paule
Title: Vice President
<PAGE>
EXHIBIT 4.12
FORM OF STOCK OPTION AGREEMENT
------------------------------
THIS AGREEMENT, dated as of the 16th day of August, 1995 and entered into
by Jackson Products, Inc. (the "Company"), and ____________________ (the
"Participant"),
WITNESSETH THAT:
---------------
WHEREAS, the Company maintains the 1995 Jackson Management Stock Option
Plan; and
WHEREAS, the terms of such stock option plan are contained in the 1995
Jackson Management Stock Option Plan, dated as of August 16, 1995, (the "Plan"),
attached hereto, which terms are incorporated herein by reference; and
WHEREAS, the Participant has received, reviewed and agreed to be bound by
the terms of the Plan; and
WHEREAS, the Participant has been selected by the Board of Directors of the
Company (the "Board") to receive an award under the Plan; and
WHEREAS, to the extent not specified in the Plan, the terms of the award
have been determined by the Board and are set forth in this Agreement;
NOW THEREFORE, IT IS AGREED as follows:
1. Award; Option Price. The Participant is hereby awarded a nonqualified
-------------------
Stock Option to purchase _____ shares of the Company's Common Stock, no par
value (the "Common Stock"). The Option Price of each share of Common Stock
subject to the Stock Option shall be $100.00.
2. Forfeitures. The Stock Option shall only be exercisable if earned
-----------
and vested in accordance with paragraphs 4(c), (d) and (e) of the Plan.
----------------------------
3. Exercise. Subject to the terms of this Agreement and the Plan, the
--------
Stock Option may be exercised in accordance with the following:
(a) To the extent that it is exercisable, the Stock Option may be
exercised in whole or in part at any time prior to the Expiration Date
(as defined in paragraph 4); provided, however, that, the Stock Option
may only be exercised with respect to whole shares of Common Stock.
(b) Subject to paragraph 11(f) of the Plan, payment of the Option Price
(and the amount of any required taxes) may be made by cash, check, or
by the delivery of shares of
<PAGE>
Common Stock having a Market Price equal to the aggregate Option Price
(and the amount of any required taxes).
4. Expiration Date. For purposes of this Agreement, the "Expiration
---------------
Date" shall be the close of business on the earliest of the following dates (or
if such date is not a business day, the last business day preceding such date):
(a) the date which is ten years from date of grant;
(b) the date which is 90 days from the effective date of termination
employment; or
(c) the date which is one year after the Participant's employment is
terminated with the Company and its subsidiaries is due to death or
disability.
5. Nontransferability of Award. The Stock Option is personal and no
---------------------------
rights granted hereunder shall be transferred, assigned, pledged or hypothecated
in any way (whether by operation of law or otherwise) nor shall any such rights
be subject to execution, attachment or similar process and the Stock Option
shall be exercisable, during the lifetime of the Participant, only by the
Participant. Upon any attempt to transfer, assign, pledge, hypothecate or
otherwise dispose of the Stock Option or of such rights contrary to the
provisions hereof, or upon the levy of any attachment or similar process upon
the Stock Option or such rights, the Stock Option and such rights shall, at the
election of the Company, become null and void. Any transfer of shares of Common
Stock issued upon exercise of the Stock Option shall be subject to the
restrictions contained in the Stockholders Agreement, dated, August 16, 1995
among the Company and certain investors in the Company.
6. Investment Representations. The Company may require the Participant,
--------------------------
as a condition of exercising the Stock Option, (i) to give written assurance in
form and substance satisfactory to the Company to the effect that the
Participant is acquiring the shares subject to the Stock Option for his or her
own account, for investment and not with any present intention of selling or
otherwise distributing the same and (ii) to execute or join the Company
Agreements.
7. Defined Terms; Terms of Plan. Unless the context clearly indicates
----------------------------
otherwise, defined terms as used in this Agreement shall have the same meaning
as ascribed to those terms under the Plan. Notwithstanding any other provision
of this Agreement, the terms of the Plan shall govern and the Stock Option shall
be subject, in all respects, to the terms and conditions of the Plan. This
Option, and any shares of Common Stock issuable upon exercise of this Option,
will be subject to the Company Agreements.
8. LITIGATION. THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED, APPLIED
----------
AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, EXCEPT THAT
NO DOCTRINE OF CHOICE OF LAW SHALL BE USED TO APPLY ANY LAW OTHER THAN THAT OF
NEW YORK, AND NO DEFENSE, COUNTERCLAIM OR RIGHT OF SET-OFF GIVEN OR ALLOWED BY
THE LAWS OF ANY OTHER STATE OR JURISDICTION, OR ARISING OUT OF THE ENACTMENT,
MODIFICATION OR REPEAL OF ANY LAW, REGULATION, ORDINANCE OR DECREE OF ANY
FOREIGN
<PAGE>
JURISDICTION, BE INTERPOSED IN ANY ACTION HEREON. SUBJECT TO SECTION 9, THE
---------
PARTIES HERETO AGREE THAT ANY ACTION OR PROCEEDING TO ENFORCE OR ARISING OUT OF
THIS AGREEMENT MAY BE COMMENCED IN THE COURTS OF THE STATE OF NEW YORK OR THE
UNITED STATES DISTRICT COURTS IN NEW YORK. THE PARTIES CONSENT TO SUCH
JURISDICTION, AGREE THAT VENUE WILL BE PROPER IN SUCH COURTS AND WAIVE ANY
OBJECTIONS BASED UPON FORUM NON CONVENIENS. THE CHOICE OF FORUM SET FORTH IN
--------------------
THIS SECTION 8 SHALL NOT BE DEEMED TO PRECLUDE THE ENFORCEMENT OF ANY JUDGMENT
---------
OBTAINED IN SUCH FORUM OR THE TAKING OF ANY ACTION UNDER THIS AGREEMENT TO
ENFORCE SAME IN ANY OTHER JURISDICTION.
9. ARBITRATION. THE PARTIES HERETO AGREE THAT ANY DISPUTE BETWEEN OR
-----------
AMONG THE PARTIES TO THIS AGREEMENT RELATING TO OR IN RESPECT OF THIS AGREEMENT,
ITS NEGOTIATION, EXECUTION, PERFORMANCE, SUBJECT MATTER, OR ANY COURSE OF
CONDUCT OR DEALING OR ACTIONS UNDER OR IN RESPECT OF THIS AGREEMENT, INCLUDING,
WITHOUT LIMITATION ANY CLAIM UNDER THE SECURITIES ACT, THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED, ANY OTHER STATE OR FEDERAL LAW RELATING TO SECURITIES
OR FRAUD OR BOTH, THE RACKETEER INFLUENCED AND CORRUPT ORGANIZATIONS ACT, AS
AMENDED, OR FEDERAL OR STATE COMMON LAW, SHALL BE SETTLED BY FINAL, BINDING AND
NON-APPEALABLE ARBITRATION IN NEW YORK, NEW YORK BY THREE ARBITRATORS. EXCEPT
AS OTHERWISE EXPRESSLY PROVIDED IN THIS SECTION 9, THE ARBITRATION SHALL BE
---------
CONDUCTED IN ACCORDANCE WITH THE VOLUNTARY LABOR ARBITRATION RULES OF THE
AMERICAN ARBITRATION ASSOCIATION (THE "ASSOCIATION") THEN IN EFFECT. ONE OF THE
ARBITRATORS SHALL BE APPOINTED BY THE COMPANY, ONE SHALL BE APPOINTED BY THE
PARTICIPANT, AND THE THIRD SHALL BE APPOINTED BY THE FIRST TWO ARBITRATORS. IF
THE FIRST TWO ARBITRATORS CANNOT AGREE ON THE THIRD ARBITRATOR WITHIN 60 DAYS OF
THE APPOINTMENT OF THE SECOND ARBITRATOR, THEN THE THIRD ARBITRATOR SHALL BE
APPOINTED BY THE ASSOCIATION. UPON THE CONCLUSION OF ARBITRATION, THE
PARTICIPANT OR THE COMPANY MAY APPLY TO ANY COURT OF THE TYPE DESCRIBED IN
SECTION 8 TO ENFORCE THE DECISION PURSUANT TO SUCH ARBITRATION. IN CONNECTION
- ---------
WITH THE FOREGOING, THE PARTIES AFTER CONSULTING COUNSEL HEREBY WAIVE ANY RIGHTS
TO A JURY TRIAL TO RESOLVE ANY DISPUTES OR CLAIMS RELATING TO THIS AGREEMENT.
10. Counterparts. This Agreement may be exercised in counterparts.
------------
<PAGE>
IN WITNESS WHEREOF, the Company has caused these presents to be executed in
its name and on its behalf, all as of the date first above written.
JACKSON PRODUCTS, INC.
By
----------------------------------
Its
-------------------------------
------------------------------------
PARTICIPANT
<PAGE>
EXHIBIT 4.13
JACKSON ACQUISITION CORP.
JORDAN INVESTORS SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT, dated August 16, 1995, (herein called this
"Agreement"), is made by and among JACKSON ACQUISITION CORP., a Delaware
---------
corporation (which upon the closing of the transactions contemplated hereby,
will be renamed "Jackson Products Inc.", and together with its successors and
its subsidiaries, unless otherwise indicated by the context "Company") whose
-------
address is c/o The Jordan Company, 9 West 57th Street, New York, New York 10019,
and the persons whose names are set forth at the end of this Agreement (herein
collectively called the "Stockholders").
------------
1. Stock Subscriptions.
-------------------
(a) Each Stockholder herewith (i) subscribes for shares of the
following securities of the Company as set forth on Exhibit 1 hereto: the
---------
Company's Class A Common Stock, $.01 par value ("Class A Common Stock"), for a
--------------------
purchase price of $1.00 per share and other good and valuable consideration,
including the sponsorship of the transactions contemplated hereby, the
sufficiency of which is hereby acknowledged and (ii) agrees to enter into a
Stock Pledge Agreement (each a "Jordan Pledge Agreement") in favor of Heller
Financial, Inc. ("Heller") as Agent for the Lenders under the Credit Agreement
(as defined in Section 2(b)) in substantially the form attached as Exhibit 2
attached hereto in order to secure, among other things, the payment of amounts
due pursuant to the Credit Agreement. The foregoing Class A Common Stock is
referred to as the "Common Stock", and, along with any other class of capital
------------
stock of the Company, collectively the "Stock".
-----
(b) Each Stockholder nominates Jordan/Zalaznick Capital Company
("JZCC") to take title to and hold the Stock the Stockholder subscribes for
----
under this Agreement. JZCC acknowledges to the Stockholders and the Company
that the Stock
<PAGE>
subscribed for under this Agreement will be distributed by JZCC to the
Stockholders pursuant to such agreements as exist between the Stockholders and
JZCC.
(c) Each Stockholder acknowledges to the Company and the other
Stockholders that he understands and agrees, as follows:
THE STOCK HAS NOT BEEN REGISTERED UNDER FEDERAL OR STATE SECURITIES
LAWS. THE STOCK IS VERY SPECULATIVE AND RISKY. THERE IS NO PUBLIC OR OTHER
MARKET FOR THE STOCK NOR IS ANY LIKELY TO DEVELOP. THE COMPANY HAS NO PREVIOUS
FINANCIAL HISTORY AND HAS BORROWED SUBSTANTIALLY ALL OF THE FUNDS AVAILABLE TO
IT TO OPERATE ITS BUSINESS. EACH STOCKHOLDER ACKNOWLEDGES THAT THE STOCKHOLDER
MAY AND CAN AFFORD TO LOSE HIS ENTIRE INVESTMENT AND THAT THE STOCKHOLDER
UNDERSTANDS THE STOCKHOLDER MAY HAVE TO HOLD THIS INVESTMENT INDEFINITELY.
(d) The Company covenants that upon issuance the Common Stock
subscribed for by the Stockholders shall aggregate $2,905,172 in purchase price
and, assuming the future issuance to management of the Company of 172,414
additional shares of the Company's Class C Common Stock, $.01 par value per
share (the "Option Shares"), upon the exercise of certain options and the future
-------------
issuance to the Institutional Investors and their Permitted Transferees (each as
defined in the Stockholders Agreement) of 3,448,276 additional shares of Common
Stock upon the exercise of certain warrants (the "Warrant Shares") after the
--------------
date hereof, shall represent 33.7% in the aggregate of the authorized and
outstanding shares of all Common Stock of all classes of the Company on a fully
diluted basis as of the date hereof.
(e) Each certificate evidencing Stock being issued pursuant to this
Agreement shall bear legends reflecting (i) this Agreement's existence and (ii)
the fact that said Stock has not been registered under Federal or state
securities laws and is subject to limitations on transfer set forth herein and
in the Stockholders Agreement, of even date herewith, by and among New Jackson
and New Jackson's Stockholders (the "Stockholders Agreement"). Each Stockholder
----------------------
acknowledges that the effect of these legends, among other things, is or may be
to limit or
-2-
<PAGE>
destroy the value of the certificate for purposes of sale or for use as loan
collateral. Each Stockholder consents that "stop transfer" instructions may be
noted against the Stock sold to him hereunder. Each Stockholder acknowledges
that he is required to become a party to the Stockholders Agreement as a
condition to purchasing the Stock hereunder.
2. Proposed Transactions.
---------------------
(a) This Agreement summarizes certain pertinent documents as well as
applicable laws and regulations. While the Company believes that these
summaries fairly reflect and summarize such matters, each Stockholder
acknowledges that such summaries are not complete and are qualified by reference
to the complete texts thereof of the documents, laws and regulations so
summarized.
(b) Each Stockholder acknowledges to the Company and the other
Stockholders that the Stockholder has received or has had ample opportunity to
review and understand the current form of each of the following documents:
A. The Certificate of Incorporation of the Company;
B. The Bylaws of the Company;
C. The Agreement and Plan of Merger (the "Merger Agreement"), dated as of
----------------
August 14, 1995, by and among the Company and Jackson Holding Company ("Old
Holdings"), the stockholders of Old Holdings a party thereto the
optionholders of Old Holdings a party thereto and Mills & Partners, Inc.,
pursuant to which the Company will merge with and into Old Holdings, with
Old Holdings as the surviving corporation, and subsequent to which Jackson
Products, Inc. ("Old Jackson") will merge with and into Old Holdings, with
-----------
Old Holdings being the surviving corporation and being renamed "Jackson
Products, Inc." ("New Jackson").
-----------
D. The Second Amended and Restated Credit Agreement, of even date
herewith, by and among New Jackson, Old
-3-
<PAGE>
Holdings, the Lenders parties thereto and Heller Financial, Inc.
("Heller"), as Agent, including all exhibits and schedules thereto.
------
E. The Note Agreement of even date herewith by and among the Company and
the other signatories thereto, including all exhibits and schedules
thereto.
F. The Securities Purchase Agreement of even date herewith executed by
the Company in favor of the Purchasers (as defined therein), including
all exhibits and schedules thereto.
G. The Stockholders Agreement, of even date herewith, by and among
Jackson Products, Inc. and the stockholders named therein, including
all exhibits and schedules thereto.
H. The Advisor Subscription Agreement ("Advisor Subscription Agreement")
------------------------------
dated as of August 16, 1995, between the Company and Safety Partners,
L.P. ("Safety Partners, L.P.").
---------------------
I. The 1995 Jackson Management Stock Option Plan of even date herewith
adopted by the Board of Directors of New Jackson, including all
exhibits thereto.
J. This Agreement and all exhibits and schedules hereto.
The documents referred to in A through J are hereinafter collectively
referred to as the "Operative Documents."
-------------------
The Company has afforded such Stockholder and such Stockholder's
advisors, if any, the opportunity to discuss an investment in the Stock and to
ask questions of representatives of the Company concerning the terms and
conditions of the offering of the Stock and the Operative Documents, and such
representatives have provided answers to all such questions concerning the
offering of the Stock and the Operative Documents. Such Stockholder has
consulted its own financial, tax, accounting and legal advisors, if any, as to
such Stockholder's investment
-4-
<PAGE>
in the Stock and the consequences thereof and risks associated therewith and the
Operative Documents. Such Stockholder and such Stockholder's advisors, if any,
has examined or has had the opportunity to examine before the date hereof the
Operative Documents and all information that the advisor or Stockholder deems to
be material to an understanding of the Company, the proposed business of the
Company, and the offering of the Stock. Such Stockholder also acknowledges that
there have been no general or public solicitations or advertisements or other
broadly disseminated disclosures (including, without limitation, any
advertisement, article, notice or other communication published in any
newspaper, magazine or similar media or broadcast over television or radio, or
any seminar or meeting whose attendees have been invited by any general
solicitation or advertising) by or on behalf of the Company regarding an
investment in the Stock.
3. Stockholder Representations and Warranties
------------------------------------------
(a) Each Stockholder represents to the Company and the other
Stockholders that such Stockholder is a sophisticated, experienced, professional
investor.
(b) Each Stockholder represents that such Stockholder has had an
opportunity to select and consult with such attorneys, business consultants and
any other person(s) the Stockholder wished to confer with since the time when
the proposed transaction and the Stockholder's participation was first discussed
with the Stockholder. Each Stockholder acknowledges that the Company has made
available to the Stockholder prior to the signing of this Agreement and sale of
any Stock hereunder, the opportunity to ask questions of any person authorized
to act on behalf of the Company concerning any aspect of the investment and to
obtain any additional information, to the extent the Company possesses such
information or can acquire it without unreasonable effort or expense, necessary
to verify the accuracy of the information.
(c) Each Stockholder agrees that the Stockholder will not transfer
any Stock if such transfer would result in a default by the Company under the
provisions of the Operative Documents.
-5-
<PAGE>
4. Risk Factors.
------------
Each Stockholder acknowledges to the Company and the other
Stockholders that the Stockholder knows and understands that the Company
borrowed a substantial portion of the funds used to effect the purchase of Old
Holdings. It is unlikely that dividends will be paid on the Common Stock.
There is no legal requirement or promise made by the Company to declare or pay
such dividends and such dividends may not in any event be paid if such payment
would violate any term of the Operative Documents. Certain of the Operative
Documents severely restrict the ability of the Company to make any dividend or
redemption payments in any case and such payment may be restricted by future
agreements or instruments binding on the Company. Such dividends and redemption
payments may be made only from funds available for such use as provided by
applicable law. Furthermore, each Stockholder acknowledges that only the Jordan
Stockholders are pledging their shares of the Company pursuant to the Jordan
Pledge Agreements, and that he has pledged, pursuant to a Jordan Pledge
Agreement of even date herewith, the Common Stock held by such Stockholder and
that the terms of such Jordan Pledge Agreement such Stockholder may
automatically surrender by foreclosure the Stockholder's Common Stock upon
acceleration of payment of amounts owed by the Company under the Credit
Agreement pursuant to the Jordan Pledge Agreement.
Each Stockholder acknowledges that the financial projections or
forecasts delivered to the Stockholder are only forecasts prepared by
management, which are subject to many assumptions and factors beyond the
Company's control, and that there are no assurances that the forecasts will be
realized.
Each Stockholder acknowledges to the Company and the other
Stockholders that the Stockholder knows and understands that an investment in
the Stock of the Company is a speculative investment which involves a high risk
of loss and that on and after the date hereof, there will be no public market
for the Stock and the Company does not contemplate that a public market will
develop.
5. Securities Law and Other Matters.
--------------------------------
-6-
<PAGE>
(a) Each Stockholder represents and warrants to the Company and the
other Stockholders that the Stockholder used no "purchaser's representative" (as
that term is used in Regulation D as promulgated by the Securities and Exchange
Commission) in connection with this transaction. Each Stockholder represents
and warrants to the Company and the other Stockholders that neither The Jordan
Company ("Jordan") nor any of its employees or affiliates has acted as a
------
representative of said Stockholder in the subject transaction. Each Stockholder
hereby releases Jordan, JZCC and each of their respective partners, principals,
directors, officers, employees, agents and representatives from and against any
claim in respect of each Stockholder's subscription for the Stock and any
related transaction hereunder or under the Operative Documents. Each
Stockholder represents that such Stockholder has substantial knowledge and
experience in financial, investment and business matters, and specifically in
the business of the Company, and has the requisite knowledge and experience to
evaluate the risks and merits of this investment. Each Stockholder represents
and warrants that the decision of such Stockholder to purchase the Stock
hereunder has been made by such Stockholder independent of any other Stockholder
and independent of any statements, disclosures or judgments as to the
properties, business, prospects or condition (financial or otherwise) of the
Company which may have been made or given by any Stockholder or other person.
Each Stockholder represents and warrants to the Company and the Stockholders
that the Stockholder can and will bear the economic risks of his investment in
the Company and acknowledges that the Stockholder is able to hold the Company's
unregistered Stock indefinitely and is able to sustain a complete loss if the
securities become worthless or are forfeited pursuant to the Jordan Pledge
Agreement executed by such Stockholder.
(b) Each Stockholder acknowledges to the Company and the other
Stockholders that the Stock being purchased hereunder has not been registered
under the Securities Act of 1933, as amended, (the "Securities Act") on the
--------------
ground that the sales of Common Stock and Preferred Stock pursuant to this
Agreement are exempt under Section 4(2) of the Securities Act as not
constituting a distribution, and that the Company's reliance on such exemption
is predicated in part on each Stockholder's representation which the Stockholder
herewith makes that
-7-
<PAGE>
the Stock has been acquired solely by and for the account of such Stockholder
for investment purposes only, and is not being purchased for subdivision,
fractionalization, resale or distribution. Such Stockholder has no contract,
undertaking, agreement or arrangement with any other Stockholder to sell,
transfer or pledge to such other Stockholder or anyone else the Stock (or any
part thereof) which such Stockholder has purchased hereunder. Such Stockholder
has no present plans or intentions to enter into any such contract, undertaking,
agreement or arrangement. The Stock has not been registered or qualified for
resale under applicable securities laws, and may not be sold except pursuant to
such registration or qualification thereunder or an exemption therefrom. Such
Stockholder has adequate means of providing for the Stockholder's current needs
and possible contingencies and has a net worth equal to at least three times the
Stockholder's investment in the Stock. Each Stockholder further acknowledges to
the Company that the Stock being sold to the Stockholder must be held
indefinitely unless it is subsequently registered under the Securities Act or a
transfer is made pursuant to an exemption from such registration, for example,
pursuant to Rule 144. Each Stockholder further represents and warrants to the
Company and the other Stockholders that such Stockholder's financial condition
is such that the Stockholder is not under any present necessity or constraint,
and does not foresee in the future any necessity or constraint, to dispose of
these shares to satisfy any existing or contemplated debt or undertaking.
(c) In the event that in the future the Company engages in any
negotiation or transaction (including a merger or consolidation or other
reorganization by or of the Company) in which Regulation D promulgated by the
Securities and Exchange Commission may or will be available to the Company, each
of the Stockholders who is not then a professional investor agrees irrevocably
(and with the knowledge and intention that the other holders of the Company's
stock of all classes will rely thereon in making their respective present
investment decisions) that the Stockholder will, within 5 business days of
notice from the Company, which may be given in the sole discretion of the
Company, appoint a purchaser's representative or representatives who shall be
qualified and acceptable to the Company and any other person(s) who is (are)
involved in the proposed transaction
-8-
<PAGE>
so that the maximum benefits of Regulation D shall be available to the Company
and all of its Stockholders. Any Stockholder who does not perform this covenant
shall be liable to the Company and all of the Company's other stockholders for
any damage or loss that may or might be incurred thereby.
6. Registration Rights.
-------------------
The Stock has not been registered under Federal or state securities
laws and, in consequence thereof, all of the Stock must be held indefinitely
unless (a) subsequently registered under applicable Federal and state securities
laws or (b) exemptions from such registration are available at the time of a
proposed sale or transfer thereof. Subject to its obligations under the
Stockholders Agreement, the Company has no present intention to file a
registration statement under either Federal or state law.
7. Legend. All certificates representing shares of the Stockholder Stock
------
shall be endorsed as follows:
"THIS CERTIFICATE IS SUBJECT TO, AND IS TRANSFERABLE ONLY UPON
COMPLIANCE WITH, THE PROVISIONS OF A STOCKHOLDERS AGREEMENT, DATED
AUGUST 16, 1995, AMONG THE COMPANY AND ITS STOCKHOLDERS AND THE
SUBSCRIPTION AGREEMENTS, DATED AUGUST 16, 1995, AMONG THE COMPANY AND
CERTAIN INVESTORS THEREIN. REFERENCE ALSO IS MADE TO THE RESTRICTIVE
PROVISIONS OF THE CERTIFICATE OF INCORPORATION AND BY-LAWS OF THE
COMPANY. A COPY OF THE ABOVE REFERENCED AGREEMENTS ARE ON FILE AT THE
OFFICE OF THE COMPANY C/O THE JORDAN COMPANY, 9 WEST 57TH STREET, NEW
YORK, NEW YORK 10019.
THE STOCK REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE TRANSFERRED EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT, OR AN EXEMPTION FROM
REGISTRATION, UNDER SAID ACT."
8. Miscellaneous Provisions and Definitions.
----------------------------------------
-9-
<PAGE>
(a) Subject to the conditions of transfer of Stock hereunder, this
Agreement shall be binding upon and shall inure to the benefit of each
individual Stockholder and the Stockholder's respective heirs, executors,
administrators, assigns and legal representatives and to the Company and its
respective successors and assigns, by way of merger, consolidation or operation
of law or otherwise. Once a Stockholder of the Company is no longer a
Stockholder of the Company, all rights and benefits previously enjoyed by such
party pursuant to the terms of this Agreement shall automatically terminate with
respect to such party.
(b) Prior to consummation of any transfer of shares of Stock held by
any Stockholder permitted under the Stockholders Agreement, except for transfers
pursuant to Rule 144 or a public offering, such party shall cause the transferee
to execute an agreement in which the transferee agrees to be bound by the terms
of this Agreement.
(c) The language used in this Agreement will be deemed to be the
language chosen by the parties hereto to express their mutual intent, and no
rule of strict construction will be applied against any person.
(d) THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED, APPLIED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, EXCEPT THAT NO
DOCTRINE OF CHOICE OF LAW SHALL BE USED TO APPLY ANY LAW OTHER THAN THAT OF NEW
YORK, AND NO DEFENSE, COUNTERCLAIM OR RIGHT OF SET-OFF GIVEN OR ALLOWED BY THE
LAWS OF ANY OTHER STATE OR JURISDICTION, OR ARISING OUT OF THE ENACTMENT,
MODIFICATION OR REPEAL OF ANY LAW, REGULATION, ORDINANCE OR DECREE OF ANY
FOREIGN JURISDICTION, BE INTERPOSED IN ANY ACTION HEREON. THE PARTIES HERETO
AGREE THAT ANY ACTION OR PROCEEDING TO ENFORCE OR ARISING OUT OF THIS AGREEMENT
MAY BE COMMENCED IN THE COURTS OF THE STATE OF NEW YORK OR THE UNITED STATES
DISTRICT COURTS IN THE SOUTHERN DISTRICT OF NEW YORK. EACH OF THE PARTIES
HERETO CONSENT TO SUCH JURISDICTION, AGREE THAT VENUE WILL BE PROPER IN SUCH
COURTS AND WAIVE ANY OBJECTIONS BASED UPON FORUM NON CONVENIENS. THE CHOICE OF
----- --- ----------
FORUM SET FORTH IN THIS SECTION 8 SHALL NOT BE DEEMED TO PRECLUDE THE
---------
ENFORCEMENT OF ANY JUDGMENT OBTAINED IN SUCH FORUM OR THE TAKING OF ANY ACTION
UNDER THIS AGREEMENT TO ENFORCE SAME IN ANY OTHER JURISDICTION.
-10-
<PAGE>
(e) THE PARTIES HERETO AGREE THAT ANY DISPUTE BETWEEN OR AMONG THE
PARTIES TO THIS AGREEMENT RELATING TO OR IN RESPECT OF THIS AGREEMENT, ITS
NEGOTIATION, EXECUTION, PERFORMANCE, SUBJECT MATTER, OR ANY COURSE OF CONDUCT OR
DEALING OR ACTIONS UNDER OR IN RESPECT OF THIS AGREEMENT, SHALL BE SUBMITTED TO,
AND RESOLVED EXCLUSIVELY PURSUANT TO ARBITRATION IN ACCORDANCE WITH THE
COMMERCIAL ARBITRATION RULES OF THE AMERICAN ARBITRATION ASSOCIATION. SUCH
ARBITRATION SHALL TAKE PLACE IN NEW YORK, NEW YORK, AND SHALL BE SUBJECT TO THE
SUBSTANTIVE LAW OF THE STATE OF NEW YORK. DECISIONS PURSUANT TO SUCH ARBITRATION
SHALL BE FINAL, CONCLUSIVE AND BINDING ON THE PARTIES SUBJECT TO CONFIRMATION,
MODIFICATION OR CHALLENGE PURSUANT TO 9 U.S.C. (S)1 ET SEQ. UPON THE CONCLUSION
OF ARBITRATION, THE PARTIES TO THIS AGREEMENT MAY APPLY TO ANY COURT OF THE TYPE
DESCRIBED IN SECTION 8 TO ENFORCE THE DECISION PURSUANT TO SUCH ARBITRATION. IN
---------
CONNECTION WITH THE FOREGOING, THE PARTIES AFTER CONSULTATION WITH COUNSEL
HEREBY WAIVE ANY RIGHTS TO A JURY TRIAL TO RESOLVE ANY DISPUTES OR CLAIMS
RELATING TO THIS AGREEMENT AND THE AGREEMENTS AND TRANSACTIONS CONTEMPLATED
HEREBY.
(f) All personal pronouns used in this Agreement, whether masculine,
feminine or neuter gender, shall include all other genders if the context so
requires; the singular shall include the plural, and vice versa.
(g) This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original but all of which together shall constitute
one and the same instrument.
(h) The words "sale", "sell", "transfer" and the like shall include
any disposition by way of transfer, with or without consideration, to any person
for any purpose and shall include, but shall not be limited in any way to,
redemption (of other than its preferred stock) by the issuer, private or public
sale or exchanges of securities or any other similar transaction involving
Stock.
(i) In case any one or more of the provisions or parts of a provision
contained in this Agreement shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect in any jurisdiction, such invalidity,
illegality or unenforceability shall not affect any other provision or part of a
provision of
-11-
<PAGE>
this Agreement or any other jurisdiction, but this Agreement shall be reformed
and construed in any such jurisdiction as if such invalid or illegal or
unenforceable provision or part of a provision had never been contained herein
and such provision or part shall be reformed so that it would be valid, legal
and enforceable to the maximum extent permitted in such jurisdiction.
(j) This Agreement constitutes the entire agreement by and among the
parties with respect to the subject matter hereof and may not be modified
orally, but only by a writing subscribed by the party charged therewith.
(k) Each of the parties hereto agrees to execute all such further
instruments and documents and to take all such further action necessary to
effectuate the terms and purposes of this Agreement.
(l) Whenever notice is required to be given by any party hereunder,
such notice shall be deemed sufficient when delivered to the Company at its
address above (which is also the address of The Jordan Company) and to each of
the other Stockholders at his address below or to such other address as the
Stockholder shall have furnished.
(m) Each party shall be entitled to rely conclusively upon any notice
received, or the failure to receive any notice, from any other party with
respect to rights and obligations under this Agreement.
-12-
<PAGE>
IN WITNESS WHEREOF, each of the undersigned has signed this Agreement:
JACKSON ACQUISITION CORP.
By: /s/ Christopher T. Paule
------------------------------
Name: Christopher T. Paule
Title: Vice President
Leucadia Investors, Inc.
By: /s/ Ruth Klindtworth
------------------------------
Name: Ruth Klindtworth
Title: Vice President
John W. Jordan, II Revocable Trust
/s/ John W. Jordan, II
----------------------------------
John W. Jordan, II
Trustee
/s/ David W. Zalaznick
----------------------------------
David W. Zalaznick
/s/ Jonathan F. Boucher
----------------------------------
Jonathan F. Boucher
/s/ John R. Lowden
----------------------------------
John R. Lowden
-13-
<PAGE>
/s/ Adam E. Max
----------------------------------
Adam E. Max
/s/ John M. Camp, III
----------------------------------
John M. Camp III
John M. Camp, III Profit Sharing
Plan DTD 1/1/88
/s/ James E. Jordan, Jr.
----------------------------------
John M. Camp, III
Trustee
/s/ A. Richard Caputo, Jr.
----------------------------------
A. Richard Caputo, Jr.
James E. Jordan, Jr. Profit
Sharing Plan and Trust
/s/ James E. Jordan, Jr.
----------------------------------
James E. Jordan, Jr.
Trustee
/s/ Paul Rodzevik
----------------------------------
Paul Rodzevik
-14-
<PAGE>
EXHIBIT 1 TO JORDAN INVESTORS SUBSCRIPTION AGREEMENT
----------------------------------------------------
<TABLE>
<CAPTION>
CLASS A COMMON STOCK
% OF
# OF SHARES COST COMPANY/(1)/
-------------- ------------- ------------
<S> <C> <C> <C>
Leucadia Investors, Inc. 726,293.00 $ 726,293.00 8.4250%
John W. Jordan, II Revocable Trust 463,146.49 463,146.49 5.3725%
David W. Zalaznick 463,146.49 463,146.49 5.3725%
Jonathan F. Boucher 396,982.70 396,982.70 4.6050%
John R. Lowden 290,517.20 290,517.20 3.3700%
Adam E. Max 290,517.20 290,517.20 3.3700%
John M. Camp III 76,206.88 76,206.88 0.8840%
John M. Camp, III Profit 10,000.00 10,000.00 0.1160%
Sharing Plan DTD 1/1/88
A. Richard Caputo, Jr. 145,258.60 145,258.60 1.6850%
James E. Jordan Jr. Profit Sharing Plan & Trust 8,620.69 8,620.69 0.1000%
Paul R. Rodzevik 34,482.75 34,482.75 0.4000%
-------------- ------------- ------
Total TJC Group 2,905,172.0000 $2,905,172.00 33.7%
============== ============= ======
</TABLE>
- --------------------------------
/(1)/ Percentage calculation assumes the issuance of 172,414 Option Shares and
3,448,276 Warrant Shares.
-15-
<PAGE>
EXHIBIT 2 TO JORDAN INVESTORS
-----------------------------
SUBSCRIPTION AGREEMENT
----------------------
JORDAN INVESTORS PLEDGE AGREEMENT
-16-
<PAGE>
EXHIBIT 4.14
JACKSON ACQUISITION CORP.
ADVISOR SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT, dated August 16, 1995 (herein called this
"Agreement"), is made by and among JACKSON ACQUISITION CORP., a Delaware
---------
corporation (which upon the closing of the transactions contemplated hereby,
will be renamed Jackson Products, Inc., and together with its successors and its
subsidiaries, unless otherwise indicated by the context, "Company"), whose
-------
address is c/o The Jordan Company, 9 West 57th Street, New York, New York
10019, and SAFETY PARTNERS, L.P., ("Safety Partners" or the "Stockholder").
--------------- -----------
1. Stock Subscriptions.
-------------------
(a) Safety Partners herewith subscribes for 344,828 shares of the
Company's Class A Common Stock, $.01 par value per share (the "Common Stock"),
------------
as set forth on Exhibit 1 hereto, for a purchase price of $1.00 per share, net
---------
of any fees payable by the Company to Safety Partners for services rendered, and
other good and valuable consideration, including its actions in connection with
the private placement of preferred stock and the senior subordinated notes by
Safety Partners with various institutional investors.
(b) The Stockholder acknowledges to the Company and the Company's
stockholders (the "Other Stockholders") that the Stockholder understands and
------------------
agrees, as follows:
THE COMMON STOCK HAS NOT BEEN REGISTERED UNDER FEDERAL OR STATE
SECURITIES LAWS. THE COMMON STOCK IS VERY SPECULATIVE AND RISKY. THERE IS NO
PUBLIC OR OTHER MARKET FOR THE STOCK NOR IS ANY LIKELY TO DEVELOP. THE COMPANY
HAS NO PREVIOUS FINANCIAL HISTORY AND HAS BORROWED SUBSTANTIALLY ALL OF THE
FUNDS AVAILABLE TO IT TO OPERATE ITS BUSINESS. THE STOCKHOLDER ACKNOWLEDGES
THAT THE STOCKHOLDER MAY AND CAN AFFORD TO LOSE ITS ENTIRE INVESTMENT
<PAGE>
AND THAT THE STOCKHOLDER UNDERSTANDS THE STOCKHOLDER MAY HAVE TO HOLD THIS
INVESTMENT INDEFINITELY.
(c) The Company covenants that upon issuance the Common Stock
subscribed for by the Stockholder shall aggregate $344,828 in purchase price
and, assuming the future issuance of 172,414 shares of Class C Common Stock,
$.01 par value, of the Company (the "Option Shares"), to certain management
investors upon the exercise of options issued pursuant to the Company Stock
Option Plan (as defined in Section 2(b) and the future issuance of shares of
Class B Common Stock, $.01 par value (the "Warrant Shares"), to certain
institutional investors upon the exercise of certain warrants, shall represent
4.0% of the authorized and outstanding shares of the Common Stock of all classes
of the Company on a fully diluted basis as of the date hereof.
(d) Each certificate evidencing Common Stock being issued pursuant to
this Agreement shall bear legends reflecting (i) this Agreement's existence and
(ii) the fact that said Common Stock has not been registered under Federal or
state securities laws and is subject to limitations on transfer set forth herein
and in the Stockholders Agreement, of even date herewith, by and among Jackson
Products ("New Jackson") and New Jackson's Other Stockholders (the "Stockholders
----------- ------------
Agreement"). The Stockholder acknowledges that the effect of these legends,
- ---------
among other things, is or may be to limit or destroy the value of the
certificate for purposes of sale or for use as loan collateral. The Stockholder
consents that "stop transfer" instructions may be noted against the Common Stock
sold to the Stockholder hereunder. The Stockholder acknowledges that the
Stockholder is required to become a party to the Stockholders Agreement as a
condition to purchasing the Common Stock hereunder.
2. Proposed Transactions.
---------------------
(a) This Agreement summarizes certain pertinent documents as well as
applicable laws and regulations. While the Company believes that these
summaries fairly reflect and summarize such matters, the Stockholder
acknowledges that such summaries are not complete and are qualified by reference
to the complete texts thereof of the documents, laws and regulations so
summarized.
-2-
<PAGE>
(b) The Stockholder acknowledges to the Company and New Jackson's
Other Stockholders party to the Stockholders Agreement that the Stockholder has
received or has had ample opportunity to review and understand the current form
of each of the following documents:
A. The Certificate of Incorporation of the Company;
B. The By-laws of the Company.
C. The Agreement and Plan of Merger (the "Merger Agreement"), dated as of
August 14, 1995, by and among the Company, Jackson Holdings ("Old
Holdings"), the stockholders of Old Holdings a party thereto the
optionholders of Old Holdings a party thereto and Mills & Partners,
Inc., pursuant to which the Company will merge with and into Old
Holdings with Old Holdings as the surviving corporation, and
subsequent to which Jackson Products, Inc. ("Old Jackson") will merge
-----------
with and into Old Holdings, with Old Holdings being the surviving
corporation and being renamed "Jackson Products, Inc."
D. The Second Amended and Restated Credit Agreement, of even date
herewith, by and among Jackson Products, Inc., Jackson Holding
Company, the Lenders parties thereto and Heller Financial, Inc.
("Heller"), as Agent, including all exhibits and schedules thereto.
E. The Note Agreement of even date herewith by and among the Company and
the other signatories thereto, including all exhibits and schedules
thereto.
F. The Securities Purchase Agreement of even date herewith executed by
the Company in favor of the Purchasers (as defined therein), including
all exhibits and schedules thereto.
G. Stockholders Agreement, of even date herewith, by and among Jackson
Products, Inc. and the stockholders named therein, including all
exhibits and schedules thereto.
-3-
<PAGE>
H. The 1995 Jackson Management Stock Option Plan (the "Company Stock
Option Plan") of even date herewith, adopted by the Board of Directors
of New Jackson, including all exhibits thereto.
I. This Agreement and all the exhibits and schedules hereto.
The documents referred to in A through H are hereinafter collectively
referred to as the "Operative Documents."
-------------------
The Company has afforded the Stockholder and the Stockholder's
advisors, if any, the opportunity to discuss an investment in the Common Stock
and to ask questions of representatives of the Company concerning the terms and
conditions of the offering of the Common Stock and the Operative Documents, and
such representatives have provided answers to all such questions concerning the
offering of the Common Stock and the Operative Documents. The Stockholder has
consulted its own financial, tax, accounting and legal advisors, if any, as to
such Stockholder's investment in the Common Stock and the consequences thereof
and risks associated therewith and the Operative Documents. The Stockholder and
its advisors, if any, has examined or has had the opportunity to examine before
the date hereof the Operative Documents and all information that the advisor or
Stockholder deems to be material to an understanding of the Company, the
proposed business of the Company, and the offering of the Common Stock. The
Stockholder also acknowledges that there have been no general or public
solicitations or advertisements or other broadly disseminated disclosures
(including, without limitation, any advertisement, article, notice or other
communication published in any newspaper, magazine or similar media or broadcast
over television or radio, or any seminar or meeting whose attendees have been
invited by any general solicitation or advertising) by or on behalf of the
Company regarding an investment in the Common Stock.
-4-
<PAGE>
3. Stockholder Representations and Warranties
------------------------------------------
(a) The Stockholder represents to the Company and the Other
Stockholders that such Stockholder is a sophisticated, experienced, professional
investor.
(b) The Stockholder represents that it has had an opportunity to
select and consult with such attorneys, business consultants and any other
person(s) the Stockholder has wished to confer with since the time when the
proposed transaction and the Stockholder's participation was first discussed
with the Stockholder. The Stockholder acknowledges that the Company has made
available to the Stockholder prior to the signing of this Agreement and sale of
any Common Stock hereunder, the opportunity to ask questions of any person
authorized to act on behalf of the Company concerning any aspect of the
investment and to obtain any additional information, to the extent the Company
possesses such information or can acquire it without unreasonable effort or
expense, necessary to verify the accuracy of the information.
(c) The Stockholder agrees that the Stockholder will not transfer any
Common Stock if such transfer would result in a default by the Company under the
provisions of the Operative Documents.
4. Risk Factors.
------------
The Stockholder acknowledges to the Company and the Other Stockholders
that the Stockholder knows and understands that the Company borrowed a
substantial portion of the funds used to effect the purchase of Old Holdings.
It is unlikely that dividends will be paid on the Common Stock. There is no
legal requirement or promise made by the Company to declare or pay dividends and
such dividends may not in any event be paid if such payment would violate any
term of the Operative Documents. Certain of the Operative Documents severely
restrict the ability of the Company to make any dividend or redemption payments
in any case and such payment may be restricted by future agreements or
instruments binding on the Company. Such dividends and redemption payments may
be made only from funds available for such use as provided by applicable law.
-5-
<PAGE>
The Stockholder acknowledges that any financial projections or
forecasts delivered to the Stockholder are only forecasts prepared by
management, which are subject to many assumptions and factors beyond the
Company's control, and that there are no assurances that the forecasts will be
realized.
The Stockholder acknowledges to the Company and the Other Stockholders
that the Stockholder knows and understands that an investment in the Common
Stock of the Company is a speculative investment which involves a high risk of
loss and that on and after the date hereof, there will be no public market for
the Common Stock and the Company does not contemplate that a public market will
develop.
5. Securities Law and Other Matters.
--------------------------------
(a) The Stockholder represents and warrants to the Company and the
Other Stockholders that the Stockholder used no "purchaser's representative" (as
that term is used in Regulation D as promulgated by the Securities and Exchange
Commission) in connection with this transaction. The Stockholder represents and
warrants to the Company and the Other Stockholders that neither The Jordan
Company ("Jordan") nor any of its employees or affiliates has acted as a
------
representative of said Stockholder in the subject transaction. The Stockholder
hereby releases Jordan, Jordan/Zalaznick Capital Company and each of their
respective partners, principals, directors, officers, employees, agents and
representatives from and against any claims in respect of such Stockholder's
subscription for the Common Stock and any related transaction hereunder or under
the Operative Documents. The Stockholder represents that such Stockholder has
substantial knowledge and experience in financial, investment and business
matters, and has the requisite knowledge and experience to evaluate the risks
and merits of this investment. The Stockholder represents and warrants that the
decision of such Stockholder to purchase the Common Stock hereunder has been
made by such Stockholder independent of any Other Stockholder and independent of
any statements, disclosures or judgments as to the properties, business,
prospects or condition (financial or otherwise) of the Company which may have
been made or given by any Other Stockholder or other person. The Stockholder
represents and warrants to the Company and the Other Stockholders
-6-
<PAGE>
that the Stockholder can and will bear the economic risks of its investment in
the Company and acknowledges that the Stockholder is able to hold the Company's
unregistered Common Stock indefinitely and is able to sustain a complete loss if
the securities become worthless.
(b) The Stockholder acknowledges to the Company and the Other
Stockholders that the Common Stock being purchased hereunder has not been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
--------------
on the ground that the sales of Common Stock pursuant to this Agreement are
exempt under Section 4(2) of the Securities Act as not constituting a
distribution, and that the Company's reliance on such exemption is predicated in
part on the Stockholder's representation which the Stockholder herewith makes
that the Common Stock has been acquired solely by and for the account of such
Stockholder for investment purposes only, and is not being purchased for
subdivision, fractionalization, resale or distribution. Such Stockholder has no
contract, undertaking, agreement or arrangement with any Other Stockholder to
sell, transfer or pledge to such Other Stockholder or anyone else the Common
Stock (or any part thereof) which such Stockholder has purchased hereunder.
Such Stockholder has no present plans or intentions to enter into any such
contract, undertaking, agreement or arrangement. The Common Stock has not been
registered or qualified for resale under applicable securities laws, and may not
be sold except pursuant to such registration or qualification thereunder or an
exemption therefrom. The Stockholder further acknowledges to the Company that
the Common Stock being sold to the Stockholder must be held indefinitely unless
it is subsequently registered under the Securities Act or a transfer is made
pursuant to an exemption from such registration, for example, pursuant to Rule
144. The Stockholder further represents and warrants to the Company and the
Other Stockholders that such Stockholder's financial condition is such that the
Stockholder is not under any present necessity or constraint, and does not
foresee in the future any necessity or constraint, to dispose of these shares to
satisfy any existing or contemplated debt or undertaking.
6. Registration Rights.
-------------------
-7-
<PAGE>
The Common Stock has not been registered under Federal or state
securities laws and, in consequence thereof, all of the Common Stock must be
held indefinitely unless (a) subsequently registered under applicable Federal
and state securities laws or (b) exemptions from such registration are available
at the time of a proposed sale or transfer thereof. Subject to its obligations
under the Stockholders Agreement, the Company has no present intention to file a
registration statement under either Federal or state law.
7. Legend. All certificates representing shares of the
------
Common Stock shall be endorsed as follows:
"THIS CERTIFICATE IS SUBJECT TO, AND IS TRANSFERABLE ONLY UPON
COMPLIANCE WITH, THE PROVISIONS OF A STOCKHOLDERS AGREEMENT, DATED
AUGUST 16, 1995, AMONG THE COMPANY AND ITS STOCKHOLDERS AND THE
SUBSCRIPTION AGREEMENTS, DATED AUGUST 16, 1995, AMONG THE COMPANY AND
CERTAIN INVESTORS THEREIN. REFERENCE ALSO IS MADE TO THE RESTRICTIVE
PROVISIONS OF THE CERTIFICATE OF INCORPORATION AND BY-LAWS OF THE
COMPANY. A COPY OF THE ABOVE REFERENCED AGREEMENTS ARE ON FILE AT THE
OFFICE OF THE COMPANY C/O THE JORDAN COMPANY, 9 WEST 57TH STREET, NEW
YORK, NEW YORK 10019.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE TRANSFERRED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT, OR AN
EXEMPTION FROM REGISTRATION, UNDER SAID ACT."
8. Miscellaneous Provisions and Definitions.
----------------------------------------
(a) Subject to the conditions of transfer of Common Stock hereunder,
this Agreement shall be binding upon and shall inure to the benefit of the
Stockholder and the Stockholder's respective successors, assigns, by way of
merger, consolidation or operation of law or otherwise and to the Company and
its respective successors and assigns, by way of merger, consolidation or
operation of law or otherwise. Once the Stockholder is no longer a Stockholder
of the Company, all rights and benefits previously enjoyed by such party
pursuant to the
-8-
<PAGE>
terms of this Agreement shall automatically terminate with respect to such
party.
(b) By execution and delivery of this Agreement, Safety Partners
acknowledged receipt of the shares of Common Stock shall be deemed payment in
full of any and all obligations of the Company, The Jordan Company and their
respective affiliates of any obligations of such parties to Safety Partners
arising on or prior to the closing date.
(c) Prior to consummation of any transfer of shares of Common Stock
held by the Stockholder permitted under the Stockholders Agreement, except for
transfers pursuant to Rule 144 or a public offering, such Stockholder shall
cause the transferee to execute an agreement in which the transferee agrees to
be bound by the terms of this Agreement.
(d) The language used in this Agreement will be deemed to be the
language chosen by the parties hereto to express their mutual intent, and no
rule of strict construction will be applied against any person.
(e) THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED, APPLIED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, EXCEPT THAT NO
DOCTRINE OF CHOICE OF LAW SHALL BE USED TO APPLY ANY LAW OTHER THAN THAT OF NEW
YORK, AND NO DEFENSE, COUNTERCLAIM OR RIGHT OF SET-OFF GIVEN OR ALLOWED BY THE
LAWS OF ANY OTHER STATE OR JURISDICTION, OR ARISING OUT OF THE ENACTMENT,
MODIFICATION OR REPEAL OF ANY LAW, REGULATION, ORDINANCE OR DECREE OF ANY
FOREIGN JURISDICTION, BE INTERPOSED IN ANY ACTION HEREON. THE PARTIES HERETO
AGREE THAT ANY ACTION OR PROCEEDING TO ENFORCE OR ARISING OUT OF THIS AGREEMENT
MAY BE COMMENCED IN THE COURTS OF THE STATE OF NEW YORK OR THE UNITED STATES
DISTRICT COURTS IN THE SOUTHERN DISTRICT OF NEW YORK. THE PARTIES HERETO
CONSENT TO SUCH JURISDICTION, AGREE THAT VENUE WILL BE PROPER IN SUCH COURTS AND
WAIVE ANY OBJECTIONS BASED UPON FORUM NON CONVENIENS. THE CHOICE OF FORUM SET
----- --- ----------
FORTH IN THIS SECTION 8 SHALL NOT BE DEEMED TO PRECLUDE THE ENFORCEMENT OF ANY
---------
JUDGMENT OBTAINED IN SUCH FORUM OR THE TAKING OF ANY ACTION UNDER THIS AGREEMENT
TO ENFORCE SAME IN ANY OTHER JURISDICTION.
-9-
<PAGE>
(f) THE PARTIES HERETO AGREE THAT ANY DISPUTE BETWEEN OR AMONG THE
PARTIES TO THIS AGREEMENT RELATING TO OR IN RESPECT OF THIS AGREEMENT, ITS
NEGOTIATION, EXECUTION, PERFORMANCE, SUBJECT MATTER, OR ANY COURSE OF CONDUCT OR
DEALING OR ACTIONS UNDER OR IN RESPECT OF THIS AGREEMENT, SHALL BE SUBMITTED TO,
AND RESOLVED EXCLUSIVELY PURSUANT TO ARBITRATION IN ACCORDANCE WITH THE
COMMERCIAL ARBITRATION RULES OF THE AMERICAN ARBITRATION ASSOCIATION. SUCH
ARBITRATION SHALL TAKE PLACE IN NEW YORK, NEW YORK, AND SHALL BE SUBJECT TO THE
SUBSTANTIVE LAW OF THE STATE OF NEW YORK. DECISIONS PURSUANT TO SUCH
ARBITRATION SHALL BE FINAL, CONCLUSIVE AND BINDING ON THE PARTIES SUBJECT TO
CONFIRMATION, MODIFICATION OR CHALLENGE PURSUANT TO 9 U.S.C. (S)1 ET SEQ. UPON
THE CONCLUSION OF ARBITRATION, THE PARTIES HERETO MAY APPLY TO ANY COURT OF THE
TYPE DESCRIBED IN SECTION 8 TO ENFORCE THE DECISION PURSUANT TO SUCH
---------
ARBITRATION. IN CONNECTION WITH THE FOREGOING, THE PARTIES AFTER CONSULTATION
WITH COUNSEL HEREBY WAIVE ANY RIGHTS TO A JURY TRIAL TO RESOLVE ANY DISPUTES OR
CLAIMS RELATING TO THIS AGREEMENT AND THE AGREEMENTS AND TRANSACTIONS
CONTEMPLATED HEREBY.
(g) All personal pronouns used in this Agreement, whether masculine,
feminine or neuter gender, shall include all other genders if the context so
requires; the singular shall include the plural, and vice versa.
(h) This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original but all of which together shall constitute
one and the same instrument.
(i) The words "sale", "sell", "transfer" and the like shall include
any disposition by way of transfer, with or without consideration, to any person
for any purpose and shall include, but shall not be limited in any way to,
private or public sale or exchanges of securities or any other similar
transaction involving Common Stock.
(j) In case any one or more of the provisions or parts of a provision
contained in this Agreement shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect in any jurisdiction, such invalidity,
illegality or unenforceability shall not affect any other provision or part of a
provision of this Agreement or any other jurisdiction, but this Agreement
-10-
<PAGE>
shall be reformed and construed in any such jurisdiction as if such invalid or
illegal or unenforceable provision or part of a provision had never been
contained herein and such provision or part shall be reformed so that it would
be valid, legal and enforceable to the maximum extent permitted in such
jurisdiction.
(k) This Agreement constitutes the entire agreement by and among the
parties with respect to the subject matter hereof and may not be modified
orally, but only by a writing subscribed by the party charged therewith.
(l) Each of the parties hereto agrees to execute all such further
instruments and documents and to take all such further action necessary to
effectuate the terms and purposes of this Agreement.
(m) Whenever notice is required to be given by any party hereunder,
such notice shall be deemed sufficient when delivered to the Company at its
address above (which is also the address of The Jordan Company) and to the
Stockholder at its address as set forth on the stock records of the Company or
to such other address as the Stockholder shall have furnished.
(n) Each party shall be entitled to rely conclusively upon any notice
received, or the failure to receive any notice, from any other party with
respect to rights and obligations under this Agreement.
-11-
<PAGE>
IN WITNESS WHEREOF, each of the undersigned has signed this Agreement:
JACKSON HOLDING COMPANY
By: /s/ Christopher T. Paule
---------------------------
Name: Christopher T. Paule
Title: Vice President
SAFETY PARTNERS, L.P.
By: /s/ Andrew Whittaker
---------------------------
Name: A. R. Whittaker
Title: Managing Director
-12-
<PAGE>
Exhibit 1 to Advisor
--------------------
Subscription Agreement
----------------------
Percentage of Common
Shares of Stock of All Classes on a
Common Stock Fully Diluted Basis/1/
------------ ----------------------
Safety Partners, L.P. 344,828 4.0%
- ----------------------
/1/ Assumes issuance of the Warrant Shares and Option Shares.
<PAGE>
EXHIBIT 4.15
JACKSON ACQUISITION CORP.
MANAGEMENT SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT, dated as of August 16, 1995 (this
"Agreement"), is made by and among Jackson Acquisition Corp., a Delaware
- ----------
corporation (together with its successors including, without limitation, Jackson
Holding Company which is successor by merger to Jackson Products, Inc. and which
will subsequently change its name to Jackson Products, Inc. and its
subsidiaries, unless otherwise indicated by the context, the "Company"), whose
-------
address is c/o The Jordan Company, 9 West 57th Street, New York, New York
10019, and the persons and entities whose names are set forth at the end of this
Agreement (collectively the "Stockholders").
------------
1. Stock Subscriptions and Cash Buyout.
-----------------------------------
(a) Each Stockholder (i) herewith subscribes for the number of shares
set forth opposite Stockholder's name in Exhibit 1 hereto of the Company's Class
---------
C Common Stock, $0.01 par value per share (the "Class C Common Stock"), which is
--------------------
convertible, under certain circumstances under the Company's Certificate of
Incorporation, into the Company's Class A Common Stock, par value $.01 per share
(the "Class A Common Stock" and together with the Class C Common Stock and the
--------------------
other classes of common stock of the Company, "Common Stock"), all as more
specifically described in Exhibit 1, at a purchase price for the Class C Common
---------
Stock of $1.00 per share, (ii) tenders in consideration of the subscription for
such Class C Common Stock (A) such Stockholder's stock certificates ("Rollover
Shares") representing shares of Old Holdings Common Stock (as defined in Section
-------
10), if any, as more fully described in Exhibit 2 hereto, (B) amount of the net
- -- ---------
proceeds payable to the Stockholder pursuant to the Merger Agreement from the
cancellation of options to purchase Old Holdings Common Stock held by such
Stockholder, (C) the net proceeds payable to the Stockholder pursuant to the
<PAGE>
Merger Agreement from performance bonuses and sale of business bonuses to be
paid by Old Jackson (as defined in Section 10) to such Stockholder, if any, as
more fully described in Exhibit 2 hereto, and (D) a Non-Recourse Promissory Note
---------
executed and delivered by the Stockholder in favor of the Company in
substantially the form of Exhibit 3 attached hereto (the "Non-Recourse Notes")
--------- ------------------
and in an initial principal amount set forth in Exhibit 2 hereto, if any, as
---------
more fully described in Exhibit 2 hereto, and (E) cash, if any, as more fully
---------
described in Exhibit 2 hereto, and (3) herewith agrees to enter into a Stock
---------
Pledge Agreement in favor of the Company in substantially the form of Exhibit 4
---------
attached hereto in order to secure the payment of amounts due under the Non-
Recourse Notes. Each of the Stockholders, in order to facilitate the
transactions contemplated by this Agreement, authorizes and appoints the Company
or any of its representatives to direct the transfer of the subscription
consideration from any account which such amounts may be paid into for the
benefit of such Stockholder to any account established for the benefit of the
Company. For purposes of this Agreement, the Class C Common Stock (and the Class
A Common Stock, if any, issued upon conversion thereof) and the Options and the
Option Shares (each as defined in Section 1(c)) are collectively referred to as
the "Securities").
(b) The Company pursuant to the Company Stock Option Plan (as defined
in Section 2(b) hereof) shall grant to the Executive Management Group (as
defined in Section 10) options to purchase 172,414 shares of Common Stock as set
----------
forth on Exhibit 1 (the "Options"). Such Options will vest as set forth in the
---------
Company Stock Option Plan.
(c) The Company covenants that upon issuance, the Class C Common
Stock subscribed for by the Stockholders pursuant to Section 1(a) of this
Agreement, shall aggregate $1,000,000 in aggregate subscription and purchase
price and, together with and assuming the future issuance of 172,414 additional
shares of Common Stock (the "Option Shares") to the Stockholders upon the
exercise of the options described in Section 1(b) (the "Options"), and assuming
the issuance of 3,448,276 shares of Common Stock upon the exercise of warrants
(the "Warrant Shares") to certain institutional investors, shall represent 13.6%
of all
-2-
<PAGE>
Common Stock of all classes of the Company on a fully-diluted basis as of the
date hereof.
(d) Each Stockholder acknowledges to the Company and the other
Stockholders that Stockholder understands and agrees, as follows:
THE SECURITIES HAVE NOT BEEN REGISTERED UNDER FEDERAL OR STATE
SECURITIES LAWS. THE SECURITIES ARE VERY SPECULATIVE AND RISKY. THERE IS NO
PUBLIC OR OTHER MARKET FOR THE SECURITIES NOR IS ANY LIKELY TO DEVELOP. THE
COMPANY HAS NO PREVIOUS FINANCIAL HISTORY AND THE COMPANY AND ITS
SUBSIDIARIES HAVE BORROWED SUBSTANTIALLY ALL OF THE FUNDS AVAILABLE TO IT
TO COMMENCE ITS BUSINESS. EACH STOCKHOLDER ACKNOWLEDGES THAT STOCKHOLDER
MAY AND CAN AFFORD TO LOSE STOCKHOLDER'S ENTIRE INVESTMENT AND THAT
STOCKHOLDER UNDERSTANDS STOCKHOLDER MAY HAVE TO HOLD THIS INVESTMENT
INDEFINITELY.
(e) Each certificate evidencing the Securities being issued pursuant
to this Agreement shall bear legends reflecting (i) this Agreement's existence
and (ii) the fact that the Securities have not been registered under Federal or
state securities laws and are subject to limitations on transfer set forth
herein and set forth in a Stockholders Agreement, of even date herewith, by and
among the Company and the Company's stockholders (the "Stockholders Agreement").
----------------------
Each Stockholder acknowledges that the effect of these legends, among other
things, is or may be to limit or destroy the value of the certificate for
purposes of sale or for use as loan collateral. Each Stockholder consents that
"stop transfer" instructions may be noted against the Securities sold to
Stockholder hereunder. Each Stockholder acknowledges that Stockholder is
required to become a party to the Stockholders Agreement as a condition to
acquiring the Securities hereunder.
(f) The Stockholders and the Company acknowledge, accept and agree
that each of their respective Purchase and Stockholder Agreements (as defined
below), is hereby terminated and shall not be of any force and effect. For the
purposes of this Agreement, "Purchase and Stockholder Agreements" means any
-----------------------------------
subscription, investment, stockholder, option or similar
-3-
<PAGE>
agreement or instrument, including any such agreement or instrument relating to
the subject matter of this Agreement or the Stockholders Agreement, as among Old
Holdings, its affiliates and each of the Stockholders, including those
agreements and instruments listed on the Former Stockholder Agreements Schedule
attached as Schedule 1(e) hereto.
-------------
(g) Each Stockholder represents and warrants that attached to the
Former Stockholder Agreements Schedule are, to the extent applicable to such
Stockholder (i) complete and accurate copies of all of the Purchase and
Stockholder Agreements executed by each of the Stockholders, (ii) copies of the
stock certificates of Old Holdings Common Stock issued to the Stockholders,
(iii) the cancelled promissory notes, if any, ("Old Holdings Notes") made by
------------------
each Stockholder to Old Holdings, (iv) cancelled Stock Pledge Agreements, if
any, executed by the Stockholders in favor of Old Holdings (the "Old Holdings
------------
Stock Pledge Agreements") in connection with the Old Holdings Notes and (v)
- -----------------------
cancelled stock powers, if any, executed by the Stockholders in favor of Old
Holdings (the "Old Holdings Stock Powers") in connection with the Old Holdings
-------------------------
Stock Pledge Agreements.
2. Proposed Transaction.
--------------------
(a) This Agreement summarizes certain pertinent documents as well as
applicable laws and regulations. While the Company believes that these
summaries fairly reflect and summarize such matters, each Stockholder
acknowledges that such summaries are not complete and are qualified in their
entirety by reference to the complete texts thereof of the documents, laws and
regulations so summarized.
(b) Each Stockholder acknowledges that Stockholder has received and
has had ample opportunity to review and understand the current form of each of
the following documents:
A. The Certificate of Incorporation of the Company.
B. The By-laws of the Company.
C. The Agreement and Plan of Merger (the "Merger Agreement"), dated
----------------
August 14, 1995, by and among the
-4-
<PAGE>
Company, Old Holdings, the Stockholders referred to therein, the
Optionholders referred to therein and Mills & Partners, Inc., pursuant
to which the Company will merge with and into Old Holdings, with Old
Holdings being the surviving corporation, and the Agreement and Plan
of Merger of even date herewith between Old Jackson and the Company,
pursuant to which Old Jackson will merge with and into Old Holdings,
with Old Holdings being the surviving corporation and being renamed
Jackson Products, Inc.
D. The Second Amended and Restated Credit Agreement (the "Credit
------
Agreement"), of even date herewith, by and among the Company and
---------
Heller Financial, Inc., as Agent for the Lenders named therein,
including all exhibits and schedules thereto.
E. The Note Agreement, of even date herewith, by and among the Company
and the other signatories thereto, including all exhibits and
schedules thereto.
F. The Securities Purchase Agreement, of even date herewith, executed by
the Company in favor of the Purchasers (as defined therein), including
all exhibits and schedules thereto.
G. The Stockholders Agreement, of even date herewith, by and among the
Company and the stockholders named therein, including all exhibits and
schedules thereto (the "Stockholders Agreement").
H. The Stock Pledge Agreement, of even date herewith, among the Company
and the Stockholders named therein, including all exhibits and
schedules thereto.
I. The 1995 Jackson Management Stock Option Plan in substantially the
form of Exhibit 5 (the "Company Stock Option Plan") of even date
herewith, adopted by the Board of Directors of the Company, including
all exhibits thereto.
J. This Agreement and all exhibits and schedules hereto.
-5-
<PAGE>
The documents referred to in A through J are hereinafter collectively
referred to as the "Operative Documents", except that, for purposes of Section
------------------- -------
11(h), this Agreement will not be considered an Operative Document.
- -----
The Company has afforded each Stockholder and each Stockholder's
advisors, if any, the opportunity to discuss an investment in the Securities and
to ask questions of representatives of the Company concerning the terms and
conditions of the offering of the Securities and the Operative Documents, and
such representatives have provided answers to all such questions concerning the
offering of the Securities and the Operative Documents. Each Stockholder has
consulted its own financial, tax, accounting and legal advisors, if any, as to
such Stockholder's investment in the Securities and the consequences thereof and
risks associated therewith and the Operative Documents. Each Stockholder and
such Stockholder's advisors, if any, have examined or have had the opportunity
to examine before the date hereof the Operative Documents and all information
that the Stockholder deems to be material to an understanding of the Company,
the proposed business of the Company, and the offering of the Securities. Each
Stockholder also acknowledges that to Stockholder's knowledge there have been no
general or public solicitations or advertisements or other broadly disseminated
disclosures (including, without limitation, any advertisement, article, notice
or other communication published in any newspaper, magazine or similar media or
broadcast over television or radio, or any seminar or meeting whose attendees
have been invited by any general solicitation or advertising) by or on behalf of
the Company regarding an investment in the Securities.
3. Stockholder Representations and Warranties.
------------------------------------------
(a) Each Stockholder represents and warrants that such Stockholder:
(i) (A) has previously worked as an employee of Old Holdings, and is employed in
a managerial or executive position with the Company and is familiar with the
Company's operations, financial condition and business prospects, or (B) is a
family member of a person described in clause (A), and is relying upon such
person in acquiring the Securities hereunder; and (ii) has had an opportunity to
select and consult with such attorneys, business consultants and any other
person(s) the Stockholder has
-6-
<PAGE>
wished to confer with since the time when the transactions contemplated by the
Merger Agreement and such Stockholder's participation were first discussed with
such Stockholder. Each Stockholder acknowledges that the Company has made
available to such Stockholder, prior to the signing of this Agreement and the
sale of any Securities, the opportunity to ask questions of any person
authorized to act on behalf of the Company concerning any aspect of the
investment and to obtain any additional information, to the extent the Company
possesses such information or can acquire it without unreasonable effort or
expense, necessary to verify the accuracy of the information.
(b) Each Stockholder agrees that Stockholder will not transfer any
Securities if such transfer would result in a default by the Company under the
provisions of the Operative Documents.
(c) Each Stockholder agrees that Stockholder will complete, execute
and file a form of election under Section 83(b) of the Internal Revenue Code of
1986, as amended, with the Internal Revenue Service within thirty (30) days of
the execution of this Agreement and the purchase of the Securities.
(d) Each Stockholder acknowledges and accepts that pursuant to the
Merger Agreement and the other Operative Documents upon consummation of the
proposed transactions the Securities of Jackson Acquisition Corp. subscribed for
hereunder shall be converted into Securities of Jackson Products, Inc., the
successor to Jackson Acquisition Corp.
4. Risk Factors.
------------
(a) Each Stockholder acknowledges to the Company and the other
Stockholders that such Stockholder knows and understands that Old Jackson is a
material asset of the Company's, and that the Company borrowed a substantial
portion of the funds used to effect the purchase of Old Jackson and Old
Holdings. It is unlikely that dividends will be paid on the Class C Common
Stock. There is no legal requirement or promise made by the Company to declare
or pay such dividends and such dividends may not in any event be paid if such
payment would violate any term of the Operative Documents. Certain of the
-7-
<PAGE>
Operative Documents severely restrict the ability of the Company to make any
dividend or redemption payments in any case and such payment may be restricted
by future agreements or instruments binding on the Company. If a Stockholder
ceases to be an employee of the Company such Stockholder's Securities may be
subject to certain rights of the Company to repurchase such Securities under
this Agreement or the Stockholder's employment agreement with the Company, if
any. Under the repurchase payment terms, such Stockholders may not receive full
cash payment in return for the Stockholder's Securities for several years.
Furthermore, each Stockholder acknowledges that he has pledged, pursuant to the
Pledge Agreement of even date herewith by and between such Stockholder and the
Company (with respect to each Stockholder a "Pledge Agreement"), the Securities
held by such Stockholder for the benefit of the Company to secure payment of the
amounts due under the Non-Recourse Note of such Stockholder. Under the terms of
the Pledge Agreements, each Stockholder may forfeit the Stockholder's Securities
upon certain defaults under the Non-Recourse Note or Pledge Agreement executed
by such Stockholder. Also, dividend and redemption payments may be made only
from funds available to the Company for such use as provided by applicable law.
(b) Each Stockholder acknowledges that any financial projections or
forecasts with respect to the Company are only forecasts prepared by management,
which are subject to many assumptions and factors beyond the Company's control,
and that there are no assurances that these forecasts will be realized.
(c) Each Stockholder acknowledges to the Company and the other
Stockholders that Stockholder knows and understands that an investment in the
Securities of the Company is a speculative investment which involves a high risk
of loss and that on and after the date hereof, there will be no public market
for the Securities and the Company does not contemplate that a public market
will develop.
5. Securities Law and Other Matters.
--------------------------------
(a) Each Stockholder represents and warrants to the Company and the
other Stockholders that Stockholder used no "purchaser's representative" (as
that term is used in Regulation
-8-
<PAGE>
D as promulgated by the Securities and Exchange Commission) in connection with
the transactions contemplated by the Operative Documents. Each Stockholder
represents and warrants to the Company and the other Stockholders that neither
The Jordan Company ("Jordan") nor any of its employees or affiliates has acted
------
as a representative of said Stockholder in the subject transaction. Each
Stockholder hereby releases Jordan, Jordan/Zalaznick Capital Company and each of
their respective partners, principals, directors, officers, employees, agents
and representatives from and against any claims in respect of each Stockholder's
subscription for the Securities and any related transaction hereunder or under
the Operative Documents. Each Stockholder represents and warrants that such
Stockholder has substantial knowledge and experience in financial, investment
and business matters, and specifically in the business of the Company, and has
the requisite knowledge and experience to evaluate the risks and merits of this
investment. Each Stockholder represents and warrants that the decision of such
Stockholder to purchase the Securities hereunder has been made by such
Stockholder independent of any other Stockholder and independent of any
statements, disclosures or judgments as to the properties, business, prospects
or condition (financial or otherwise) of the Company which may have been made or
given by any Stockholder or other person. Each Stockholder represents and
warrants to the Company and the Company's other stockholders that Stockholder
can and will bear the economic risks of Stockholder's investment in the Company
and acknowledges that the Stockholder is able to hold the Company's unregistered
Stock indefinitely and is able to sustain a complete loss if the Securities
become worthless or are forfeited pursuant to the Pledge Agreement executed by
such Stockholder.
(b) Each Stockholder acknowledges to the Company and the Company's
other Stockholders that the Securities being purchased hereunder have not been
registered under the Securities Act of 1933, as amended, (the "Securities Act")
--------------
on the ground that the sales of Securities pursuant to this Agreement are exempt
under Section 4(2) of the Securities Act as not constituting a distribution, and
that the Company's reliance on such exemption is predicated in part on each
Stockholder's representation which Stockholder herewith makes that the
Securities have been acquired solely by and for the account
-9-
<PAGE>
of such Stockholder for investment purposes only, and are not being purchased
for subdivision, fractionalization, resale or distribution. Other than as
expressly set forth in the Operative Documents, such Stockholder has no
contract, undertaking, agreement or arrangement with any other Stockholder to
sell, transfer or pledge to such other Stockholder or anyone else the Securities
(or any part thereof) which such Stockholder has purchased hereunder, and such
Stockholder has no present plans or intentions to enter into any such contract,
undertaking, agreement or arrangement. The Securities have not been registered
or qualified for resale under applicable securities laws, and may not be sold
except pursuant to such registration or qualification thereunder or an exemption
therefrom. Such Stockholder has adequate means of providing for Stockholder's
current needs and possible contingencies. Each Stockholder further acknowledges
to the Company that the Securities being sold to said Stockholder must be held
indefinitely unless they are subsequently registered under the Securities Act or
a transfer is made pursuant to an exemption from such registration, including,
for example, pursuant to Rule 144 thereunder. Each Stockholder further
represents and warrants to the Company and the Company's other stockholders that
such Stockholder's financial condition is such that Stockholder is not under any
present necessity or constraint, and does not foresee in the future any
necessity or constraint, to dispose of these shares to satisfy any existing or
contemplated debt or undertaking.
(c) In the event that in the future the Company engages in any
negotiation or transaction (including a merger or consolidation or other
reorganization by or of the Company) in which Regulation D promulgated by the
Securities and Exchange Commission may or will be available to the Company, each
of the Stockholders who is not then a professional investor agrees irrevocably
(and with the knowledge and intention that the other holders of the Company's
stock of all classes will rely thereon in making their respective present
investment decisions) that Stockholder will, within 5 business days of notice
from the Company, which may be given in the sole discretion of the Company,
appoint a purchaser's representative or representatives who shall be qualified
and acceptable to the Company and any other person(s) who is (are) involved in
the proposed transaction so that the maximum benefits of Regulation D shall be
available
-10-
<PAGE>
to the Company and all of its Stockholders. Any Stockholder who does
not perform this covenant shall be liable to the Company and all of the
Company's other stockholders for any damage or loss that may or might be
incurred thereby.
6. Registration Rights. The Securities have not been registered under
-------------------
Federal or state securities laws and, in consequence thereof, all of the
Securities must be held indefinitely unless (a) subsequently registered under
applicable Federal and state securities laws or (b) exemptions from such
registration are available at the time of a proposed sale or transfer thereof.
Except as set forth in the Stockholders Agreement, the Company has no agreements
in respect of a registration statement under either Federal or state law.
7. Legend. All certificates representing shares of Securities shall be
------
endorsed as follows:
"THIS CERTIFICATE IS SUBJECT TO, AND IS TRANSFERABLE ONLY UPON
COMPLIANCE WITH, THE PROVISIONS OF A STOCKHOLDERS AGREEMENT, DATED
AUGUST 16, 1995, AMONG THE COMPANY AND ITS STOCKHOLDERS AND
SUBSCRIPTION AGREEMENTS, DATED AUGUST 16, 1995, AMONG THE COMPANY AND
CERTAIN INVESTORS THEREIN. REFERENCE ALSO IS MADE TO THE RESTRICTIVE
PROVISIONS OF THE CERTIFICATE OF INCORPORATION AND BY-LAWS OF THE
COMPANY. A COPY OF THE ABOVE REFERENCED AGREEMENTS ARE ON FILE AT THE
OFFICE OF THE COMPANY C/O THE JORDAN COMPANY, 9 WEST 57TH STREET, NEW
YORK, NEW YORK 10019.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE TRANSFERRED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT, OR AN EXEMPTION
FROM REGISTRATION, UNDER SAID ACT."
8. Repurchase Provisions.
---------------------
(a) Call Upon Termination. If the employment by the Company of any
---------------------
Stockholder is terminated at any time:
-11-
<PAGE>
(i) by the Company or the Stockholder due to the death of
the Stockholder;
(ii) by the Company or the Stockholder due to Disability (as
defined in Section 10);
----------
(iii) by the Company due to Cause or Material Breach (as
defined in Section 10);
----------
(iv) by the Company due to Unsatisfactory Performance (as
defined in Section 10);
----------
(v) by the Company due to any reason not referred to in
clauses (i) through (iv), or for no reason,
(vi) by the Stockholder due to Good Reason (as defined in
Section 10); or
----------
(vii) by the Stockholder due to Retirement (as defined in
Section 10); or
----------
(viii) by the Stockholder voluntarily or for any reason not
referred to in clauses (i), (ii) or (vi) or for no
reason,
then, all, but not less than all, of the Securities owned by such Stockholder
and by all of such Stockholder's Permitted Transferees under the Stockholders
Agreement may be repurchased by the Company, at the option of the Company, at
the "call" price for the Securities, as follows:
1. If the termination is for the reason described in clause (iii)
above, the call price for shares of Common Stock shall be Cost (as defined
in Section 10), payable in cash, Three Year Junior Notes (as defined in
----------
Section 10) or any combination thereof.
----------
2. If the termination is for reasons described in clauses (i), (ii),
(iv) or (vi):
-12-
<PAGE>
(A) If the termination occurs on or before the first anniversary
of this Agreement, the call price for shares of Common Stock
shall be Cost, payable in cash.
(B) If the termination occurs after the first anniversary of
this Agreement and on or before the second anniversary of
this Agreement, the call price for shares of Common Stock
shall be as follows: (i) for 33 1/3% of the called shares
the call price shall be the Fair Market Value of the shares
on the date of the call, payable in cash, Three Year Junior
Notes or any combination thereof, subject to the provisions
of Section 8(i); and (ii) for 66 2/3% of the call shares the
------------
call price shall be the Cost of the call shares, payable in
cash.
(C) If the termination occurs after the second anniversary of
this Agreement and on or before the third anniversary of
this Agreement, the call price for shares of Common Stock
shall be as follows: (i) for 66 2/3% of the call shares the
call price shall be the Fair Market Value of the shares on
the date of the call, payable in cash, Three Year Junior
Notes or any combination thereof, subject to the provisions
of Section 8(i); and (ii) for 33 1/3% of the call shares the
------------
call price shall be the Cost of the call shares, payable in
cash.
(D) If the termination occurs after the third anniversary of
this Agreement, the call price for shares of Common Stock
shall be the Fair Market Value of the call shares on the
date of the call, payable in cash, Three Year Junior Notes
or any combination thereof, subject to the provisions of
Section 8(i).
------------
-13-
<PAGE>
3. If the termination is for reasons described in clauses (v) or
(vii) above, the call price for shares of Common Stock shall be the Fair
Market Value of the called shares on the date of the call, payable in cash,
Three Year Junior Notes or any combination thereof.
To exercise the foregoing call rights, the Company must notify the
Stockholder of its exercise of such call rights within six months following
termination.
4. If the termination is for reasons described in clause (viii)
above:
(A) If the termination occurs on or before the third anniversary
of this Agreement, the call price for shares of Common Stock
shall be Cost, payable in cash, Three Year Junior Notes or
any combination thereof.
(B) If the termination occurs after the third anniversary of
this Agreement, the call price for shares of Common Stock
shall be the Fair Market Value of the called shares on the
date of the call, payable in cash, Three Year Junior Notes
or any combination thereof.
To exercise the foregoing call rights, the Company must notify the
Stockholder of its exercise of such call rights within six months following
termination. In the event that the termination of the Stockholder relates to
circumstances involving Cause or Material Breach, then the Company's call rights
under Section 8(a) will take precedence over and supersede any Stockholder put
rights hereunder.
5. If the termination is for any reason other than Cause or Material
Breach, the call price for unexercised, but earned and vested Stock Options
(determined pursuant to the terms and conditions of the Company Option
Plan) shall be the Fair Market Value of the Option Shares which the
Stockholder would have received had the Stockholder exercised the Options
less the exercise price of such Options, payable in cash, Three Year Junior
Notes or any
-14-
<PAGE>
combination thereof (subject to the provisions of Section 8(i)). Pursuant
------------
to the Company Option Plan, if the termination is for Cause or Material
Breach, all of such Stockholder's Options will upon the Stockholder's
termination be considered unvested, irrespective of being previously
vested, and the Options of such Stockholder will automatically terminate
and expire without any payment.
(b) Stockholder Put Rights. If the employment by the Company of any
----------------------
Stockholder is terminated at any time:
(i) due to the death of the Stockholder;
(ii) due to Disability;
(iii) by the Company due to Unsatisfactory Performance;
(iv) by the Company due to any reason not referred to in clause
(i) or (ii) other than Cause or Material Breach;
(v) by the Stockholder due to Good Reason; or
(vi) by the Stockholder due to Retirement;
then the Stockholder (or, solely in the case of death, the person or persons to
whom the Stockholder's rights with respect to the Securities shall have lawfully
passed by will or by applicable law) may, at the Stockholder's or their option,
cause the Company to repurchase any or all of the Common Stock owned by such
Stockholder and by all of the Stockholder's Permitted Transferees under the
Stockholders Agreement at the put price described below:
1. If the Termination is for reasons described in clause (i), (ii),
(iii) or (v) above:
(A) If the termination occurs on or before the first anniversary
of this Agreement, the put price for shares of Common Stock
shall be Cost, payable in cash.
-15-
<PAGE>
(B) If the termination occurs after the first anniversary of
this Agreement and on or before the second anniversary of
this Agreement, the put price for shares of Common Stock
shall be as follows: (i) for 33 1/3% of the put shares the
put price shall be the Fair Market Value of the shares on
the date of the put, payable in cash, Three Year Junior
Notes or any combination thereof, subject to the provisions
of Section 8(i); and (ii) for 66 2/3% of the put shares the
------------
put price shall be the Cost of the put shares, payable in
cash.
(C) If the termination occurs after the second anniversary of
this Agreement and on or before the third anniversary of
this Agreement, the put price for shares of Common Stock
shall be as follows: (i) for 66 2/3% of the put shares the
put price shall be the Fair Market Value of the shares on
the date of the put, payable in cash, Three Year Junior
Notes or any combination thereof, subject to the provisions
of Section 8(i); and (ii) for 33 1/3% of the put shares the
------------
put price shall be the Cost of the put shares, payable in
cash.
(D) If the termination occurs after the third anniversary of
this Agreement, the put price for shares of Common Stock
shall be the Fair Market Value of the put shares on the date
of the put, payable in cash, Three Year Junior Notes or any
combination thereof, subject to the provisions of
Section 8(i).
------------
2. If the termination is for reasons described in clauses (iv) or
(vi) above, the put price for shares of Common Stock shall be the Fair
Market Value of the put shares on the date of the put, payable in cash,
Three Year Junior Notes or any combination thereof.
-16-
<PAGE>
3. If the termination is for any reason other than Cause or Material
Breach, the put price for unexercised, but earned and vested Options
(determined pursuant to the Company Option Plan) shall be the Fair Market
Value of the Option Shares which the Stockholder would have received had
the Stockholder exercised the Options, less the exercise price of such
Options, payable in cash, Three Year Notes or any combination thereof
(subject to the provisions of Section 8(i)). Pursuant to the Company
Option Plan, if the termination is for Cause or Material Breach, all of
such Stockholder's Options will upon the Stockholder's termination be
considered unvested, irrespective of being previously vested, and the
Options of such Stockholder will automatically terminate and expire without
any payment.
To exercise the foregoing put rights, the Stockholder or such persons who
may exercise the put must notify the Company of its or their exercise of such
put rights within six months following termination. In the event that the
termination of the Stockholder relates to circumstances involving Cause or
Material Breach, then the Company's call rights under Section 8(a) will take
------------
precedence over and supersede any Stockholder put rights hereunder.
(c) Put Upon Voluntary Stockholder Termination. If the employment by
------------------------------------------
the Company of the Stockholder is terminated by the Stockholder voluntarily or
for any reason not referred to in clauses (i) through (vi) of Section 8(b), and
------------
the Company would not otherwise have the right to terminate the employment of
the Stockholder for Cause or Material Breach, then the Stockholder, at
Stockholder's option, may cause the Company to repurchase the Common Stock owned
by such Stockholder and by all of the Stockholder's Permitted Transferees under
the Stockholders Agreement at the put price described below:
(A) If the termination occurs on or before the third anniversary of
this Agreement, the put price shall be Cost payable in cash; provided,
--------
however, the Stockholder shall have the right to put only the number of
-------
shares of Common Stock whose aggregate Cost equals the Stockholder's
Percentage of the Put Pool (as defined in Section 10) at the date of the
----------
put, and with any remaining shares continuing to
-17-
<PAGE>
be held by such Stockholder, subject to the call provisions of this Agreement.
(B) If the termination is after the third anniversary of this
Agreement, the put price shall be Fair Market Value, with the amount equal
to Cost of such Securities payable in cash, and for any amount equal to
Fair Market Value minus Cost, payable, at the option of the Company, in
cash, Three Year Junior Notes or any combination thereof; provided,
--------
however, that the Stockholder shall have the right to put only the number
-------
of shares of Common Stock whose aggregate Cost equals the Stockholder's
Percentage of the Put Pool at the date of the put, and with any remaining
shares continuing to be held by such Stockholder, subject to the call
provisions of this Agreement.
To exercise the foregoing put rights, the Stockholder or such persons who
may exercise the put must notify the Company of its or their exercise of such
put rights within six months following termination. In the event that the
termination of the Stockholder relates to circumstances involving Cause, then
the Company's call rights under Section 8(a) will take precedence over and
------------
supersede any Stockholder put rights hereunder.
(d) Payment of Non-Recourse Notes; Right of Set-Off. (i) Amounts
-----------------------------------------------
payable to a Stockholder upon the repurchase of Securities pursuant to this
Section 8 shall first be applied to the outstanding principal, interest and any
other amounts owed under the Non-Recourse Note made by such Stockholder and (ii)
the Company, in addition to any other rights or remedies available to the
Company, shall be entitled to set-off and reduce any amounts payable to a
Stockholder upon the repurchase of Securities pursuant to this Section 8 for (A)
---------
any obligations or liabilities of such Stockholder to the Company or (B) any
claims by the Company against such Stockholder under this Agreement, the Merger
Agreement or any other agreement, written or oral, between the Company and such
Stockholder, in each case, after such obligation, liability or claim becomes a
final decision of a court of competent jurisdiction which is not subject to
appeal.
(e) Expiration of Repurchase Option. If the repurchase call rights
-------------------------------
set forth in Sections 8(a) or the
-------------
-18-
<PAGE>
repurchase put rights set forth in Sections 8(b) and 8(c) are not exercised
------------- ----
within six months of termination of employment of a Stockholder, such call
rights and put rights will expire. This Section 8 shall terminate upon (i) an
initial public offering of any shares of Securities for which the aggregate
purchase price of the Securities sold is in excess of $30 million or (ii) a Sale
of the Company (as defined in Section 10).
----------
(f) Restrictions on Payments by the Company. Notwithstanding anything
---------------------------------------
to the contrary contained in this Agreement, all repurchases pursuant to this
Section 8, including issuances of and payments by the Company on, the Three Year
- ---------
Junior Notes, shall be subject to (i) applicable restrictions contained in any
applicable law, (ii) restrictions contained in the Company's and its
subsidiaries' debt and equity financing agreements, including the Credit
Agreement and the Subordinated Note Purchase Agreement, each as amended and in
effect from time to time, and any Senior Indebtedness (as defined in the Three
Year Junior Notes) and (iii) the availability of cash to make any lump sum cash
payments. If any such restrictions or unavailability prohibit the repurchase of
Securities or other capital stock of the Company hereunder which the Company is
otherwise entitled or required to make, the Company may make such repurchases as
soon as it is permitted to do so under such restrictions.
(g) In the event that the Company is obligated to pay to the
Stockholder the Fair Market Value of any put or call shares pursuant to the
provisions of Section 8 (other than with respect to Section 8(a)(3) to which
---------
this Section 8(g) shall not apply), and the Fair Market Value of such shares
exceeds the cost of such shares, the Company may, at its option, pay the
difference between the Fair Market Value of the shares and the cost of the
shares in cash, Three Year Junior Notes or any combination thereof.
(h) In the event the Company elects or is obligated to make payments
in cash pursuant to the provisions of Section 8, such payments will be made
---------
within twelve months of the date of the put or call, as the case may be. In the
event that the Company elects or is obligated to make payments in Three Year
-19-
<PAGE>
Junior Notes, such notes will be executed and delivered within 90 days of the
date of the put or call, as the case may be.
(i) In the event any put or call pursuant to the provisions of
Section 8 arises due to the death or disability of any Stockholder and the
- ---------
Company has the option of paying a portion of the put or call price in cash or
Three Year Junior Notes, the Company will use commercially reasonable efforts to
pay such put or call price in cash.
9. Non-Competition/Non-Disclosure Provisions.
-----------------------------------------
(a) Non-Competition. In consideration of this Agreement, each
---------------
Stockholder covenants and agrees that during the Restricted Period (as defined
in Section 10), such Stockholder shall not, without the express written approval
----------
of the Board of Directors of the Company, directly or indirectly, in one or a
series of transactions, own, manage, operate, control, invest or acquire an
interest in, whether as a proprietor, partner, stockholder, lender, director,
officer, employee, joint venturer, investor, lessor, supplier, customer, agent,
representative or other participant, or otherwise engage or participate in,
whether as a proprietor, partner, stockholder, lender, director, officer,
employee, joint venturer, investor, lessor, supplier, customer, agent,
representative or other participant, any business which competes, directly or
indirectly, with the Business in the Market ("Competitive Business") without
--------------------
regard to (A) whether the Competitive Business has its office, manufacturing or
other business facilities within or without the Market, (B) whether any of the
activities of the Stockholder referred to above occur or are performed within or
without the Market or (C) whether the Stockholder resides, or reports to an
office, within or without the Market; provided, however, that (x) the
-------- -------
Stockholder may, anywhere in the Market, directly or indirectly, in one or a
series of transactions, own, invest or acquire an interest in up to five percent
(5%) of the capital stock of a corporation whose capital stock is traded
publicly, or that (y) Stockholder may accept employment with a successor company
to the Company.
(b) Notwithstanding the provisions of any employment agreement
between the Company and such Stockholder, the Company covenants and agrees to
provide Benefits and pay Base
-20-
<PAGE>
Compensation to the affected Stockholder during any applicable Restricted Period
(as defined in Section 10).
----------
(c) In consideration of this Agreement, each Stockholder covenants
and agrees that during the period such Stockholder is an officer, director or
employee of the Company and for two years thereafter, the Stockholder shall not
(A) directly or indirectly, in one or a series of transactions, recruit, solicit
or otherwise induce or influence any proprietor, partner, stockholder, lender,
director, officer, employee, sales agent, joint venturer, investor, lessor,
supplier, agent, representative or any other person which has a business
relationship with the Company or had a business relationship with the Company
within the twenty-four (24) month period preceding the date of the incident in
question, to discontinue, reduce or modify such employment, agency or business
relationship with the Company, or (B) employ or seek to employ or cause any
Competitive Business to employ or seek to employ any person or agent who is then
(or was at any time within six (6) months prior to the date the Stockholder or
the Competitive Business employs or seeks to employ such person) employed or
retained by the Company. Notwithstanding the foregoing, nothing herein shall
prevent the Stockholder from providing a letter of recommendation to an employee
with respect to a future employment opportunity.
(d) Non-Disclosure. Each Stockholder further agrees that Stockholder
--------------
will not, directly or indirectly in one or a series of transactions disclose to
any person or use or otherwise exploit for the Stockholder's own benefit or for
the benefit of anyone other than the Company any Confidential Information (as
defined below) whether prepared by the Stockholder or not provided, however,
that any Confidential Information may be disclosed to officers, representatives,
employees and agents of the Company who need to know such Confidential
Information in order to perform the services or conduct the operations required
or expected of them in the Business. The Stockholder shall use Stockholder's
commercially reasonable efforts to cause all persons or entities to whom
Confidential Information shall be disclosed by Stockholder hereunder to observe
the terms and conditions set forth herein as though each such person or entity
was bound hereby. The Stockholder shall have no obligation hereunder to keep
confidential any Confidential Information if
-21-
<PAGE>
and to the extent disclosure of any thereof is specifically required by law;
provided, however, that in the event disclosure is required by applicable law,
the Stockholder shall provide the Company with prompt notice of such
requirement, prior to making any disclosure, so that the Company may seek an
appropriate protective order. At the request of the Company, the Stockholder
agrees to deliver to the Company all Confidential Information which Stockholder
may possess or control. As used herein, the term "Confidential Information"
means any confidential information including, without limitation, any study,
data, calculations, software storage media or other compilation of information,
patent, patent application, copyright, trademark, trade name, service mark,
service name, "know-how", trade secrets, customer lists, details of client or
consultant contracts, pricing policies, operational methods, marketing plans or
strategies, product development techniques or plans, business acquisition plans
or any portion or phase of any scientific or technical information, ideas,
discoveries, designs, computer programs (including source of object codes),
processes, procedures, formulas, improvements or other proprietary or
intellectual property of the Company, whether or not in written or tangible
form, and whether or not registered, and including all files, records, manuals,
books, catalogues, memoranda, notes, summaries, plans, reports, records,
documents and other evidence thereof. The term "Confidential Information" does
------------------------
not include, and there shall be no obligation hereunder with respect to,
information that becomes generally available to the public other than as a
result of a disclosure by the Stockholder not permissible hereunder.
(e) Specific Performance. All the parties hereto agree that their
--------------------
rights under this Section 9 are special and unique and that violation thereof
---------
would not be adequately compensated by money damages and each grants the others
the right to specifically enforce (including injunctive relief where
appropriate) the terms of this Agreement.
10. Definitions.
-----------
(a) "Base Compensation" means, with respect to any Stockholder, the
-----------------
Stockholder's annual base salary at the highest
-22-
<PAGE>
rate calculated on a per annum basis during the twelve month period preceding
the date of termination.
(b) "Benefits" means health insurance plans and related fringe
--------
benefit programs, if any, maintained by the Company for the benefit of a
Stockholder in the Stockholder's capacity as an employee of the Company.
(c) "Business" means any business conducted by or engaged in by the
--------
Company, or proposed to be conducted by or engaged in by the Company on or prior
to the date hereof or at any time while a stockholder of the Company.
(d) "Cause" means any of the following:
-----
(i) Stockholder's commission or conviction of any crime or
criminal offense involving monies or other property, or
any felony;
(ii) Stockholder's commission or conviction of fraud or
embezzlement; or
(iii) Stockholder's material and knowing violation of any
obligations imposed upon Stockholder, personally, as
opposed to upon the Company, whether as a stockholder or
otherwise, under this Agreement or the Operative
Documents; provided, that the Stockholder has been given
--------
notice and 90 days from such notice fails to cure the
violation;
(e) "Cost" means the initial subscription price for shares of the
----
Common Stock, which will be deemed their value at the time of the closing of the
transactions contemplated by the Operative Documents.
(f) "Determination Period" means the last four consecutive completed
--------------------
fiscal quarters as set forth on the audited financial statements of the Company
immediately preceding the "call" or the "put" exercised pursuant to Section 8
---------
for which Fair Market Value shall be used to determine the "call" or "put"
price.
-23-
<PAGE>
(g) "Disability" means due to physical or mental disability any
----------
Stockholder is unable to perform, and does not perform, Stockholder's duties as
an employee of the Company (i) for a continuous period of 180 days or (ii) at
such earlier time as such Stockholder submits satisfactory medical evidence that
the Stockholder has a physical or mental disability which will likely prevent
him from returning to work within 180 days. Determination of Disability shall be
made in the reasonable judgment of the Board of Directors. In the event of any
inconsistency between the definition of disability herein and the definition of
such term in any employment agreement between the Stockholder and the Company
then in effect, the definition of such term in such employment agreement shall
control for purposes of this Agreement.
(h) "EBITDA" shall have the meaning given to such term in the Credit
------
Agreement, as amended or supplemented from time to time.
(i) "Executive Management Group" shall mean Wayne C. Bircher, Ronald
--------------------------
C. Boeger, John L. Bortle, Kathleen M. Caselton, Michael C. Taylor, Robert H.
Elkin, Allan A. Huning, Robert J. Mills, John M. Pappas, Darold G. Oltjenbruns,
Christopher T. Paule and Robert J. Sandner.
(j) "Fair Market Value" means, for any Determination Period, an
-----------------
amount equal to (i) 5.0 multiplied by the EBITDA for the Determination Period
less (ii) the aggregate amount of all indebtedness or capitalized leases of the
- ----
Company (including, without limitation, the Credit Agreement and the Notes (as
defined in the Subordinated Note Purchase Agreement) immediately prior to the
call or put date (including, without limitation, interest accrued but unpaid
immediately prior to the call date, all determined in accordance with GAAP
(except that working capital borrowing will be averaged over the Determination
Period) less (iii) the aggregate amount of the Liquidation Value preferred stock
----
of the Company outstanding immediately prior to the call or put date, including
accrued but unpaid dividends, all determined in accordance with GAAP plus (iv)
----
cash or cash equivalents held by the Company immediately prior to the call or
put date; provided, however, that Fair Market Value shall in no event be less
-------- -------
than Cost.
-24-
<PAGE>
(k) "GAAP" means the generally accepted accounting principles in the
----
United States of America in effect from time to time, applied on a consistent
basis both as to classification of items and amounts.
(l) "Good Reason" means as a result of material reduction in
-----------
Stockholder's authority, perquisites, salary, position or responsibilities
(other than such a reduction which affects all of the Company's senior
executives on a substantially equal or proportionate basis), the relocation of
the Company's primary place of business or the relocation of Stockholder by the
Company to another Company office more than 50 miles from St. Louis, Missouri,
or the Company's willful, material violation of its obligations under this
Agreement, in each case, after 60 days' prior written notice to the Company and
its Board of Directors and the Company's failure thereafter to cure such
reduction or violation.
(m) "Liquidation Value" shall have the meaning in respect of the
-----------------
Preferred Stock set forth in the Certificate of Incorporation of the Company;
however, in no event shall Liquidation Value ever be less than Cost of Preferred
Stock.
(n) "Market" means any county in the United States of America and
------
each similar jurisdiction in Canada and in any other country in which the
Business was conducted by or engaged in by the Company on or prior to the date
hereof or is conducted or engaged in by the Company, or for which the Company is
planning development.
(o) "Material Breach" means:
---------------
(i) Stockholder's breach of any of Stockholder's fiduciary duties
to the Company or its stockholders or making of a willful
misrepresentation or omission which breach, misrepresentation
or omission would reasonably be expected to materially
adversely affect the business, properties, assets, condition
(financial or other) or prospects of the Company;
-25-
<PAGE>
(ii) Stockholder's willful, continual and material neglect or
failure to discharge Stockholder's duties,
responsibilities or obligations prescribed by the Company
(other than arising solely due to physical or mental
disability);
(iii) Stockholder's habitual drunkenness or substance abuse
which materially interferes with Stockholder's ability to
discharge Stockholder's duties, responsibilities or
obligations prescribed by the Company;
(iv) Stockholder's violation of any non-competition or
confidentiality agreement with the Company, including
without limitation, those set forth in Sections 9 of this
----------
Agreement, or any other agreements with the Company; and
(v) Stockholder's gross neglect of Stockholder's duties and
responsibilities, as determined by the Company's Board of
Directors;
in each case, for purposes of clauses (i) through (v), after the Company or
the Board of Directors has provided Stockholder with 60 days' written
notice of such circumstances and the possibility of a Material Breach, and
Stockholder fails to cure such circumstances and Material Breach within
those 60 days.
(p) "New Holdings" means Jackson Acquisition Corp., a Delaware
------------
corporation, which, effective the date hereof, shall be renamed "Jackson Holding
Company."
(q) "Old Holdings" means Jackson Holding Company, a Delaware
------------
corporation as in existence prior to the date hereof.
(r) "Old Holdings Common Stock" means the Common Stock, par value
-------------------------
$.01 per share, of Old Holdings.
-26-
<PAGE>
(s) "Old Jackson" means Jackson Products, Inc., a Delaware
-----------
corporation, as in existence prior to the Effective Time (as defined in the
Merger Agreement).
(t) "Put Pool" means the lesser of (i) the amount equal to 10% of the
--------
net increase (after giving full effect to any losses or reductions therein),
measured from the date hereof, in the Company's retained earnings determined in
accordance with GAAP, less the amount of any extraordinary, nonrecurring gains,
or (ii) $1 million.
(u) "Restricted Period" means with respect to any Stockholder, 24
-----------------
months from the date of termination of employment.
(v) "Retirement" shall mean any voluntary termination of employment
----------
by a Stockholder for any reason other than Death, Disability, Cause, Material
Breach or Unsatisfactory Performance after such Stockholder reaches age 65.
(w) "Right of First Refusal" shall mean an option, but not an
----------------------
obligation, to purchase the Common Stock of the Company from a Stockholder at
the same terms as the proposed sale.
(x) "Sale", "sell", "transfer" and the like shall include any
---- ---- --------
disposition by way of transfer, with or without consideration, to any person for
any purpose and shall include, but shall not be limited in any way to,
redemption by the issuer, private or public sale or exchanges of securities or
any other similar transaction involving stock.
(y) "Sale of the Company" means the sale of the Company to an
-------------------
independent third party or group of third parties pursuant to which such party
or parties acquire (i) capital stock of the Company possessing the voting power
under normal circumstances to elect a majority of the Company's Board of
Directors (whether by merger, consolidation or sale or transfer of the Company's
capital stock) or (ii) all or substantially all of the Company's assets
determined on a consolidated basis. Such sale shall require a vote of 60% of all
Stockholders in order to bind all Stockholders to the sale.
-27-
<PAGE>
(z) "Stockholder's Percentage" means with respect to an individual
------------------------
Stockholder, the percentage equal to the fraction the numerator of which is the
number of shares of Common Stock owned by the Stockholder and by all of
Stockholder's Permitted Transferees under the Stockholders Agreement and the
denominator of which is 1,172,424.
(aa) "Subscription Price" shall mean the aggregate purchase price for
------------------
the Company's Common Stock for each given Stockholder.
(bb) "Three Year Junior Notes" means a promissory note of the Company
-----------------------
in the form attached hereto as Exhibit 6.
---------
(cc) "Unsatisfactory Performance" means a Stockholder's failure to
--------------------------
perform Stockholder's duties to the standards set by the Board (such
determination to be solely within the discretion of the Board); provided, that
--------
Stockholder has been given notice and 30 days from such notice fails to cure
such unsatisfactory performance.
11. Miscellaneous.
-------------
(a) Subject to the conditions of transfer of Securities hereunder and
in the Stockholders Agreement, this Agreement shall be binding upon and shall
inure to the benefit of each individual Stockholder and Stockholder's respective
heirs, executors, administrators, assigns and legal representatives and to the
Company and its respective successors and assigns, by way of merger,
consolidation or operation of law or otherwise. Once a Stockholder of the
Company is no longer a stockholder of the Company all rights and benefits
previously enjoyed by such party pursuant to the terms of this Agreement shall
automatically terminate with respect to such party.
(b) Prior to consummation of any transfer of Securities held by a
Stockholder permitted under the Stockholders Agreement, except for transfers
pursuant to a public offering, such party shall cause the transferee to execute
an agreement in which the transferee agrees to be bound by the terms of this
Agreement and the Stockholders Agreement.
-28-
<PAGE>
(c) The Stockholders in the Executive Management Group shall be
afforded a Right of First Refusal to purchase Securities held by a Stockholder
if such Stockholder elects to transfer any Securities other than as described in
Section 4.2(b) of the Stockholders Agreement. In the event that this right is
not exercised by any member of the Executive Management Group, such right will
vest in the Company and the other Stockholders.
(d) Each Stockholder acknowledges that the Company may purchase, at
its sole expense, a life insurance policy, the proceeds of which will be used to
purchase Stockholder's Securities in the event of Stockholder's death and each
Stockholder hereby agrees to cooperate with the Company in obtaining such
insurance.
(e) Nothing in this Agreement shall constitute an agreement by, or
shall impose any obligation upon, the Company to employ, or to continue to
employ, any Stockholder, or shall constitute an agreement by, or shall impose
any obligation upon, the Company with respect to the terms and conditions of
employment of any Stockholder, and will not limit or restrict, in any manner,
the Company's right or ability to terminate any Stockholder.
(f) The language used in this Agreement will be deemed to be the
language chosen by the parties hereto to express their mutual intent, and no
rule of strict construction will be applied against any person.
(g) THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED, APPLIED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. EACH OF THE
PARTIES HERETO ACKNOWLEDGES AND AGREES THAT IN THE EVENT OF ANY BREACH OF THIS
AGREEMENT, THE NON-BREACHING PARTY WOULD BE IRREPARABLY HARMED AND COULD NOT BE
MADE WHOLE BY MONETARY DAMAGES, AND THAT, IN ADDITION TO ANY OTHER REMEDY TO
WHICH THEY MAY BE ENTITLED AT LAW OR IN EQUITY, THE PARTIES SHALL BE ENTITLED TO
SUCH EQUITABLE OR INJUNCTIVE RELIEF AS MAY BE APPROPRIATE. EACH PARTY AGREES
THAT JURISDICTION, SUBJECT TO THE PROVISIONS OF SECTION 11(h), AND VENUE WILL BE
PROPER IN THE SOUTHERN DISTRICT OF NEW YORK AND WAIVES ANY OBJECTIONS BASED UPON
FORUM NON CONVENIENS. EACH PARTY WAIVES PERSONAL SERVICE OF PROCESS AND AGREES
THAT A SUMMONS AND COMPLAINT COMMENCING AN
-29-
<PAGE>
ACTION OR PROCEEDING SHALL BE PROPERLY SERVED AND SHALL CONFER PERSONAL
JURISDICTION IF SERVED BY REGISTERED OR CERTIFIED MAIL TO THE PARTY AT THE
ADDRESS SET FORTH IN THIS AGREEMENT, OR AS OTHERWISE PROVIDED BY THE LAWS OF THE
STATE OF NEW YORK OR THE UNITED STATES. THE CHOICE OF FORUM SET FORTH IN THIS
SECTION 11(F) SHALL NOT BE DEEMED TO PRECLUDE THE ENFORCEMENT OF ANY JUDGMENT
OBTAINED IN ANY OTHER FORUM OR THE TAKING OF ANY ACTION UNDER THIS AGREEMENT TO
ENFORCE SAME IN ANY OTHER APPROPRIATE JURISDICTION.
(h) THE STOCKHOLDERS AND THE COMPANY AGREE THAT ANY DISPUTE BETWEEN
OR AMONG THE PARTIES TO THIS AGREEMENT RELATING TO OR IN RESPECT OF THIS
AGREEMENT, ITS NEGOTIATION, EXECUTION, PERFORMANCE, SUBJECT MATTER, OR ANY
COURSE OF CONDUCT OR DEALING OR ACTIONS UNDER OR IN RESPECT OF THIS AGREEMENT,
INCLUDING, WITHOUT LIMITATION ANY CLAIM UNDER THE SECURITIES ACT, THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED, ANY OTHER STATE OR FEDERAL LAW RELATING TO
SECURITIES OR FRAUD OR BOTH, THE RACKETEER INFLUENCED AND CORRUPT ORGANIZATIONS
ACT, AS AMENDED, OR FEDERAL OR STATE COMMON LAW, SHALL BE SETTLED BY FINAL,
BINDING AND NON-APPEALABLE ARBITRATION IN NEW YORK, NEW YORK BY THREE
ARBITRATORS. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS SECTION 11, THE
----------
ARBITRATION SHALL BE CONDUCTED IN ACCORDANCE WITH THE VOLUNTARY COMMERCIAL
ARBITRATION RULES OF THE AMERICAN ARBITRATION ASSOCIATION (THE "ASSOCIATION")
-----------
THEN IN EFFECT. ONE OF THE ARBITRATORS SHALL BE APPOINTED BY THE COMPANY, ONE
SHALL BE APPOINTED BY THE STOCKHOLDER, AND THE THIRD SHALL BE APPOINTED BY THE
FIRST TWO ARBITRATORS. IF THE FIRST TWO ARBITRATORS CANNOT AGREE ON THE THIRD
ARBITRATOR WITHIN 60 DAYS OF THE APPOINTMENT OF THE SECOND ARBITRATOR, THEN THE
THIRD ARBITRATOR SHALL BE APPOINTED BY THE ASSOCIATION. UPON THE CONCLUSION OF
ARBITRATION, EXECUTIVE OR THE COMPANY MAY APPLY TO ANY COURT OF THE TYPE
DESCRIBED IN SUBSECTION (g) OF THIS SECTION 11 TO ENFORCE THE DECISION PURSUANT
----------
TO SUCH ARBITRATION. IN CONNECTION WITH THE FOREGOING, THE PARTIES, AFTER
CONSULTING WITH COUNSEL, HEREBY WAIVE ANY RIGHTS TO A JURY TRIAL TO RESOLVE ANY
DISPUTES OR CLAIMS RELATING TO THIS AGREEMENT. SUCH ARBITRATION SHALL TAKE
PLACE IN NEW YORK, NEW YORK, AND SHALL BE SUBJECT TO THE SUBSTANTIVE LAW OF THE
STATE OF NEW YORK. DECISIONS AS TO FINDINGS OF FACT AND CONCLUSIONS OF LAW
PURSUANT TO SUCH ARBITRATION SHALL BE FINAL, CONCLUSIVE AND BINDING ON THE
PARTIES, SUBJECT TO CONFIRMATION, MODIFICATION OR CHALLENGE
-30-
<PAGE>
PURSUANT TO 9 U.S.C. (S)(S) 1 ET SEQ. ANY FINAL AWARD SHALL BE ENFORCEABLE AS A
JUDGMENT OF A COURT OF RECORD.
(i) Each of the Stockholders agrees and acknowledges that the
Operative Documents and any other agreement or instrument that may restrict the
ability of the Company to make any dividend or redemption payments may be
created, amended, modified or supplemented, from time to time, and may be
refinanced, extended or substituted, from time to time, without notice to, or
the consent or approval of, the Stockholders.
(j) All personal pronouns used in this Agreement, whether used in
masculine, feminine or neuter gender, shall include all other genders if the
context so requires; the singular shall include the plural, and vice versa.
(k) This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original but all of which together shall constitute
one and the same instrument.
(l) In case any one or more of the provisions or parts of a provision
contained in this Agreement shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect in any jurisdiction, such invalidity,
illegality or unenforceability shall not affect any other provision or part of a
provision of this Agreement or any other jurisdiction, but this Agreement shall
be reformed and construed in any such jurisdiction as if such invalid or illegal
or unenforceable provision or part of a provision had never been contained
herein and such provision or part shall be reformed so that it would be valid,
legal and enforceable to the maximum extent permitted in such jurisdiction.
(m) This Agreement constitutes the entire agreement by and among the
parties with respect to the subject matter hereof and may not be modified
orally, but only by a writing subscribed by the party charged therewith.
(n) Each of the parties hereto agrees to execute all such further
instruments and documents and to take all such further action necessary to
effectuate the terms and purposes of this Agreement.
-31-
<PAGE>
(o) Whenever notice is required to be given by any party hereunder,
such notice shall be deemed sufficient when delivered to the Company at its
address above and to each of the other Stockholders at Stockholder's address
below or to such other address as the Stockholder shall have furnished to the
Company.
(p) Each party shall be entitled to rely conclusively upon any notice
received, or the failure to receive any notice, from any other party with
respect to rights and obligations under this Agreement.
12. Receipt of Stock Certificates.
-----------------------------
Each Stockholder herewith acknowledges receipt of the certificate(s)
evidencing the Securities purchased by Stockholder.
-32-
<PAGE>
IN WITNESS WHEREOF, each of the undersigned has signed this Agreement:
JACKSON ACQUISITION CORP.
By /s/ Christopher T. Paule
-------------------------------
Name: Christopher T. Paule
Title: Vice President
STOCKHOLDERS:
/s/ Robert H. Elkin
---------------------------------
Robert H. Elkin
/s/ Christopher T. Paule
---------------------------------
Christopher T. Paule
/s/ Allan A. Huning
---------------------------------
Allan A. Huning
/s/ Wayne C. Bircher
---------------------------------
Wayne C. Bircher
/s/ Ronald C. Boeger
---------------------------------
Ronald C. Boeger
/s/ John L. Bortle
---------------------------------
John L. Bortle
/s/ Kathleen M. Caselton
---------------------------------
Kathleen M. Caselton
/s/ Michael C. Taylor
---------------------------------
Michael C. Taylor
/s/ Robert J. Mills
---------------------------------
Robert J. Mills
-33-
<PAGE>
/s/ John M. Pappas
---------------------------------
John M. Pappas
/s/ Darold G. Oltjenbruns
---------------------------------
Darold G. Oltjenbruns
/s/ Robert J. Sandner
---------------------------------
Robert J. Sandner
-34-
<PAGE>
NEW STOCKHOLDERS:
/s/ Mark A. Kolmer
---------------------------------
Date: March 1, 1996 Mark A. Kolmer
/s/ John L. Garavaglia
---------------------------------
Date: December 1, 1996 John L. Garavaglia
-35-
<PAGE>
EXHIBIT 1
---------
Schedule of Management Investors
<PAGE>
EXHIBIT 2
---------
Schedule of Old Holdings Common Stock
and Bonus Proceeds
<PAGE>
EXHIBIT 3
---------
Non-Recourse Promissory Note
<PAGE>
EXHIBIT 4
---------
Stock Pledge Agreement
<PAGE>
EXHIBIT 5
---------
1995 Jackson Management Stock Option Plan
<PAGE>
EXHIBIT 6
---------
Three Year Junior Subordinated Note
<PAGE>
EXHIBIT 1 TO MANAGEMENT SUBSCRIPTION AGREEMENT
----------------------------------------------
Vesting Schedule for Options
----------------------------
<TABLE>
<CAPTION>
====================================================================================================================================
Options Granted No. of Options Allocated for Vesting for the Twelve Months Ended as of Such Dates
- ------------------------------------------------------------------------------------------------------------------------------------
Stockholder August 16, 1996 August 16, 1997 August 16, 1998 August 16, 1999 August 16, 2000
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
Ronald C. Boeger 10.00 2.00 2.00 2.00 2.00 2.00
- -----------------------------------------------------------------------------------------------------------------------------------
John L. Bortle 10.00 2.00 2.00 2.00 2.00 2.00
- -----------------------------------------------------------------------------------------------------------------------------------
Robert H. Elkin 1512.22 302.44 302.44 302.44 302.44 302.46
- -----------------------------------------------------------------------------------------------------------------------------------
Allan A. Huning 35.00 7.00 7.00 7.00 7.00 7.00
- -----------------------------------------------------------------------------------------------------------------------------------
Darold G. Oltjenbruns 10.00 2.00 2.00 2.00 2.00 2.00
- -----------------------------------------------------------------------------------------------------------------------------------
John M. Pappas 10.00 2.00 2.00 2.00 2.00 2.00
- -----------------------------------------------------------------------------------------------------------------------------------
Christopher T. Paule 525.79 105.15 105.15 105.15 105.15 105.19
- -----------------------------------------------------------------------------------------------------------------------------------
Michael C. Taylor 10.00 2.00 2.00 2.00 2.00 2.00
- -----------------------------------------------------------------------------------------------------------------------------------
Total August Vesting Shares 2123.01 424.59 424.59 424.59 424.59 424.65
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Options Granted No. of Options Allocated for Vesting for the Twelve Months Ended as of Such Dates
- ------------------------------------------------------------------------------------------------------------------------------------
Stockholder June 1, 1998 June 1, 1999 June 1, 2000 June 1, 2001 June 1, 2002
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Timothy A. Esposito 150.00 30.00 30.00 30.00 30.00 30.00
- ------------------------------------------------------------------------------------------------------------------------------------
John L. Garavaglia 250.00 50.00 50.00 50.00 50.00 50.00
- ------------------------------------------------------------------------------------------------------------------------------------
David Graham 100.00 20.00 20.00 20.00 20.00 20.00
- ------------------------------------------------------------------------------------------------------------------------------------
James B. Taylor 200.00 40.00 40.00 40.00 40.00 40.00
- ------------------------------------------------------------------------------------------------------------------------------------
James Van Dusen 150.00 30.00 30.00 30.00 30.00 30.00
- ------------------------------------------------------------------------------------------------------------------------------------
Total June Vesting Shares 850.00 170.00 170.00 170.00 170.00 170.00
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
November 1, November 1, November 1, November 1, November 1,
1998 1999 2000 2001 2002
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Mark R. Hefty 225.03 45.00 45.00 45.00 45.00 45.03
- ------------------------------------------------------------------------------------------------------------------------------------
Total November Vesting Shares 225.03 45.00 45.00 45.00 45.00 45.03
- ------------------------------------------------------------------------------------------------------------------------------------
====================================================================================================================================
TOTAL 3198.04 639.59 639.59 639.59 639.59 639.68
====================================================================================================================================
</TABLE>
1-2
<PAGE>
EXHIBIT 2 TO MANAGEMENT SUBSCRIPTION AGREEMENT
----------------------------------------------
Schedule of Management Stockholder
Consideration and Securities Received as of December 1, 1996
------------------------------------------------------------
<TABLE>
<CAPTION>
====================================================================================================================================
Net Proceeds
Options No. of Proceeds No. of Sale of from the
No. of Granted cancelled from Rollover Proceeds Business Rollover
Shares of under the Options Cancellation Shares of from Sale Bonus Shares and the
Stockholder Class C Company for Old of Options Old of Cancellation
Common Stock Holdings ------------- Holdings Rollover ---------- of Options in
Stock Option Plan Common Gross Common Shares Old Holdings
Stock Amount Stock Gross Common
Amount Stock (1)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
John L. Garavaglia 250.00 0 0 $0 0 $0 $0 $0
- ------------------------------------------------------------------------------------------------------------------------------------
Ronald C. Boeger 391.18 10.00 15,000 $7,576.68 0 $0 $30,000 $22,590
- ------------------------------------------------------------------------------------------------------------------------------------
John L. Bortle 750.36 10.00 30,000 $31,953.37 0 $0 $40,000 $43,260
- ------------------------------------------------------------------------------------------------------------------------------------
Mark A. Kolmer 200.00 0 0 $0 0 $0 $0 $0
- ------------------------------------------------------------------------------------------------------------------------------------
Michael C. Taylor 166.67 10.00 0 $0 0 $0 $0 $0
- ------------------------------------------------------------------------------------------------------------------------------------
Robert H. Elkin 3787.78 1250.00 162,500 $82,080.75 50,000 $43,500 $200,000 $213,225
- ------------------------------------------------------------------------------------------------------------------------------------
Allan A. Huning 873.54 35.00 45,000 $22,730.06 0 $0 $60,000 $49,770
- ------------------------------------------------------------------------------------------------------------------------------------
Robert J. Mills 811.15 10.00 40,000 $37,004.50 0 $0 $40,000 $46,320
- ------------------------------------------------------------------------------------------------------------------------------------
John M. Pappas 341.18 10.00 15,000 $7,576.68 0 $0 $25,000 $19,590
- ------------------------------------------------------------------------------------------------------------------------------------
Darold G. Oltjenbruns 491.18 10.00 15,000 $7,576.68 0 $0 $40,000 $28,590
- ------------------------------------------------------------------------------------------------------------------------------------
Christopher T. Paule 1274.21 359.14 30,000 $23,553.36 0 $0 $60,000 $50,220
- ------------------------------------------------------------------------------------------------------------------------------------
Robert J. Sandner 521.57 10.00 20,000 $10,102.25 0 $0 $40,000 $30,120
- ------------------------------------------------------------------------------------------------------------------------------------
Retained by Company 141.18 10.00 -- -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total 10,000.00 1724.14 387,500(2) $237,731.01(3) 50,000 $43,500 $585,000(4) $538,275(5)
====================================================================================================================================
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Net Proceeds
from the Rollover
Shares and the Total
Cancellation of Principal Value of
Additional Options in Old Amount of Treasury Total Value of
Stockholder Cash Holdings Non- Shares Consideration
Investment Common Stock Recourse Retained
and Cash Note by the
Invested in Company
Company
===============================================================================================================
<S> <C> <C> <C> <C> <C>
John L. Garavaglia $25,000 $25,000 0 -- $25,000
- ---------------------------------------------------------------------------------------------------------------
Ronald C. Boeger $0 $22,590 $16,528 -- $39,118
- ---------------------------------------------------------------------------------------------------------------
John L. Bortle $0 $43,260 $31,776 -- $75,036
- ---------------------------------------------------------------------------------------------------------------
Mark A. Kolmer $12,000 $12,000 $8,000 -- $20,000
- ---------------------------------------------------------------------------------------------------------------
Michael C. Taylor $10,000 $10,000 $6,667 -- $16,667
- ---------------------------------------------------------------------------------------------------------------
Robert H. Elkin $0 $213,225 $165,553 -- $378,778
- ---------------------------------------------------------------------------------------------------------------
Allan A. Huning $0 $49,770 $37,584 -- $87,354
- ---------------------------------------------------------------------------------------------------------------
Robert J. Mills $0 $46,320 $34,795 -- $81,115
- ---------------------------------------------------------------------------------------------------------------
John M. Pappas $0 $19,590 $14,528 -- $34,118
- ---------------------------------------------------------------------------------------------------------------
Darold G. Oltjenbruns $0 $28,590 $20,528 -- $49,118
- ---------------------------------------------------------------------------------------------------------------
Christopher T. Paule $25,000 $75,220 $52,201 -- $127,421
- ---------------------------------------------------------------------------------------------------------------
Robert J. Sandner $0 $30,120 $22,037 -- $52,157
- ---------------------------------------------------------------------------------------------------------------
Retained by Company -- -- -- $14,118 $14,118
- ---------------------------------------------------------------------------------------------------------------
Total $37,410(6) $575,685(7) $410,197(8) $14,118 $1,000,000
===============================================================================================================
</TABLE>
(1) The difference with the Gross Amount reflects the amount of withholding
taxes.
(2) Includes 15,000 cancelled Options provided by Wayne C. Bircher, a former
employee of the Company, whose stock was repurchased as of June 30, 1996.
(3) Includes $7,576,38 in proceeds from cancelled Options provided by Wayne C.
Bircher.
(4) Includes $20,000 provided by Kathleen M. Caselton, a former employee of the
Company, whose stock was repurchased as of February 29, 1996, and $30,000
provided by Wayne C. Bircher.
(5) Includes $12,000 provided by Kathleen M. Caselton and $22,590 provided by
Wayne C. Bircher.
(6) Represents total cash investment of $72,000, net of payoff of $12,000 to
Kathleen M. Caselton and $22,590 to Wayne C. Bircher.
(7) Represents total of $610,275, net of payoff of $12,000 to Kathleen M.
Caselton and $22,590 to Wayne C. Bircher.
(8) Represents total of $426,725, net of cancellation of $8,000 note from
Kathleen M. Caselton and $16,528 note from Wayne C. Bircher and issuance of
new note for $8,000 from Mark A. Kolmer.
<PAGE>
EXHIBIT 4.16
Jackson Products, Inc.
FIRST AMENDMENT TO MANAGEMENT SUBSCRIPTION AGREEMENT
THIS FIRST AMENDMENT TO MANAGEMENT SUBSCRIPTION AGREEMENT (this
"Amendment"), dated March 1, 1996, is made by and among Jackson Products, Inc.,
a Delaware corporation (together with its successors and assigns, and its
subsidiaries, the "Company"), Robert H. Elkin, Christopher T. Paule, Allan A.
Huning, Wayne C. Bircher, Ronald C. Boeger, John L. Bortle, Michael C. Taylor,
Robert J. Mills, John M. Pappas, Darold G. Oltjenbruns, Robert J. Sandner, Mark
A. Kolmer (the "Stockholders"). Capitalized terms used herein, but not
otherwise defined herein, shall have the meaning given such terms in the
Management Subscription Agreement, dated August 16, 1996, by and among the
Company and the persons and entities whose names are set forth at the end of
such agreement (the "Management Subscription Agreement").
WHEREAS, the Company and the Stockholders, other than Mark A. Kolmer, have
entered into the Management Subscription Agreement; and
WHEREAS, the Company desires to amend the Management Subscription Agreement
(i) to accept the subscription for shares of Class C Common Stock by Mark A.
Kolmer in the number set forth on Exhibit A hereto, pursuant to the provisions
of the Management Subscription Agreement, as amended by this First Amendment;
and (ii) to reflect the repurchase as of February 29, 1996, by the Company of
all of the shares of Class C Common Stock owned by Kathleen Caselton, the
cancellation as of February 29, 1996 of the Option held by Kathleen Caselton to
purchase shares of Class C Common Stock and (iii) to reflect the award of an
Option to purchase an additional shares of Class C Common Stock to Allan A.
Huning pursuant to the Company Stock Option Plan, as amended to date.
WHEREAS, the Company and the Stockholders desire to provide for additional
management stockholders to receive Securities pursuant to the execution and
delivery of a signed counterpart to the Management Subscription Agreement and
this First Amendment;
<PAGE>
NOW, THEREFORE, the parties hereto agree as follows:
1. The following definition shall be added to Section 10 of the
Management Subscription Agreement and the definitions previously set forth shall
be relettered beginning with (b):
(a) "anniversary of this Agreement" refers, with respect to each
-----------------------------
Stockholder, to the date as of which such Stockholder originally executed a
counterpart to this Agreement.
2. The definition of "Executive Management Group" set forth in Section 10
--------------------------
is amended and revised to delete Kathleen M. Caselton and to add Mark A. Kolmer.
3. Subsection 11(k) of the Management Subscription Agreement is amended
by the addition of the following sentence to the end of such subsection:
"New members of management of the Company may subscribe for stock by
executing a counterpart to this Agreement at which time the Company shall
revise the Exhibits as may be necessary and appropriate."
4. Exhibit 1 and Exhibit 2 of the Management Subscription Agreement are
amended and revised to read in their entirety as set forth on Exhibit B hereto.
5. Except as herein amended, the Agreement shall remain in full force and
effect and is ratified in all respects. On and after the effectiveness of this
Amendment, each reference in the Agreement to "this Agreement," "hereunder,"
"hereof," "herein" or words of like import, and each reference to the Agreement
in any other agreements, documents or instruments executed and delivered
pursuant to the Agreement, shall mean and be a reference to the Agreement, as
amended by this Amendment.
-2-
<PAGE>
IN WITNESS WHEREOF, each of the undersigned has signed this Amendment:
JACKSON ACQUISITION CORP.
By /s/ Christopher T. Paule
---------------------------------
Name: Christopher T. Paule
Title: Vice President
STOCKHOLDERS:
/s/ Robert H. Elkin
-----------------------------------
Robert H. Elkin
/s/ Christopher T. Paule
-----------------------------------
Christopher T. Paule
/s/ Allan A. Huning
-----------------------------------
Allan A. Huning
/s/ Wayne C. Bircher
-----------------------------------
Wayne C. Bircher
/s/ Ronald C. Boeger
---------------------------------
Ronald C. Boeger
/s/ John L. Bortle
-----------------------------------
John L. Bortle
/s/ Michael C. Taylor
-----------------------------------
Michael C. Taylor
/s/ Robert J. Mills
-----------------------------------
Robert J. Mills
/s/ John M. Pappas
-----------------------------------
John M. Pappas
/s/ Darold G. Oltjenbruns
-----------------------------------
Darold G. Oltjenbruns
/s/ Robert J. Sandner
-----------------------------------
Robert J. Sandner
-3-
<PAGE>
NEW STOCKHOLDERS:
/s/ Mark A. Kolmer
-----------------------------------
Date: March 1, 1996 Mark A. Kolmer
/s/ John L. Garavaglia
-----------------------------------
Date: December 1, 1996 John L. Garavaglia
-4-
<PAGE>
EXHIBIT A
---------
The number of shares for which Mark A. Kolmer has subscribed as of
March 1, 1996, is 20,000 shares of Class C Common Stock.
-5-
<PAGE>
EXHIBIT B
---------
-6-
<PAGE>
EXHIBIT 4.17
JACKSON PRODUCTS, INC.
SECOND AMENDMENT TO MANAGEMENT SUBSCRIPTION AGREEMENT
THIS SECOND AMENDMENT TO MANAGEMENT SUBSCRIPTION AGREEMENT (this
"Amendment"), dated as of December 1, 1996, is made by and among Jackson
Products, Inc., a Delaware corporation (together with its successors and
assigns, and its subsidiaries, the "Company"), Robert H. Elkin, Christopher T.
Paule, Allan A. Huning, Ronald C. Boeger, John L. Bortle, Michael C. Taylor,
Robert J. Mills, John M. Pappas, Darold G. Oltjenbruns, Robert J. Sandner, Mark
A. Kolmer and John L. Garavaglia (the "Stockholders"). Capitalized terms used
herein, but not otherwise defined herein, shall have the meaning given such
terms in the Management Subscription Agreement, dated August 16, 1995, as
amended March 1, 1996, by and among the Company and the persons and entities
whose names are set forth at the end of such agreement (as amended, the
"Management Subscription Agreement").
WHEREAS, the Company and the Stockholders, other than John L. Garavaglia,
have entered into the Management Subscription Agreement; and
WHEREAS, the Company desires to amend the Management Subscription Agreement
(i) to accept a subscription for shares of Class C Common Stock by John L.
Garavaglia, pursuant to the provisions of the Management Subscription Agreement,
as amended by this Second Amendment and (ii) to reflect the repurchase as of
June 30, 1996, by the Company of all of the shares of Class C Common Stock owned
by Wayne C. Bircher, the cancellation as of June 30, 1996, of the Option held by
Wayne C. Bircher to purchase shares of Class C Common Stock.
NOW, THEREFORE, the parties hereto agree as follows:
1. The definition of "Executive Management Group" set forth in Section 10
--------------------------
is amended and revised to read in its entirety as follows:
<PAGE>
"Executive Management Group" shall mean the management signatories to this
--------------------------
Agreement (including execution of a counterpart to this Agreement), other than
those management signatories whose shares or other subscription agreement
presented by the Company to an officer or managerial employee of the Company or
any of its subsidiaries and their Permitted Transferees (as defined in the
Stockholders Agreement).
2. Section 11(k) is amended by the addition of the following sentence to
the end of such Section:
"If the requirements of this Agreement otherwise have been met, new
Stockholders may become parties to this Agreement by executing a
counterpart to this Agreement at which time the Company shall revise
Exhibits 1 and 2 as may be necessary or appropriate."
3. Except as herein amended, the Agreement shall remain in full force and
effect and is ratified in all respects. On and after the effectiveness of this
Amendment, each reference in the Agreement to "this Agreement," "hereunder,"
"hereof," "herein" or words of like import, and each reference to the Agreement
in any other agreements, documents or instruments executed and delivered
pursuant to the Agreement, shall mean and be a reference to the Agreement, as
amended by this Amendment.
-2-
<PAGE>
IN WITNESS WHEREOF, each of the undersigned has signed this Amendment:
JACKSON ACQUISITION CORP.
By /s/ Christopher T. Paule
-------------------------------
Name: Christopher T. Paule
Title: Vice President
STOCKHOLDERS:
/s/ Robert H. Elkin
---------------------------------
Robert H. Elkin
/s/ Christopher T. Paule
---------------------------------
Christopher T. Paule
/s/ Allan A. Huning
---------------------------------
Allan A. Huning
/s/ Ronald C. Boeger
---------------------------------
Ronald C. Boeger
/s/ John L. Bortle
---------------------------------
John L. Bortle
/s/ Michael C. Taylor
---------------------------------
Michael C. Taylor
/s/ Robert J. Mills
---------------------------------
Robert J. Mills
/s/ John M. Pappas
---------------------------------
John M. Pappas
/s/ Darold G. Oltjenbruns
---------------------------------
Darold G. Oltjenbruns
/s/ Robert J. Sandner
---------------------------------
Robert J. Sandner
-3-
<PAGE>
/s/ Mark A. Kolmer
---------------------------------
Mark A. Kolmer
NEW STOCKHOLDER:
/s/ John L. Garavaglia
---------------------------------
Date: December 1, 1996 John L. Garavaglia
-4-
<PAGE>
EXHIBIT 4.18
NON-RECOURSE PROMISSORY NOTE
$_________ August 17, 1995
FOR VALUE RECEIVED, the undersigned,________________, an individual
residing in _________________ ("Borrower"), promises to pay to the order of
--------
Jackson Products, Inc., a Delaware corporation ("Holder" or "Company"), or any
------ -------
successor thereof, the sum of ________________ ($________) with interest from
the date hereof on the unpaid principal sum from time to time outstanding
accruing at the rate of 7% per annum compounded annually on March 31 of each
year, commencing with March 31, 1996 (the "Non-Default Interest Rate"). Accrued
-------------------------
interest will be paid on or before March 31 of each year commencing with March
31, 1996, and principal of, and all accrued and unpaid interest on, this Note
will be paid upon the earlier of March 31, 2006 or within ninety (90) days after
Borrower ceases to be an employee (for any reason or no reason) of Holder, or
any of its subsidiaries.
All payments of principal and interest on this Note are payable at
Holder's office at c/o Jackson Products, Inc., 101 S. Hanley Road, St. Louis,
Missouri 63105, Attention: Chief Executive Officer, or at such other place as
Holder shall notify Borrower in writing. Principal and interest shall be
payable in United States currency that at the time is legal tender for the
payment of public and private debts.
This Note is executed and delivered together with a certain Pledge
Agreement dated as of even date herewith (the "Pledge Agreement") between
----------------
Borrower and Holder which, among other things, secures payment of this Note. In
the event of a Default (as hereinafter defined) under this Note, Holder shall be
entitled to enforce his rights against the Pledged Collateral (as defined in the
Pledge Agreement) with respect to the amount due under the Note upon such
Default.
So long as any amounts remain outstanding under this Note, or any shares
of Class C Common Stock of the Company, par value $0.01 per share ("Common
------
Stock"), or any other capital stock of the Company (collectively, the "Stock"),
-----
owned by Borrower shall be subject to the Pledge Agreement, Borrower shall not
sell or transfer such Stock; however, in the event that at any time Borrower
shall, in violation of the terms of this Note, sell or transfer any of the
Stock, any interest in the Stock or other equity interest of the Company, of
which he is the owner,
<PAGE>
Borrower shall apply, from time to time, upon, and only to the extent of
receipt, the net cash proceeds of such sale or transfer (after allowance for any
federal, state and local income taxes payable with respect to such sale) to the
prepayment of this Note; such prepayment shall be charged first against accrued
interest and then against principal, and then against any other obligations in
respect of this Note, provided, such prepayment shall not affect Holder's right
to declare a Default (as hereinafter defined) under this Note. In addition, this
Note shall be prepaid to the extent provided in the Pledge Agreement. Borrower
may prepay this Note in whole or in part, without penalty, at any time, provided
that at the time of any such prepayment, Borrower shall also pay all accrued
interest on the amount of the principal sum so prepaid.
Upon the happening of any Default of Borrower of the type specified in
paragraph (a) below, Holder at its option may declare the entire unpaid balance
of the amount owed by Borrower under this Note, together with interest accrued
thereon, to be due and payable 90 days after such declaration, and upon the
happening of any other Default, Holder at its option may declare the entire
unpaid balance of the amount owed by Borrower under this Note, together with
interest accrued thereon, to be immediately due and payable.
Each of the following shall constitute a "Default" of Borrower:
(a) failure to make any payment of principal or interest within 10
business days of when due hereunder and the same shall have not been cured
within 45 days after written notice thereof has been given to the
Borrower;
(b) any representation of Borrower contained in the Pledge Agreement
shall prove to have been false or misleading in any material respect as of
the time made;
(c) Borrower shall default in the performance or observance of any
covenant or provision contained herein or in the Pledge Agreement and the
same shall not have been cured within 60 days after written notice thereof
has been given to the Borrower;
(d) Borrower assigns any of his obligations under this Note to any
person or entity other than in connection with his death, or by operation
of law in connection with his death;
(e) Borrower (i) generally is not paying his debts as they become
due; (ii) shall admit in writing his inability to pay his debts generally;
(iii) shall make a general
-2-
<PAGE>
assignment for the benefit of creditors; or (iv) commences any proceeding
relating to him under any other bankruptcy, reorganization, arrangement,
readjustment of debt, receivership, dissolution, liquidation or similar
law or statute of any jurisdiction, whether now or hereafter in effect, or
any other procedure for the relief of financially distressed debtors;
(f) there is commenced by or against Borrower any proceeding under
any other applicable bankruptcy, insolvency, reorganization or other
similar law seeking to adjudicate it bankrupt or insolvent, or seeking
liquidation, winding-up, reorganization, arrangement, adjustment,
protection, relief or composition of it or its debts, or seeking the entry
of an order for relief or the appointment of a receiver, liquidator,
assignee, trustee, sequestrator, agent or custodian (or other similar
official) for him or any substantial part of his property, and relief
against him is ordered in such proceeding or such proceeding remains
undismissed for a period of 60 days or more.
(g) Borrower's employment by the Company or its subsidiaries is
terminated for any reason.
Upon the occurrence of any Default of Borrower, interest on the
outstanding amount of Borrower's debt to Holder hereunder shall accrue, in lieu
of the aforementioned rate, at a per annum rate equal to two percent over the
Non-Default Interest Rate. All payments received by Holder from Borrower on this
Note after such default shall be applied by Holder to Borrower's debt hereunder
as follows: first, to accrued and unpaid interest; second, to the reduction of
principal; and third, to any other obligations in respect of this Note.
EXCEPT AS PROVIDED IN THE IMMEDIATELY FOLLOWING PARAGRAPH AND WITH REGARD
TO THE PLEDGED COLLATERAL, THIS NOTE AND ALL OBLIGATIONS OF BORROWER HEREUNDER
SHALL BE NON-RECOURSE TO BORROWER PERSONALLY, AND BORROWER SHALL NOT BE
PERSONALLY OBLIGATED OR LIABLE UNDER THIS NOTE AND FOR SUCH OBLIGATIONS, AND
HOLDER'S SOLE AND EXCLUSIVE RECOURSE UNDER THIS NOTE AND FOR SUCH OBLIGATIONS
WILL BE WITH REGARD TO THE PLEDGED COLLATERAL PURSUANT TO THIS NOTE AND THE
PLEDGE AGREEMENT.
In the event this Note is turned over to any attorney at law for
collection after any Default of Borrower, in addition to principal and interest,
Holder shall be entitled to collect all costs of collection, including, but not
limited to, reasonable attorneys' fees and costs incurred in connection with any
of Holder's collection efforts, whether or not suit on this Note is filed, and
all such costs and expenses shall be payable by
-3-
<PAGE>
Borrower on demand and also shall be secured by all other collateral at any time
held by Holder as security for Borrower's obligations to Holder, it being
understood, without limiting the generality of the foregoing, that Borrower
shall have personal liability for an amount equal to any such costs and
expenses.
No failure on the part of Holder or other holder hereof to exercise any
right or remedy hereunder with respect to Borrower, whether before or after the
happening of a Default of Borrower, shall constitute waiver of any future
Default or of any other Default of Borrower. No failure to accelerate the debt
of Borrower evidenced hereby by reason of a Default of Borrower or indulgence
granted from time to time shall be construed to be a waiver of the right to
insist upon prompt payment thereafter, or shall be deemed to be a novation of
this Note or a reinstatement of such debt evidenced hereby or a waiver of such
right of acceleration or any other right, or be construed so as to preclude the
exercise of any right Holder may have, whether by the laws of the state
governing this Note, by agreement or otherwise, and Borrower hereby expressly
waives the benefit of any statute or rule of law or equity that would produce a
result contrary to or in conflict with the foregoing. This Note may not be
modified orally, but only by an agreement in writing signed by the party against
whom such agreement is sought to be enforced.
Borrower, for himself and his heirs, successors and assigns, hereby waives
presentment, protest, demand, diligence, notice of dishonor and of nonpayment,
and waives and renounces all rights to the benefits of any statute of
limitations or any moratorium, appraisement, or exemption now provided or that
hereafter may be provided by any applicable federal or state statute, both as to
himself personally and as to all of his property, whether real or personal,
against the enforcement and collection of the obligations evidenced by this Note
and any and all extensions, renewals, and modifications hereof.
Each of the Holder and Borrower intends that the obligations evidenced by
this Note conform strictly to the applicable usury laws as are from time to time
in force. All agreements between Borrower and Holder, whether now existing or
hereafter arising and whether oral or written, hereby are expressly limited so
that in no contingency or event whatsoever, whether by acceleration of maturity
hereof or otherwise, shall the amount paid or agreed to be paid to Holder, or
collected by Holder, by or on behalf of Borrower for the use, forbearance or
detention of the money to be loaned to Borrower hereunder or otherwise; or for
the payment or performance of any covenant or obligation contained herein of
Borrower to Holder, or in any other document evidencing, securing or pertaining
to such indebtedness evidenced hereby, exceed the maximum amount permissible
under applicable usury law. If under any
-4-
<PAGE>
circumstances whatsoever fulfillment of any provision hereof or any other
document, at the time performance of such provisions shall be due, shall involve
transcending the limit of validity prescribed by law, then, the obligation to be
fulfilled shall be reduced to the limit of such validity; and if under any
circumstances Holder ever shall receive from or on behalf of Borrower an amount
deemed interest, which would exceed the highest lawful rate under applicable
law, such amount that would be excessive interest under applicable usury laws
shall be applied to the reduction of Borrower's principal amount owing hereunder
and not to the payment of interest, or if such excessive interest exceeds the
unpaid balance of principal and such other indebtedness, the excess shall be
deemed to have been a payment made by mistake and shall be refunded to Borrower
or to any other person making such payment on Borrower's behalf.
This Note is binding upon Borrower's successors and heirs, shall inure to
the benefit of Holder, its successors and assigns and shall be governed by and
construed in accordance with the laws of the State of New York without regard to
the principles of conflicts of laws. The Borrower hereby irrevocably submits on
a non-exclusive basis to the jurisdiction of the federal courts of the United
States of America, the courts of New York and any courts competent to hear
appeals therefrom.
-5-
<PAGE>
IN WITNESS WHEREOF, Borrower has executed this instrument on the date
first above written.
WITNESS: BORROWER:
- ---------------------------------- -----------------------------------
Print Name:
------------------------
Print Home Address:
-----------------------------------
-----------------------------------
-----------------------------------
-6-
<PAGE>
EXHIBIT 4.19
PLEDGE AGREEMENT
AGREEMENT made as of August 17, 1995, between ____________ ("Pledgor"), an
-------
individual resident of ______________, and JACKSON PRODUCTS, INC., a Delaware
corporation ("Pledgee").
-------
WHEREAS, at the time of the execution of this Agreement the Pledgor is
indebted to the Pledgee in the principal amount of ________________ dollars
($_________), as evidenced by the Promissory Note for such amount executed in
favor of the Pledgee by the Pledgor of even date herewith (the "Note") a copy of
----
which is attached hereto; and
WHEREAS, to induce the Pledgee to make the loan evidenced by the Note, the
Pledgor has agreed to pledge certain securities in favor of Pledgee as security
for the repayment of the Note.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, it is agreed as follows:
1. Pledge. In consideration of the sum of $__________ loaned to the
------
Pledgor by the Pledgee, receipt of which hereby is acknowledged, the Pledgor
hereby pledges to the Pledgee, and grants to the Pledgee a security interest in,
all of his right, title and interest in and to the following (the "Pledged
-------
Collateral"): (i) ______ shares of Class C Common Stock of Jackson Products,
- ----------
Inc., a corporation incorporated and existing under the laws of the State of
Delaware (the "Company"), presently owned by the Pledgor (the "Common Stock"),
------- ------------
(ii) any other capital stock of the Company hereafter required by Pledgor,
including any shares of Common Stock acquired by Pledgor pursuant to the Company
Stock Option Plan, and (iii) all dividends, cash, instruments and other property
from time to time received, receivable or otherwise distributed in respect of or
in exchange for any or all of the stock referred to in clauses (i), (ii) and
(iii) to the extent not included above, all proceeds (as such term is defined in
the Uniform Commercial Code as in effect in the State of New York) of the
foregoing collateral.
2. Security for Obligations. This Agreement secures the payment of all
------------------------
obligations of the Pledgor now or hereafter existing under the Note, whether for
principal, interest, fees, expenses or otherwise, and all obligations of the
Pledgor now or hereafter existing under this Agreement (the "Obligations").
-----------
<PAGE>
3. Delivery of Pledged Property; Registration of Pledge, Transfer, etc.
-------------------------------------------------------------------
All certificates or instruments representing or evidencing the Pledged
Collateral shall be delivered to and held by or on behalf of the Pledgee
pursuant hereto, shall be in suitable form for transfer by delivery, and shall
be accompanied by all necessary instruments of transfer or assignment, duly
executed in blank. The Pledgee shall have the right, at any time and without
notice to the Pledgor, to transfer to, or to register in the name of the Pledgee
or any of its nominees, any or all of the Pledged Collateral, subject only to
the revocable rights of the Pledgor specified in Section 5 hereof.
---------
4. Dividends. During the term of this Agreement, within ten (10) days
---------
after any payment of a dividend with respect to the Common Stock, such dividend
payment shall be applied to the payment first of accrued interest, then of
principal and then other Obligations under or in respect of the Note.
5. Voting Rights. Subject to the restrictions imposed upon the Pledgor
-------------
by the Pledgor's Management Subscription Agreement, dated August 16, 1995, as
amended by the First Amendment to Management Subscription Agreement, dated March
1, 1996, by and among the Pledgor, other Stockholders (as defined therein) and
the Company, and the Company's Stockholder's Agreement, dated August 16, 1995,
as amended by the First Amendment to Stockholders Agreement, dated March 1,
1996, among the Company and its stockholders (collectively, the "Company Stock
Agreements"), during the term of this Agreement, and so long as the Pledgor is
not in default in the performance of any of the terms of this Agreement or of
the Note, the Pledgor shall be entitled to exercise all of his voting and other
consensual rights pertaining to the Pledged Collateral or any part thereof,
provided that the exercise of said rights shall in no way jeopardize the
Pledgee's security hereunder. To this end, the Pledgee shall execute and deliver
to the Pledgor all proxies and other instruments as the Pledgor may reasonably
request. Upon the occurrence and during the continuance of a default under this
Agreement or the Note, all rights of the Pledgor to exercise the voting and
other consensual rights which he would otherwise be entitled to exercise
pursuant to this Section 5 shall cease, and all such rights shall thereupon
---------
become vested in the Pledgee, who shall thereupon have the sole right to
exercise such voting and other consensual rights, subject to the restrictions
imposed upon the Pledgee by the Company Stock Agreements.
6. Payment of Obligations; Release of Collateral. Upon payment in full
---------------------------------------------
of the Obligations, the Pledgee shall, upon the
-2-
<PAGE>
request of the Pledgor and at his expense, cause the Company to make such
entries upon its share register as are necessary to vest in the Pledgor full
right, title and interest in such of the Pledged Collateral as shall not have
been sold or otherwise applied pursuant to the terms hereof.
7. Protection of Pledged Collateral. The Pledgor shall pay all taxes,
--------------------------------
charges and assessments against the Pledged Collateral and do all acts necessary
and appropriate to preserve and maintain the value thereof. Without limiting the
generality of the foregoing, the Pledgor shall not grant a security interest in
the Pledged Collateral to any other person or entity without the prior written
consent of the Pledgee thereto. Upon the failure of the Pledgor to comply with
any of the foregoing, the Pledgee may make such payments and take such actions
on account thereof as it, in its discretion, deems desirable. The Pledgor shall
reimburse the Pledgee immediately on demand for each and all such payments and
any costs so incurred.
8. Representations and Warranties of the Pledgor. The Pledgor
---------------------------------------------
represents and warrants that as of the date hereof:
(a) The Pledgor is the legal, record and beneficial owner of and
has good and marketable title to the Pledged Collateral;
(b) This Agreement constitutes a valid, legal and binding
obligation of the Pledgor enforceable in accordance with its terms. The
execution, delivery and performance of this Agreement by the Pledgor are
not in contravention of any prior obligation of the Pledgor or of any
obligation with respect to the Pledged Collateral;
(c) The pledge, assignment and delivery of the Pledged Collateral
pursuant to this Agreement creates a valid lien and a security interest in
the Pledged Collateral;
(d) No material statement made by the Pledgor in this Agreement or
any document delivered hereunder is untrue as of the date hereof or omits
to state a material fact, necessary in order to make the statements made,
in the light of the circumstances under which they were made, not
misleading; and
(e) There are no restrictions upon the transfer of any of the
Common Stock other than those imposed pursuant to
-3-
<PAGE>
federal and state securities laws and by the terms of the Management
Securities Agreement and the Note.
9. Covenants of the Pledgor. The Pledgor covenants and agrees that he
------------------------
will defend the Pledgee's right, title and security interest in and to the
Pledged Collateral and the proceeds thereof against the claims of all persons.
10. Default. In the event that the Pledgor defaults in the performance
-------
of any of the terms of this Agreement or of the Note, the Pledgee shall have the
rights and remedies provided in the Uniform Commercial Code in force in the
State of New York at the date of this Agreement; provided, however, that if the
Pledgee decides to foreclose on the Pledged Collateral, it shall be governed by
and do so pursuant to the terms of the Company Stock Agreements. Out of the
proceeds of any sale the Pledgee may retain an amount equal to the principal and
interest then due under the Note, plus the amount of the expenses of the sale,
and shall pay any balance of such proceeds to the Pledgor.
11. Waivers. The Pledgor assents to any extension or waiver of any
-------
obligation of the Pledgor secured hereby. The Pledgee shall have no duty with
respect to the preservation or protection of the Pledged Collateral or any
income thereof or the preservation or protection of any rights against other
parties with respect thereto. The Pledgee may exercise any rights it may have
hereunder against the Pledgor or the Pledged Collateral, after having given
notice to the Pledgor, whether or not it has given any other party any notice or
otherwise taken any action against any other party or assets for the enforcement
of such rights.
No waiver or modification of any of the provisions hereof shall be binding
upon the Pledgee unless in writing and signed by a duly authorized
representative thereof, and no waiver by the Pledgee of any right it may have
hereunder shall be deemed a waiver of any other rights it may have. All rights
and remedies of the Pledgee shall be cumulative and may be exercised singly or
concurrently.
12. Assignment. The Pledgor shall not pledge, assign or otherwise
----------
transfer any or all of its rights in the Pledged Collateral or hereunder,
without the prior written consent of the Pledgee.
13. Costs. The Pledgor shall pay all costs, including without limitation,
-----
reasonable attorneys' fees, incurred by the
-4-
<PAGE>
Pledgee in protecting, enforcing or releasing any of the Pledgee's rights
hereunder.
14. Additional Documents. Upon the request of the Pledgee, the Pledgor
--------------------
will execute and deliver such further documents and take such further action as
the Pledgee may reasonably request in order to full effect the purposes of this
Agreement.
15. Miscellaneous. This Agreement shall be interpreted under and
-------------
construed in accordance with the laws of the State of New York, without regard
to the principles of conflicts of laws. The parties hereby irrevocably submit on
a non-exclusive basis to the jurisdiction of the federal courts of the United
States of America, the courts of the State of New York and any courts competent
to hear appeals therefrom. All notices given hereunder shall be deemed to be
given upon delivering the notice by hand or by mailing it, postage prepaid, by
certified mail to the last known address of the addressee.
This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
This Agreement shall be binding upon and inure to the benefit of the
parties hereto, their heirs, executors, administrators, successors and permitted
assigns, and may not be changed or modified except by an instrument in writing,
executed by both parties.
-5-
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
on the date first written above.
WITNESS: PLEDGOR:
- ----------------------------- ----------------------------------------
-------------------
Home Address:
------------
-------------------
-------------------
PLEDGEE: JACKSON PRODUCTS, INC.
----------------------------------------
Name:
Title:
-6-
<PAGE>
EXHIBIT 4.20
SECURITIES PURCHASE AGREEMENT
170,000 Shares of Series A Cumulative Exchangeable
Preferred Stock,
750,000 Shares of Common Stock
and
3,448,276 Common Stock Purchase Warrants
of
Jackson Acquisition Corp.
----------------------------
August 16, 1995
----------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
SECTION 1. DEFINITIONS .............................................................................. -1-
SECTION 2. PURCHASE AND SALE OF SECURITIES .......................................................... -1-
Section 2.1. Issue of Securities .................................................................. -1-
Section 2.2. Sale and Purchase; the Closing ....................................................... -2-
Section 2.3. Failure to Deliver ................................................................... -3-
Section 2.4. Issue Price .......................................................................... -3-
Section 2.5. Indemnification ...................................................................... -3-
SECTION 3. CLOSING CONDITIONS ....................................................................... -6-
Section 3.1. Satisfaction of Closing Conditions to Note Agreement ................................. -6-
Section 3.2. Compliance with Agreements ........................................................... -6-
Section 3.3. Legality of Investment ............................................................... -6-
Section 3.4. Filing of the Certificate ............................................................ -6-
Section 3.5. Satisfactory Proceedings ............................................................. -6-
SECTION 4. COVENANTS ................................................................................ -7-
Section 4.1. Expenses, Stamp and Other Taxes, Indemnities by the Company .......................... -7-
Section 4.2. Direct Payment ....................................................................... -7-
Section 4.3. Board Observance ..................................................................... -8-
Section 4.4. ERISA Compliance ..................................................................... -8-
Section 4.5. Loss, Theft, Etc. of Security ........................................................ -8-
Section 4.6. Financial Statements and Other Information ........................................... -9-
SECTION 5. REPRESENTATIONS AND WARRANTIES ........................................................... -9-
Section 5.1. Representations of the Company ....................................................... -9-
Section 5.2. Representations of the Purchaser ..................................................... -9-
SECTION 6. MISCELLANEOUS ........................................................................... -10-
Section 6.1. Notices ............................................................................. -10-
Section 6.2. Amendment and Waiver ................................................................ -11-
Section 6.3. Successors and Assigns .............................................................. -11-
Section 6.4. Survival of Covenants and Representations ........................................... -11-
Section 6.5. Severability ........................................................................ -11-
Section 6.6. Governing Law ....................................................................... -11-
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
Section 6.7. Captions ............................................................................ -12-
Section 6.8. Counterparts ........................................................................ -12-
Section 6.9. Powers and Rights Not Waived; Remedies Cumulative ................................... -12-
</TABLE>
EXHIBITS
- --------
Exhibit 1 Exchange Note
Exhibit 2 Preferred Stock Certificate
Exhibit 3 Certificate of Designation
Exhibit 4 Common Stock Certificate
Exhibit 5 Warrant
-ii-
<PAGE>
Jackson Acquisition Corp.
9 West 57th Street
New York, New York 10019
Dated as of August 16, 1995
To the Purchaser named in Schedule I hereto:
The undersigned JACKSON ACQUISITION CORP., a Delaware corporation (to
be known from and after the Closing and the transactions contemplated thereby as
Jackson Products, Inc.) (the "Company"), hereby agrees with you as follows:
SECTION 1. DEFINITIONS
Capitalized terms used but not otherwise defined herein shall have the
meaning assigned to such term in the several Note Agreements, dated as of the
date hereof (collectively, the "Note Agreement"), between the Company and the
Purchasers (as defined below). As used in this Agreement, the following terms
shall have the following meanings:.
"Exchange Notes" shall mean the subordinated notes of the Company, due
August 15, 2005, in the form of Exhibit 1 hereto which may be issued at the
Company's option in exchange for the Preferred Shares.
"Purchasers" shall mean you and each of the Other Purchasers (defined
below).
"Securities" shall mean the Preferred Shares, the Exchange Notes, the
Common Shares, the Warrants and the shares of Common Stock deliverable upon
exercise of the Warrants.
<PAGE>
SECTION 2. PURCHASE AND SALE OF SECURITIES
Section 2.1. Issue of Securities. (a) The Company has taken all
necessary action to authorize the issuance and sale of 170,000 shares of
Preferred Stock pursuant to this Agreement (the "Preferred Shares"). Each
Preferred Share shall be evidenced by a certificate in the form attached hereto
as Exhibit 2 and shall be entitled to the designations, rights, preferences and
privileges set forth in the Certificate of Designation attached hereto as
Exhibit 3 (the "Certificate").
(b) The Company has taken all necessary action to authorize
the issuance and sale of 750,000 shares of Common Stock pursuant to this
Agreement (the "Common Shares"). Each Common Share shall be evidenced by a
certificate in the form attached hereto as Exhibit 4.
(c) The Company has taken all necessary action to authorize
the issuance and sale of Warrants to purchase 3,448,276 shares of Common Stock
(the "Warrants") pursuant to this Agreement. Each Warrant shall be in the form
attached hereto as Exhibit 5. The Company hereby agrees (i) to cause to be
authorized and to reserve and keep available at all times during which any
Warrants remain outstanding, free from preemptive rights, out of its treasury
stock or authorized but unissued shares of Common Stock, or both, solely for the
purpose of effecting the exercise of the Warrants pursuant to the terms thereof,
sufficient shares of Common Stock to provide for the issuance of the maximum
number of shares of Common Stock issuable upon exercise of the outstanding
Warrants, (ii) to issue and deliver such shares of Common Stock as are required
upon exercise of the Warrants, and to take all actions necessary to ensure that
all such shares of Common Stock will, when issued and paid for pursuant to the
exercise of the Warrants, be duly and validly issued, fully paid and
nonassessable, and (iii) if any shares of its Common Stock to be reserved for
the purpose of issuance of shares of Common Stock upon exercise of the Warrants,
require registration with or approval of any governmental authority under any
Applicable Law before such shares of Common stock may be validly issued or
delivered, to secure such registration or approval, as the case may be, and
maintain such registration or approval in effect so long as so required.
Section 2.2. Sale and Purchase; the Closing. (a) In reliance upon
the representations and warranties contained herein and subject to the terms and
conditions set forth herein, the Company agrees to sell to each Purchaser (i)
the number of Preferred Shares set forth below such Purchaser's signature on the
executive page hereof, to be sold at a price equal to $83.50 per share, (ii) the
number of Common Shares set forth below such Purchaser's signature on the
executive page hereof, to be sold at a price equal to $1.00 per Common Share and
(iii) Warrants to purchase the number of shares of Common Stock set forth below
such Purchaser's signature on the execution page hereof, to be sold at a price
equal to $1.00 per Warrant.
-2-
<PAGE>
(b) In reliance upon the representations and warranties of
the Company contained herein and in the other Documents, and subject to the
terms and conditions set forth herein and therein, you hereby agree to purchase
the Securities to be purchased by you at the respective purchase prices set
forth in Section 2.2(a) hereof. Each Purchaser shall be liable severally, and
not jointly, for only the purchase of that portion of such Securities that
appears on the execution page hereof that relates to such Purchaser.
(c) Simultaneously with the execution of this Agreement,
the Company is executing other purchase agreements (the "Other Purchase
Agreements") identical to this Agreement with the other purchasers listed on the
signature pages thereof (the "Other Purchasers"), pursuant to which the Company
shall issue and sell Securities to such Other Purchasers in the respective
aggregate amounts set forth below their names on the signature pages thereof for
the respective purchase prices set forth thereon. The amount of Securities being
sold hereby and to the Other Purchasers shall aggregate the amounts indicated as
authorized to be sold in Section 2.1 hereof. The sale of Securities to you and
the Other Purchasers are to be separate sales, and this Agreement and the Other
Purchase Agreements are to be separate agreements; provided that references to
--------
this "Agreement" shall include the Other Purchase Agreements where the context
so permits, together with all modifications hereof and thereof.
(d) The sale and purchase of the Securities shall take
place at a closing (the "Closing") at the offices of Mayer, Brown & Platt, New
York City, at 9:00 A.M., New York City time, on the Closing Date. At the
Closing, the Company shall deliver to you (i) one or more certificates
representing the Preferred Shares to be purchased by you, (ii) one or more
certificates representing the Common Shares to be purchased by you and (iii) one
or more Warrants to be purchased by you, in each case in such permitted
denomination or denominations as you may request registered in your name or in
the name of such nominee or designee as you may request, against payment of the
purchase price therefor by Federal funds bank wire transfer to the Company's
account.
Section 2.3 Failure to Deliver. If the Closing fails to occur on
or before August 18, 1995, you shall, at your election and notwithstanding
anything to the contrary in this Agreement, be relieved of all further
obligations under this Agreement without thereby waiving any rights you may have
by reason of such nonfulfillment or failure. Nothing in this Section 2.3 shall
operate to relieve the Company from any of its obligations hereunder.
Section 2.4 Issue Price. The Company and the Purchasers agree that
for purposes of section 1271 et seq. of the Code, the issue price of each (i)
-- ---
Preferred Share is $83.52 per Preferred Share, (ii) Common Share is $1.00 per
Common Share and (iii) Warrant to purchase a share of Common Stock is $1.00 per
Warrant, and that this Agreement is intended to constitute an agreement as to
the issue price for all Federal and other income tax purposes.
-3-
<PAGE>
Section 2.5. Indemnification. (a) In addition to any and all
obligations of the Company to indemnify you hereunder (including without
limitation under Section 2.5(b) hereof) or under any of the other Documents, the
Company shall, without limitation as to time, indemnify and hold harmless you,
your Affiliates, and the employees, officers, directors, and agents of you and
your Affiliates (including, without limitation, the Placement Agent and its
agents) (collectively, the "Indemnified Parties"), to the fullest extent lawful,
from and against any and all losses, claims, damages, liabilities, costs
(including, without limitation, costs of preparation and reasonable attorneys'
fees) and expenses (including expenses of investigation) (collectively,
"Losses") arising out of or in connection with this Agreement or the other
Documents or the transactions contemplated hereby or thereby, whether or not the
transactions contemplated by this Agreement or any of the other Documents are
consummated and whether or not any Indemnified Party is a formal party to any
Proceeding; provided that the Company shall not be liable to any Indemnified
Party for any Losses if it shall be finally determined by a court of competent
jurisdiction (which determination is not subject to appeal) that such Losses
arose from the gross negligence or willful misconduct of such Indemnified Party,
which (i) is independent of any wrongful act by the Company or any of its
Subsidiaries, or any of its representatives, and (ii) was not taken by such
Indemnified Party in reliance upon any of the representations, warranties,
covenants or promises of the Company herein or in any of the other Documents,
including (without limitation) the certificates delivered by the Company
pursuant hereto or thereto. The Company will not, in any event, be liable for
any income taxes of the Purchaser. The Company shall promptly reimburse each
Indemnified Party for all such Losses as they are incurred by such Indemnified
Party. The obligations of the Company to any Indemnified Party hereunder shall
not be extinguished solely because any other Indemnified Party is not entitled
to indemnity hereunder.
(b) Without limiting the foregoing, the Company shall indemnify, pay
and hold each Indemnified Party harmless from and against any and all Losses
incurred by the Indemnified Party by reason of any violation of any applicable
Environmental Law for which the Company or any Subsidiary is or may be liable or
that is related to any real property owned, leased or operated by the Company or
any Subsidiary, or by reason of the imposition of any governmental Lien for the
recovery of environmental cleanup or response costs expended by reason of any
such violation, or by reason of any breach of any representation, warranty or
affirmative or negative covenant in this Agreement; provided that the Company
shall have no obligation to any Indemnified Party under this Section 2.5(b) with
respect to such Losses to the extent arising from the gross negligence or
willful misconduct of such Indemnified Party as determined by a court of
competent jurisdiction.
(c) If any Indemnified Party is entitled to indemnification
hereunder, such Indemnified Party shall give prompt written notice to the
Company of any claim or of the commencement of any Proceeding with respect to
which such Indemnified Party seeks indemnification or contribution pursuant
hereto; provided that the failure so to notify the Company shall not relieve the
Company from any obligation or liability except to the extent (but only to the
extent) that it shall be finally determined by a court of competent jurisdiction
-4-
<PAGE>
(which determination is not subject to appeal) that the Company has been
prejudiced materially by such failure. The Company shall have the right,
exercisable by giving written notice to an Indemnified Party within 20 business
days after the receipt of written notice from such Indemnified Party of such
Proceeding, to assume, at its expense, the defense of any such Proceeding
including employment of counsel satisfactory to such Indemnified Party and the
payment of all expenses; provided that an Indemnified Party shall have the right
to employ separate counsel in any such Proceeding and to participate in the
defense thereof, but the fees and expenses of such counsel shall be at the
expense of such Indemnified Party unless: (i) the Company agrees to pay such
fees and expenses; or (ii) the Company fails promptly to assume the defense of
such Proceeding or fails to employ counsel reasonably satisfactory to such
Indemnified Party; or (iii) the named parties to any such Proceeding (including
any impleaded parties) include both such Indemnified Party and the Company or an
Affiliate of the Company, and there may be one or more defenses available to
such Indemnified Party that are in addition to, or in conflict with, those
available to the Company or such Affiliate (in which case, if such Indemnified
Party notifies the Company in writing that it elects to employ separate counsel
at the expense of the Company, the Company shall not have the right to assume
the defense of such Proceeding on behalf of such Indemnified Party), it being
understood, however, that the Company shall not, in connection with any one such
Proceeding or separate but substantially similar or related Proceedings in the
same jurisdiction, arising out of the same general allegations or circumstances,
be liable for the fees and expenses of more than one separate firm of attorneys
(together with appropriate local counsel) at any time for such Indemnified Party
unless, in the reasonable judgment of an Indemnified Party, a conflict of
interest may exist between such Indemnified Party and any other Indemnified
Party with respect to such Proceeding, in which event the Company shall be
liable for the fees and expenses of such additional counsel. The Company shall
not be liable for any settlement of any such Proceeding effected without its
written consent, but if settled with its written consent, or if there be a final
judgment for the plaintiff in any such Proceeding, the Company agrees to
indemnify and hold harmless such Indemnified Party from and against any loss or
liability by reason of such settlement or judgment. The Company shall not
consent to entry of any judgment or enter into any settlement that does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to each Indemnified Party of a release, in form and substance reasonably
satisfactory to the Indemnified Party, from all liability in respect of such
Proceeding for which such Indemnified Party would be entitled to indemnification
hereunder (whether or not any Indemnified Party is a party thereto).
(d) If the indemnification provided for in paragraphs (a) or (b) of
this Section 2.5 is unavailable to any Indemnified Party in respect of any
Losses referred to therein or is insufficient to hold such Indemnified Party
harmless, then the Company, in lieu of indemnifying such Indemnified Party,
shall contribute to the amount paid or payable by such Indemnified Party as a
result of such Losses in such proportion as is appropriate to reflect the
relative fault of the Company, on the one hand, and such Indemnified Party, on
the other hand, in connection with the actions, statements or omissions that
resulted in such Losses as well as any other relevant equitable considerations.
The relative fault of the Company, on
-5-
<PAGE>
the one hand, and any Indemnified Party, on the other hand, shall be determined
by reference to, among other things, whether any action in question, including
any untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact, has been taken by, or relates to information
supplied by, the Company or such Indemnified Party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
any such action, statement or omission. The amount paid or payable by a party as
a result of any Losses shall be deemed to include any legal or other fees or
expenses incurred by such party in connection with any Proceeding. The parties
hereto agree that it would not be just and equitable if contribution pursuant to
this paragraph (d) were determined by pro rata allocation or by any other method
of allocation that does not take account of the equitable considerations
referred to in the immediately preceding paragraph. No Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation.
(e) The obligations of the Company under this Section 2.5 shall
remain in full force and effect regardless of any investigation made by or on
behalf of any Indemnified Party and shall survive payment or prepayment of the
Securities, at maturity, upon redemption or otherwise, any transfer of the
Securities by you, and any termination of this Agree ment and the other
Documents.
SECTION 3. CLOSING CONDITIONS
Your obligation to purchase and pay for the Securities to be
delivered to you at the Closing shall be subject to the satisfaction of the
following conditions precedent on or before the Closing Date:
Section 3.1. Satisfaction of Closing Conditions to Note
Agreement. All of the conditions precedent to the obligations of the Purchaser
contained in Section 4 of the Note Agreement shall have been satisfied or waived
in accordance with the terms thereof.
Section 3.2. Compliance with Agreements. The Company shall have
performed and complied with all agreements, covenants and conditions contained
herein, in the other Documents and in all other documents contemplated hereby or
thereby that are required to be performed or complied with by the Company on or
before the Closing Date.
Section 3.3. Legality of Investment. The Securities to be
purchased by you shall be a legal investment for you under the laws of each
jurisdiction to which you may be subject. The Company shall have delivered to
you factual certificates or other evidence as you shall reasonably request, in
form and substance reasonably satisfactory to you, to enable you to establish
compliance with this condition.
-6-
<PAGE>
Section 3.4. Filing of the Certificate. The Certificate shall have
been filed with the Secretary of State of the State of Delaware and shall have
become effective in accordance with all Applicable Laws.
Section 3.5. Satisfactory Proceedings. All proceedings taken in
connection with the transactions contemplated by this Agreement and all
documents necessary to the consummation thereof, shall be satisfactory in form
and substance to you, and you shall have received a copy (executed or certified
as may be appropriate) of all legal documents or proceedings taken in
connection with the consummation of said transactions.
If on the Closing Date the Company fails to tender to you the
Securities to be issued to you on such date or if the conditions specified in
this Section 3 have not been fulfilled, you may thereupon elect to be relieved
of all further obligations under this Agreement. Without limiting the
foregoing, if the conditions specified in this Section 3 have not been
fulfilled, you may waive compliance by the Company with any such condition to
any such extent as you may in your sole discretion determine. Nothing in this
paragraph shall operate to relieve the Company of any of its obligations
hereunder or to waive any of your rights against the Company.
SECTION 4. COVENANTS.
Section 4.1. Expenses, Stamp and Other Taxes, Indemnities by the
Company. (a) Whether or not the transactions herein contemplated shall be
consummated, the Company agrees to pay directly all of your reasonable out-of-
pocket expenses in connection with the preparation, execution and delivery of
the Agreement and the other Documents and the transactions contemplated hereby
and thereby, including but not limited to the reasonable charges and
disbursements of your special counsel (if any), duplicating and printing costs
and charges for shipping the Securities adequately insured to you at your home
office or at such other place as you may designate, and all such expenses
relating to any amendments, waivers or consents pursuant to the provisions of
this Agreement and the other Documents (whether or not the same are actually
executed and delivered), including, without limitation, any amendments, waivers
or consents resulting from any work-out, restructuring or similar proceedings
relating to the performance by the Company of its obligations under this
Agreement, any of the other Documents or the Securities. The Company also
agrees that it will pay and save you harmless against any and all liability with
respect to stamp and other taxes, if any, which may be payable in connection
with the execution and delivery of this Agreement or the Securities, whether or
not any Securities are then outstanding. The Company agrees to protect and
indemnify you against any liability for any and all brokerage fees and
commissions payable or claimed to be payable to any Person in connection with
the transactions contemplated by this Agreement. Without limiting the foregoing,
the Company agrees to pay the cost of obtaining a private placement number for
the Securities and authorizes the submission of such information as may be
required by Standard & Poor's for the purpose of obtaining such number.
-7-
<PAGE>
Section 4.2. Direct Payment. Notwithstanding anything to the
contrary in this Agreement or the Securities, in the case of any Security owned
by (or by a nominee of) a Purchaser or any other Institutional Holder that has
given written notice to the Company requesting that the provisions of this
Section 4.2 shall apply, the Company will promptly and punctually pay all
amounts payable in respect if such Security, without any presentment thereof,
directly to such Purchaser, such Institutional Holder or such nominee, at the
address of such Purchaser set forth in Schedule I or at such other address as
such Purchaser or such Institutional Holder may from time to time designate in
writing to the Company or, if a bank account is designated for the Purchaser on
Schedule I hereto or in any written notice to the Company from a Purchaser or
any such Institutional Holder, the Company will make such payments in
immediately available funds to such bank account, no later than 11:00 A.M., New
York City time on the date due, marked for attention as indicated, or in such
other manner or to such other account of such Purchaser or such Institutional
Holder in any bank in the United States as such Purchaser or such Institutional
Holder may from time to time direct in writing. If for any reason whatsoever
the Company does not make any such payment by such 11:00 a.m. transmittal time,
such payment shall be deemed to have been made on the next following Business
Day and such payment shall bear interest at the Overdue Rate.
Section 4.3. Board Observance. So long as a Purchaser or any of its
Affiliates owns any Securities, the Company shall (a) provide such Purchaser or
Affiliate with notice of each meeting of the Board of Directors of the Company
concurrently with, and in the same manner as, the notice of such meeting
provided to the members of such board (but not less than one Business Day prior
to such meeting), (b) provide such Purchaser or Affiliate a copy of all
materials and written information provided to members of such board and any
committee thereof in connection with any such meeting concurrently with the
distribution thereof to such members, and (c) permit a single person designated
by such Purchaser or Affiliate to attend and observe each such board meeting (in
person or telephonically) all of which shall be subject to reasonable
restrictions intended to maintain the confidentiality of such proceedings and
materials.
Section 4.4. ERISA Compliance. So long as a Purchaser, any of its
Affiliates or an Institutional Holder owns any Securities, the Company shall
provide such Purchaser, Affiliate, or Institutional Holder, promptly upon the
occurrence thereof, or the date notice is required to be given to the Internal
Revenue Service, the Department of Labor, the PBGC or any governmental or quasi-
governmental entity, if earlier, written notice of (1) a Reportable Event with
respect to any Pension Plan; (2) the institution of any steps by the Company,
any ERISA Affiliate, the PBGC or any other Person to terminate any Pension Plan;
(3) the institution of any steps by the Company or any ERISA Affiliate to
withdraw from any Pension Plan; (4) a non-exempt "prohibited transaction" within
the meaning of Section 406 of ERISA in connection with any Pension Plan; (5) any
material increase in the contingent liability of the Company or any Subsidiary
with respect to any post-retirement welfare liability; or (6) the taking of any
action by, or the threatening of the taking of any action by,
-8-
<PAGE>
the Internal Revenue Service, the Department of Labor or the PBGC with respect
to any of the foregoing.
Section 4.5. Loss, Theft, Etc. of Security. Upon receipt of evidence
satisfactory to the Company of the loss, theft, mutilation or destruction of any
Security, and in the case of any such loss, theft, or destruction upon delivery
of a bond or indemnity in such form and amount as shall be reasonably
satisfactory to the Company, or in the event of such mutilation upon surrender
and cancellation of the Security, the Company will make and deliver without
expense to the holder thereof, a new Security, of like tenor, in lieu of such
lost, stolen, destroyed or mutilated Security. If the Purchaser or any
subsequent Institutional Holder is the owner of any such lost, stolen or
destroyed Security, then the affidavit of an authorized officer of such owner,
setting forth the fact of loss, theft or destruction shall be accepted as
satisfactory evidence thereof and no further indemnity shall be required as a
condition to the execution and delivery of the new Security other than the
written agreement of such owner to indemnify the Company.
Section 4.6. Financial Statements and Other Information.
(a) The Company shall deliver or cause to be delivered to you and
each other Institutional Holder owning Securities, the financial statements and
other information required by Section 5.16 of the Note Agreement; provided, that
you and each such Institutional Holder shall be bound by the confidentiality
provisions of such Section.
(b) For so long as any Securities remain outstanding, the Company
shall, upon request, make available to any beneficial owner and any prospective
purchaser of such Securities, the information required by Rule 144A(d)(4) under
the Securities Act.
SECTION 5. REPRESENTATIONS AND WARRANTIES.
Section 5.1. Representations of the Company. The Company represents
and warrants that all representations and warranties set forth in Exhibit C to
the Note Agreement are true and correct as of the date hereof and shall be true
and correct on the Closing Date (after giving effect to the transactions
contemplated by the Documents), and such representations and warranties are
incorporated herein by reference with the same force and effect as though herein
set forth in full.
Section 5.2. Representations of the Purchaser. (a) You represent,
and in entering into this Agreement the Company understands, that you are an
accredited investor within the meaning of Regulation D under the Securities Act,
that you are acquiring the Securities being acquired by you hereunder for the
purpose of investment and not with a view to the distribution thereof, and that
you have no present intention of selling, negotiating or otherwise disposing of
the Securities; provided that the disposition of your property shall at all
times be and remain within your control.
-9-
<PAGE>
(b) You further represent and warrant that, with respect to each
source of funds to be used by you to purchase the Securities (respectively, the
"Source"), at least one of the following statements is true as of the Closing
Date:
i) The Source is not assets of an "employee benefit plan," as
defined in Section 3(3) of ERISA, subject to Title I of ERISA, or a "plan," as
defined in Section 4975(e)(1) of the Code, subject to Section 4975 of the Code
(each such employee benefit plan or plan hereinafter referred to as a "Plan");
ii) The Source is assets of an "insurance company general
account," as such term is defined in section V(e) of Prohibited Transaction
Class Exemption ("PTE") 95-60 (issued July 12, 1995), and the purchase by or on
behalf of such account is exempt, under PTE 95-60, from the application of the
prohibited transaction provisions of ERISA and the Code (the "Prohibited
Transaction Provisions");
iii) The Source is a "governmental plan" as defined in Section
3(32) of ERISA;
iv) The Source is assets of either (A) an insurance company
pooled separate account, and the purchase by or on behalf of such account is
exempt from the Prohibited Transaction Provisions under PTE 90-1 (issued January
29, 1990), or (B) a bank collective investment fund, and the purchase by or on
behalf of such account is exempt from the Prohibited Transaction Provisions
under PTE 91-38 (issued July 12, 1991);
v) The Source is assets of an "investment fund" managed by a
"qualified professional asset manager" or "QPAM" (as defined in Part V of PTE
84-14, issued March 13, 1984), which QPAM has been identified in writing, such
that the purchase by or on behalf of such fund is exempt under PTE 84-14, from
the Prohibited Transaction Provisions, provided that no other party to the
transactions described in this Agreement and no "affiliate" of such other party
(as defined in Section V(c) of PTE 84-14) has at this time, or at any time
during the immediately preceding year, exercised the authority to appoint or
terminate said QPAM as manager of the assets of any Plan that has an interest in
such investment fund (each such Plan having been identified in writing) or to
negotiate the terms of said QPAM's management agreement on behalf of any such
identified Plan; or
vi) The Source is assets of one or more Plans, or a separate
account or trust fund comprised of one or more Plans, each of which has been
identified in writing.
SECTION 6. MISCELLANEOUS.
Section 6.1. Notices. All communications provided for hereunder
shall be in writing and, if to any Purchaser, delivered or mailed by prepaid
overnight air courier, or by facsimile communication, in each case addressed to
such Purchaser at its address appearing
-10-
<PAGE>
on Schedule I to this Agreement or such other address as such Purchaser may
designate to the Company in writing, with a copy to Skadden, Arps, Slate,
Meagher & Flom, 300 South Grand Avenue, Los Angeles, CA 90071, Attention:
Michael A. Woronoff, Esq., Telecopier No.: (213) 687-5600 and (ii) in the case
of MCIT PLC, with a copy to Mayer, Brown & Platt, 1675 Broadway, New York, NY
10019, Attention: Jay Parry Monge; and if to the Company, delivered and mailed
by prepaid overnight air courier, or by facsimile communication, in each case
to the Company at The Jordan Company, 9 West 57th Street, Suite 4000, New York,
New York 10019, Attention: A. Richard Caputo, Jr., Telecopier No.: (212) 755-
5263, with a copy to Mayer, Brown & Platt, 1675 Broadway, New York, NY 10019,
Attention: James B. Carlson, Esq., Telecopier No.: (212) 262-1910, or to such
other address as the Company may in writing designate to you or to a subsequent
holder of the Securities initially issued to you, or by facsimile communication;
provided, however, that a notice sent by overnight air courier shall only be
effective if delivered to you at a street address designated for such purpose in
Schedule I, and a notice to you by facsimile communication shall only be
effective if confirmed by a copy thereof by prepaid overnight air courier, in
either case, as you or a subsequent holder of any Securities initially issued to
you may designate to the Company in writing.
Section 6.2. Amendment and Waiver. This Agreement and the other
Documents may be amended, modified or supplemented, and waivers or consents to
departures from the provisions hereof may be given; provided that the same are
in writing and signed by (a) the Company and the Purchasers of at least 66 2/3%
of the Preferred Shares originally issued.
Section 6.3. Successors and Assigns. This Agreement shall be
binding upon the Company and its successors and assigns and shall inure to your
benefit and to the benefit of your successors and assigns, including each
successive holder or holders of any Securities in accordance with this
Agreement.
Section 6.4. Survival of Covenants and Representations. All
covenants, representations and warranties made by the Company herein and in any
certificates delivered pursuant hereto, whether or not in connection with the
Closing Date, shall survive the closing and the delivery of this Agreement and
the Securities.
Section 6.5. Severability. Should any part of this Agreement for
any reason be declared invalid or unenforceable, such decision shall not affect
the validity of any remaining portion, which remaining portion shall remain in
force and effect as if this Agreement had been executed with the invalid or
unenforceable portion thereof eliminated and it is hereby declared the intention
of the parties hereto that they would have executed the remaining portion of
this Agreement without including therein any such part, parts or portion which
may, for any reason, be hereafter declared invalid or unenforceable.
Section 6.6. Governing Law. THIS AGREEMENT AND THE SECURITIES
ISSUED AND SOLD HEREUNDER SHALL BE GOVERNED BY AND CON-
-11-
<PAGE>
STRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO
CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW. THE COMPANY HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN
THE CITY OF NEW YORK OR ANY FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN
THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO THIS AGREEMENT, AND IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT
OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, JURISDICTION OF THE AFORESAID
COURTS. THE COMPANY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY
DO SO UNDER APPLICABLE LAW, TRIAL BY JURY AND ANY OBJECTION THAT IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
THE COMPANY IRREVOCABLY CONSENTS, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO
UNDER APPLICABLE LAW, TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED
COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY
REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE COMPANY AT ITS ADDRESS SET
FORTH HEREIN, SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING.
NOTHING HEREIN SHALL AFFECT THE RIGHT OF ANY PURCHASER TO SERVE PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE
PROCEED AGAINST THE COMPANY IN ANY OTHER JURISDICTION.
Section 6.7 Captions. The descriptive headings of the various
Sections or parts of this Agreement are for convenience only and shall not
affect the meaning or construction of any of the provisions hereof.
Section 6.8 Counterparts. This Agreement may be executed in any
number of counterparts and by the parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
Section 6.9 Powers and Rights Not Waived; Remedies Cumulative. No
delay or failure on the part of the holder of any Securities in the exercise of
any power or right shall operate as a waiver thereof; nor shall any single or
partial exercise of the same preclude any other or further exercise thereof, or
the exercise of any other power or right, and the rights and remedies of the
holder of any Securities are cumulative to and are not exclusive of any rights
or remedies any such holder would otherwise have, and no waiver or consent,
given or extended, shall extend to or affect any obligation or right not
expressly waived or consented to.
-12-
<PAGE>
The execution hereof by you shall constitute a contract between us for
the uses and purposes hereinabove set forth, and this Agreement may be executed
in any number of counterparts, each executed counterpart constituting an
original but all together only one agreement.
JACKSON ACQUISITION CORP.
By /s/ Robert H. Elkin
-----------------------------------
Name: Robert H. Elkin
Title: Chairman, President and
Chief Executive Officer
By /s/ Christopher T. Paule
----------------------------------
Name: Christopher T. Paule
Title: Chief Financial Officer
<PAGE>
EXHIBIT 4.21
JACKSON PRODUCTS, INC.
FIRST AMENDMENT TO SECURITIES PURCHASE AGREEMENT
THIS FIRST AMENDMENT TO SECURITIES PURCHASE AGREEMENT, dated as of July 1,
1996 (this "Amendment"), is made by and among JACKSON PRODUCTS, INC. (formerly
---------
JACKSON ACQUISITION CORP.), a Delaware corporation (together with its
subsidiaries, unless otherwise indicated by the context, the "Company"), whose
-------
address is 101 S. Hanley Road, St. Louis, Missouri 63105, MCIT PLC, an
investment trust organized under the laws of the United Kingdom ("MCIT"),
----
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY, MASSMUTUAL PARTICIPATION INVESTORS,
MASSMUTUAL CORPORATE VALUE PARTNERS LIMITED, MASSMUTUAL CORPORATE INVESTORS, THE
NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY and the JOHN HANCOCK MUTUAL LIFE
INSURANCE COMPANY (collectively with MCIT, the "Institutional Investors").
-----------------------
WHEREAS, a Securities Purchase Agreement (the "Agreement") was entered into
---------
on August 16, 1995, by and among the Company and the Institutional Investors,
with respect to the purchase and sale of 170,000 Shares of Series A Cumulative
Exchangeable Preferred Stock, 750,000 Shares of Common Stock and 3,448,276
Common Stock Purchase Warrants. Capitalized terms used herein and not otherwise
defined herein shall have the meanings ascribed to them in the Agreement.
WHEREAS, the Company desires to effect a 100-to-1 Reverse Stock Split (the
"Stock Split") to reduce its total authorized number of shares of capital stock
-----------
from 16,200,000 to 162,000;
WHEREAS, the parties desire to amend this Agreement to set forth their
respective ownership interests in connection with the reduction in the total
authorized number of shares of capital stock;
NOW, THEREFORE, in consideration of the mutual agreements and
understandings set forth herein, the parties hereto mutually agree as follows:
1. Section 4 of each of Warrants W-1 through W-10 is hereby amended to
read in its entirety as follows:
SECTION 4. Fractional Interests. At the option of the Holder, the
Company may be required to issue fractional Warrant Shares on the exercise
of this Warrant. Such fractional Warrant Shares may arise upon an
adjustment made pursuant to subsection 3(a). If more than one Warrant
shall
<PAGE>
be presented for exercise in full at the same time by the same
Holder, the number of full Warrant Shares which shall be issuable upon the
exercise thereof shall be computed on the basis of the aggregate number of
Warrant Shares purchasable on exercise of the Warrants so presented. If
the Holder decides against receiving fractional Warrant Shares and if any
fraction of a Warrant Share would, except for the provisions of this
Section 4, be issuable on the exercise of any Warrants (or specified
portion thereof), upon payment in full of the Exercise Price with respect
to such fraction of a Warrant Share the Company shall pay an amount in cash
equal to the same fraction of the Current Market Price of such Warrant
Share on the day immediately preceding the date the Warrant is presented
for exercise, provided, that at the request of the Holder, the Exercise
Price with respect to such fraction of a Warrant Share may be netted
against the cash to be paid by the Company under this Section 4.
provided, that no individual stockholder's share ownership shall be deemed
- --------
reduced unless all stockholders' share ownership are proportionately and
simultaneously reduced. As a result, the respective ownership percentages (but
not the number of shares held) of the Company's stockholders prior to the date
hereof will remain unchanged following the Stock Split.
2. Except as herein amended, the Agreement shall remain in full force
and effect and is ratified in all respects. On and after the effectiveness of
this Amendment, each reference in the Agreement to "this Agreement,"
"hereunder," "hereof, " "herein" or words of like import, and each reference to
the Agreement in any other agreements, documents or instruments executed and
delivered pursuant to the Agreement, shall mean and be a reference to the
Agreement, as amended by this Amendment.
3. This Amendment may be executed in two or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
duly executed as of the date first above written.
JACKSON PRODUCTS, INC. (formerly
JACKSON ACQUISITION CORP.)
By: /s/ Christopher T. Paule
--------------------------------
Name: Christopher T. Paule
Title: Vice President
MCIT PLC
By: /s/ James E. Jordan, Jr.
--------------------------------
Name: James E. Jordan, Jr.
Title: Director
MASSACHUSETTS MUTUAL LIFE INSURANCE
COMPANY
By: /s/ Michael L. Klofas
--------------------------------
Name: Michael L. Klofas
Title: Managing Director
<PAGE>
MASSMUTUAL PARTICIPATION INVESTORS
The name MassMutual Participation
Investors is the designation of the
Trustees under a Declaration of Trust
dated April 7, 1988, as amended from
time to time. The obligations of such
Trust are not binding upon, nor shall
resort be had to the property of, any of
the Trustees, shareholders, officers,
employees or agents of such Trust
individually, but the Trust's assets and
property only shall be bound.
By: /s/ John B. Joyce
--------------------------------
Name: John B. Joyce
Title: Vice President
MASSMUTUAL CORPORATE INVESTORS
The foregoing is executed on behalf of
MassMutual Corporate Investors,
organized under a Declaration of Trust,
dated September 13, 1988, as amended
from time to time. The obligations of
such Trust are not personally binding
upon, nor shall resort be had to the
property of, any of the Trustees,
shareholders, officers, employees or
agents of such Trust, but the Trust's
property only shall be bound.
By: /s/ John B. Joyce
--------------------------------
Name: John B. Joyce
Title: Vice President
<PAGE>
MASSMUTUAL CORPORATE VALUE PARTNERS
By: /s/ Michael L. Klofas
--------------------------------
Name: Michael L. Klofas
Title: Managing Director
THE NORTHWESTERN MUTUAL LIFE INSURANCE
COMPANY
By: /s/ A. Kipp Koester
--------------------------------
Name: A. Kipp Koester
Title: Vice President
JOHN HANCOCK MUTUAL LIFE INSURANCE
COMPANY
By: /s/ Dana Donovan
--------------------------------
Name: Dana Donovan
Title: Sr. Investment Officer
<PAGE>
EXHIBIT 4.22
[PLACE LEGEND HERE]
No. W-_____ Warrants to Purchase
_______ Shares
WARRANT TO PURCHASE
SHARES OF COMMON STOCK
OF
JACKSON ACQUISITION CORP.
(to be known as Jackson Products, Inc.)
Void after August 15, 2005
THIS CERTIFIES THAT, for value received,
or registered assigns, is entitled to purchase from Jackson Acquisition Corp., a
Delaware corporation (to be known from and after the Closing and the
transactions contemplated thereby as Jackson Products, Inc.) (the "Company"), at
any time on or before 5:00 p.m., New York City time, on August 15, 2005 (the
"Expiration Date"), _____ fully paid and nonassessable shares of Common Stock
(the Common Stock and other consideration deliverable on exercise of the
Warrants being referred to herein as the "Warrant Shares"), subject to the
adjustments and on the terms and conditions hereinafter set forth, at the
exercise price of $.01 per Warrant Share (the "Exercise Price").
The terms that are capitalized herein shall have the meanings
specified in Section 14 unless the context shall otherwise require.
SECTION 1. Exercise of Warrant.
(a) Subject to the conditions hereinafter set forth, this Warrant may
be exercised on or prior to the Expiration Date in whole at any time or from
time to time in part by the holder hereof (the "Holder"), by the surrender of
this Warrant (with the subscription form at the end hereof duly executed) at the
office of the Company specified in Section 13 hereof and upon payment to the
Company of the aggregate Exercise Price (or the proportionate part thereof if
exercised in part) for the Warrant Shares so purchased. Payment for the Warrant
Shares purchased by the Holder pursuant to this Section 1 shall be made in
cash or by certified or official bank check in lawful money of the United States
of America to the order of the Company. The
-1-
<PAGE>
date of exercise of this Warrant (or any portion hereof if exercised in part)
shall be deemed to be the date of receipt by the Company of this Warrant duly
filled in and signed and accompanied by proper payment as herein provided.
(b) Upon receipt of this Warrant, with the appropriate form of
election to exercise duly executed, accompanied by payment of the Exercise Price
for the Warrant Shares to be purchased, the Company shall promptly (but in any
event within three trading days) (i) requisition from any transfer agent of the
Warrant Shares certificates for the number of Warrant Shares to be purchased and
cause the same to be delivered to or upon the order of the Holder, registered in
such name or names as may be designated by such Holder and (ii) when
appropriate, deliver to or upon the order of the Holder cash in lieu of issuance
of fractional Warrant Shares in accordance with Section 4. Unless otherwise
requested by the Holder, the Warrant Shares issuable hereunder shall be voting
stock.
(c) If this Warrant is exercised in respect of fewer than all of the
Warrant Shares at the time purchasable hereunder, the Holder shall be entitled
to receive a new Warrant covering the number of Warrant Shares in respect of
which this Warrant shall not have been exercised; provided, however, that this
Warrant and all rights and options hereunder shall expire on the Expiration
Date, and shall be null and void to the extent this Warrant is not exercised
before it expires.
SECTION 2. Reservation of Warrant Shares. The Company shall at all
times on and prior to the Expiration Date reserve and keep available, free from
preemptive rights, out of the aggregate of its authorized but unissued Common
Stock or its authorized and issued Common Stock held in its treasury, the
maximum number of shares of Common Stock that may then be deliverable upon the
exercise of the rights represented by this Warrant.
The Company covenants that all Warrant Shares issued upon exercise of
this Warrant shall, upon issue, be fully paid, nonassessable, free of preemptive
rights and free from all taxes, liens, charges and security interests with
respect to the issue thereof.
SECTION 3. Adjustments. The number of Warrant Shares issuable upon
the exercise of this Warrant is subject to adjustment from time to time upon the
occurrence of the events enumerated in this Section 3.
(a) Adjustment for Change in Capital Stock. If the Company:
(i) pays a dividend or makes a distribution on its Common Stock
in shares of its Common Stock or other shares of its capital stock;
(ii) subdivides its outstanding shares of Common Stock into a
greater number of shares;
-2-
<PAGE>
(iii) combines its outstanding shares of Common Stock into a
smaller number of shares; or
(iv) issues by reclassification of its Common Stock any shares
of its capital stock;
then the number of Warrant Shares deliverable upon exercise of this Warrant
immediately prior to such action shall be proportionately adjusted so that the
Holder may thereafter receive the aggregate number and kind of shares of capital
stock of the Company that the Holder would have owned immediately following such
action if this Warrant had been exercised immediately prior to such action.
The adjustment shall become effective immediately after the record
date in the case of a dividend or distribution and immediately after the
effective date in the case of a subdivision, combination or reclassification.
Such adjustment shall be made successively whenever any event listed
above shall occur.
(b) Distributions. If the Company distributes to holders of its
Common Stock any of its assets (including but not limited to cash), securities
(other than capital stock), or any rights or warrants to purchase securities of
the Company (including but not limited to capital stock), then the Company shall
make the same distribution to the Holder as though, immediately prior to the
record date with respect to such distribution, the Holder owned the number of
shares of Common Stock it could have purchased upon the exercise of this
Warrant.
(c) Reorganization of Company. If the Company consolidates or merges
with or into, or transfers or leases all or substantially all of its assets to,
any person, upon consummation of such transaction this Warrant shall
automatically become exercisable for the kind and amount of securities, cash or
other assets that the Holder would have owned immediately after the
consolidation, merger or transfer or lease if the Holder had exercised the
Warrant immediately before the effective date of the transaction. Concurrently
with the consummation of such transaction, the corporation formed by or
surviving any such consolidation or merger if other than the Company, or the
person to which such sale or conveyance shall have been made, shall assume by
written instrument executed and mailed or delivered to the Holder the obligation
to deliver to the Holder, such securities, cash or other assets to which, in
accordance with the foregoing provisions, such Holder is entitled upon exercise
of this Warrant, and further providing for adjustments which shall be as nearly
equivalent as may be practical to the adjustments provided for in this
Section 3.
If the issuer of securities deliverable upon exercise of this Warrant
following such a transaction is an Affiliate of the formed, surviving,
transferee or lessee corporation, that issuer shall join in the written
undertaking specified in the foregoing paragraph.
-3-
<PAGE>
If this subsection (c) applies to any transaction, subsections 3(a)
and (b) shall not apply to such transaction.
(d) Form of Warrants. Irrespective of any adjustments in the number
or kind of shares purchasable upon the exercise of this Warrant, this Warrant
may continue to express the same number and kind of shares as are stated
initially.
(e) Notice of Adjustments. Whenever the number of shares deliverable
upon exercise of this Warrant shall be adjusted pursuant to this Section 3, the
Company shall promptly prepare a certificate signed by the President or a Vice
President and by the principal financial officer or principal accounting officer
of the Company setting forth, in reasonable detail, the event requiring the
adjustment, the amount of the adjustment, the method by which such adjustment
was calculated (including a description of the basis on which the Board of
Directors of the Company made any determination hereunder), and shall promptly
cause copies of such certificate to be mailed (by first-class mail, postage
prepaid) to the Holder. In addition, if the adjustment or action arises
pursuant to subsection 3(a), the Company shall deliver, or cause to be
delivered, to the Holder a certificate of a firm of independent public
accountants selected by the Board of Directors of the Company (who may be the
regular accountants employed by the Company) setting forth the number of Warrant
Shares issuable upon exercise of this Warrant after such adjustment, setting
forth a brief statement of the facts requiring such adjustment and setting forth
the computation by which such adjustment was made. Where appropriate, such
notice may be given in advance and may be included as a part of the notice
required to be sent under the other provisions of Section 11.
SECTION 4. Fractional Interests. The Company shall not be required
to issue fractional Warrant Shares on the exercise of this Warrant. If more
than one Warrant shall be presented for exercise in full at the same time by the
same Holder, the number of full Warrant Shares which shall be issuable upon the
exercise thereof shall be computed on the basis of the aggregate number of
Warrant Shares purchasable on exercise of the Warrants so presented. If any
fraction of a Warrant Share would, except for the provisions of this Section 4,
be issuable on the exercise of any Warrants (or specified portion thereof), upon
payment in full of the Exercise Price with respect to such fraction of a Warrant
Share the Company shall pay an amount in cash equal to the same fraction of the
Current Market Price of such Warrant Share on the day immediately preceding the
date the Warrant is presented for exercise, provided, that at the request of the
Holder, the Exercise Price with respect to such fraction of a Warrant Share may
be netted against the cash to be paid by the Company under this Section 4.
SECTION 5. Exchange of Warrant Certificates. This Warrant may be
exchanged for another Warrant or Warrants entitling the holder thereof to
purchase a like aggregate number of Warrant Shares as this Warrant then entitles
the Holder to purchase. If the Holder desires to exchange this Warrant the
Holder shall make such request in writing delivered to the Company and shall
surrender, properly endorsed, this Warrant at the office of the Company
designated for such purpose. Thereupon, the Company shall deliver to the person
entitled
-4-
<PAGE>
thereto, without expense to the Holder, a new Warrant or Warrants, as the case
may be, as so requested.
SECTION 6. Transfers. This Warrant shall be transferable only on the
Warrant Register upon delivery of this Warrant duly endorsed by the Holder or by
a duly authorized attorney or representative, or accompanied by proper evidence
of succession, assignment or authority to transfer. In all cases of transfer by
an attorney, the original power of attorney, duly approved, or an official copy
thereof, duly certified, shall be deposited and remain with the Company. In
case of transfer by executors, administrators, guardians or other legal
representatives, duly authenticated evidence of their authority shall be
produced, and may be required to be deposited with the Company in its
discretion. Upon any registration of transfer, the Company shall deliver to the
persons entitled thereto a new Warrant or Warrants, as the case may be. Upon
the request of the Holder, the Company shall provide the information required by
Rule 144A(d)(4) under the Securities Act.
SECTION 7. Partial Exercise and Partial Assignment. If this Warrant
is exercised in part only, the Holder shall be entitled to receive a new Warrant
covering the number of shares in respect of which this Warrant shall not have
been exercised as provided in Section 1. If this Warrant is partially assigned,
this Warrant shall be surrendered at the principal office of the Company (with
the partial assignment form at the end hereof duly executed), and thereupon a
new Warrant shall be issued to the Holder covering the number of shares not
assigned. The assignee of such partial assignment of this Warrant shall also be
entitled to receive a new Warrant covering the number of shares so assigned.
SECTION 8. Taxes. The Company covenants and agrees that it will pay
when due and payable any and all Federal, State and local taxes (other than
taxes with respect to income) that may be payable in respect of the delivery of
this Warrant or any Warrant Shares upon the exercise of the rights represented
by this Warrant pursuant to the provisions hereof.
SECTION 9. Lost, Stolen Warrants, Etc. Upon receipt of evidence
satisfactory to the Company of the loss, theft, mutilation or destruction of
this Warrant, and in the case of any such loss, theft, or destruction upon
delivery of a bond or indemnity in such form and amount as shall be reasonably
satisfactory to the Company, or in the event of such mutilation upon surrender
and cancellation of this Warrant, the Company will make and deliver without
expense to the Holder, a new Warrant, of like tenor, in lieu of such lost,
stolen, destroyed or mutilated Warrant. If the Purchaser or any subsequent
Institutional Holder is the owner of any such lost, stolen or destroyed Warrant,
then the affidavit of an authorized officer of such owner, setting forth the
fact of loss, theft or destruction shall be accepted as satisfactory evidence
thereof and no further indemnity shall be required as a condition to the
execution and delivery of the new Warrant other than the written agreement of
such owner to indemnify the Company.
SECTION 10. Government Approvals and Stock Exchange Listings. The
Company shall use its best efforts to (a) obtain and keep effective any and all
permits, consents and approvals of governmental agencies and authorities and to
make securities acts filings under
-5-
<PAGE>
Federal and state laws, if any, that are required to permit the exercise of the
Warrants, and (b) have the Warrant Shares, immediately upon their issuance,
listed on the principal securities exchanges and markets within the United
States of America, if any, on which other shares of Common Stock are then
listed.
SECTION 11. Consolidation, Merger, Dissolution and Liquidation. In
the event of
(i) 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
conveyance or transfer of the properties and assets of the Company substantially
as an entirety, or of any reclassification or change of Common Stock deliverable
upon exercise of this Warrant (other than a change in par value, or from par
value to no par value, or from no par value to par value, or as a result of a
subdivision or combination), or a tender offer or exchange offer for shares of
Common Stock; or
(ii) the voluntary or involuntary dissolution, liquidation or winding
up of the Company,
the Company shall deliver, or cause to be delivered, to the Holder, at least 30
days prior to the applicable record date hereinafter specified, or at least 30
days prior to such event in the case of events for which there is no record
date, in accordance with Section 13 hereof, a written notice stating, as
appropriate, (x) the initial expiration date set forth in any tender offer or
exchange offer for shares of Common Stock, or (y) the date on which any such
consolidation, merger, conveyance, transfer, dissolution, liquidation or winding
up is expected to become effective or consummated, and the date as of which it
is expected that holders of record of shares of Common Stock shall be entitled
to exchange such shares for securities or other property, if any, deliverable
upon such reclassification, consolidation, merger, conveyance, transfer,
dissolution, liquidation or winding up.
SECTION 12. Warrant Holder Not A Shareholder. Nothing contained in
this Warrant shall be construed as conferring upon the Holder the right to vote
or to consent or to receive notice as a shareholder in respect of the meetings
of shareholders or the election of directors of the Company or any other matter,
or any rights whatsoever as shareholders of the Company.
SECTION 13. Notices. Any notice required to be given or made by the
Holder to or on the Company shall be sufficiently given or made (i) five
Business Days after being deposited in the mail, first class, return receipt
requested, or (iii) one Business Day after being deposited with a nationally
recognized next-day air courier, in each case postage prepaid and addressed to
the office of the Company expressly designated by the Company at its office for
purposes of this Warrant (until the Holder is otherwise notified in accordance
with this Section by the Company), as follows:
-6-
<PAGE>
Jackson Acquisition Corp.
9 West 57th Street
New York, New York 10019
Attention: Richard Caputo
Any notice pursuant to this Warrant to be given by the Company to the
Holder shall be sufficiently given when or made (i) five Business Days after
being deposited in the mail, first class, return receipt requested or (ii) one
Business Day after being deposited with a nationally recognized next-day air
courier, in each case postage prepaid and addressed (until the Company is
otherwise notified in accordance with this Section by the Holder) or next-day
air courier to such Holder at the address appearing on the Warrant Register of
the Company.
SECTION 14. Definitions. As used in this Warrant, the following
terms shall have the following meanings:
"Affiliate" of any specified person shall mean any other person (a)
that directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified person, (b) that
beneficially owns or holds 10% or more of the Voting Stock of such specified
person or (c) 10% or more of the Voting Stock (or in the case of a person that
is not a corporation, 10% or more of the Equity Interest) of which is
beneficially owned or held by such specified person or one of its Subsidiaries.
The term "control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a person,
whether through the ownership of Voting Stock, by contract or otherwise.
Notwithstanding the foregoing to the contrary, (i) the Principals and their
respective Affiliates shall be deemed to be Affiliates of the Company and (ii)
none of Jefferies & Company, Inc., any of the original holders of Warrants nor
any of their respective Affiliates shall be deemed to be Affiliates of the
Company.
"Board of Directors" shall mean the board of directors or any duly
constituted committee of any corporation or of a corporate general partner of a
partnership and any similar body empowered to direct the affairs of any other
entity.
"Business Day" shall mean any day other than a Saturday, Sunday,
statutory holiday or other day on which banks in New York or Missouri are
authorized to close.
"Common Stock" shall mean shares now or hereafter authorized of any
class of common stock of the Company and any other stock of the Company, however
designated, that has the right (subject to any prior rights of any class or
series of preferred stock) to participate in any distribution of the assets or
earnings of the Company without limit as to per share amount.
"Equity Interests" shall mean capital stock or warrants, options or
other rights to acquire capital stock (but excluding any debt security that is
convertible into, or exchangeable for, capital stock).
-7-
<PAGE>
"Institutional Holder" shall mean any of the following persons: (a)
any bank, savings and loan association, savings institution, trust company,
public investment trust or national banking association, acting for its own
account or in a fiduciary capacity, (b) any charitable foundation, (c) any
insurance company, (d) any fraternal benefit society, (e) any pension,
retirement or profit-sharing trust or fund within the meaning of title I of
ERISA or for which any bank, trust company, national banking association or
investment adviser registered under the Investment Advisers Act of 1940, as
amended, is acting as trustee or agent, (f) any investment company or business
development company, as defined in the Investment Company Act of 1940, as
amended, (g) any small business investment company licensed under the Small
Business Investment Act of 1958, as amended, (h) any broker or dealer registered
under the Exchange Act, or any investment adviser registered under the
Investment Advisers Act of 1940, as amended, (i) any government, any public
employees' pension or retirement system, or any other government agency
supervising the investment of public funds, (j) any other entity all of the
equity owners of which are Institutional Holders or (k) any other person that
may be within the definition of "qualified institutional buyer" as such term is
used in Rule 144A.
"Other Purchasers" shall mean the other purchasers listed on the
signature pages of the Securities Purchase Agreement.
"Principals" shall mean The Jordan Company and Jordan/Zalaznick
Capital Corporation and their respective Affiliates, principals, partners and
employees, family members of any of the foregoing and trusts for the benefit of
any of the foregoing, including, without limitation, Leucadia National
Corporation and its subsidiaries. Notwithstanding the foregoing, MCIT PLC shall
be deemed not to be a Principal or an Affiliate of a Principal.
"Related Warrants" shall mean the Warrants (other than this Warrant)
initially issued pursuant to the Securities Purchase Agreement.
"Requisite Percentage" on any date shall mean the holders of Warrants
that are entitled to receive at least 66 2/3% of the Warrant Shares that are
deliverable upon the exercise of all Warrants then outstanding (assuming for
such purpose that Warrants held by Affiliates of the Company are not
outstanding).
"Securities Purchase Agreement" shall mean the several Purchase
Agreements, dated as of August 16, 1995, relating to the purchase and sale of
the Warrants and certain other equity securities of the Company.
"Voting Stock" shall mean, with respect to any person, (i) any class
or classes of capital stock of such person the holders of which are entitled to
elect a majority of the corporate directors (or persons performing similar
functions) (irrespective of whether or not at the time capital stock of any
other class or classes have or might have voting power by reason of the
happening of any contingency) and (ii) any capital stock of such person
convertible or exchangeable without restriction at the option of the holder
thereof into capital stock of such person described in clause (i) above.
-8-
<PAGE>
"Warrants" shall mean this Warrant and Related Warrants and all
warrants hereafter issued in exchange or substitution for this Warrant or any
Related Warrants.
SECTION 15. Supplements and Amendments. The Company may from time to
time supplement or amend this Warrant; provided, that
(a) the consent of the Holder shall be required for any amendment (i)
pursuant to which the Exercise Price would be increased or the number of Warrant
Shares purchasable upon exercise of this Warrant would be decreased or (ii) of
Sections 1, 2, 3 hereof or of this Section 15; and
(b) the consent of the registered holders of the Requisite Percentage
of then outstanding Warrants shall be required for any other amendment hereto.
Any such amendment or waiver shall apply equally to all of the holders
of the Warrants and shall be binding upon them, upon each future holder of any
Warrant and upon the Company, whether or not such Warrant shall have been marked
to indicate such amendment or waiver. No such amendment or waiver shall extend
to or affect any obligation not expressly amended or waived or impair any right
consequent thereon.
SECTION 16. Successors. All the covenants and provisions of this
Warrant by or for the benefit of the Company shall bind and inure to the benefit
of their respective successors and assigns hereunder. Upon becoming a successor
to the Company, such successor shall be deemed to be the Company for the
purposes of this Warrant.
SECTION 17. Governing Law. THIS WARRANT SHALL BE DEEMED TO BE A
CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK AND FOR ALL PURPOSES SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF SAID STATE,
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. THE COMPANY HEREBY
IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN
THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK OR ANY FEDERAL COURT SITTING IN
THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION
OR PROCEEDING ARISING OUT OF OR RELATING TO THIS WARRANT, AND IRREVOCABLY
ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS. THE COMPANY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW,
TRIAL BY JURY AND ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING
OF THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT
AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT
HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. THE COMPANY IRREVOCABLY CONSENTS, TO
THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, TO THE SERVICE
OF
-9-
<PAGE>
PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY
THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID,
TO THE COMPANY AT ITS ADDRESS SET FORTH HEREIN, SUCH SERVICE TO BECOME EFFECTIVE
30 DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF ANY
PURCHASER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE
LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE COMPANY IN ANY OTHER
JURISDICTION.
SECTION 18. Severability. If any term, provision, covenant or
restriction of this Warrant is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Warrant shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
SECTION 19. Descriptive Headings. Descriptive headings of the
several Sections of this Warrant are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, Jackson Acquisition Corp. has caused this Warrant
to be signed by its President and attested by its Secretary and this Warrant is
to be dated August __, 1995.
JACKSON ACQUISITION CORP.
By
-----------------------------
Name:
Title:
ATTEST
- -------------------
Secretary
-10-
<PAGE>
ELECTION TO EXERCISE
JACKSON PRODUCTS, INC.
The undersigned, _____________________, pursuant to the provisions of the
within Warrant, hereby elects to purchase _______ shares of Common Stock of
Jackson Products, Inc. covered by the within Warrant.
Signature
-------------------------------
Address
---------------------------------
Dated
----------------------
ASSIGNMENT
FOR VALUE RECEIVED ____________ hereby sells, assigns and transfers
unto the within Warrant and all rights evidenced thereby and does irrevocably
constitute and appoint ______________________, attorney, to transfer the said
Warrant on the books of the within-named Company.
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED ____________ hereby sells, assigns and transfers
unto that portion of the within Warrant and the rights evidenced thereby which
will on the date hereof entitle the holder to purchase _____ shares of Common
Stock of Jackson Products, Inc., and does hereby irrevocably constitute and
appoint _______________________, attorney, to transfer that part of the said
Warrant on the books of the within-named Company.
----------------------------------------
Dated
----------------------
-11-
<PAGE>
EXHIBIT 5
[Letterhead of Mayer, Brown & Platt]
July 24, 1998
Jackson Products, Inc.
2997 Clarkson Road
Chesterfield, Missouri 63017
Ladies and Gentlemen:
We are acting as special counsel to Jackson Products, Inc. (the "Company")
-------
in connection with the corporate proceedings ("Corporate Proceedings") taken and
---------------------
to be taken relating to the registration under the Securities Act of 1933, as
amended, of an exchange offer relating to the 9 1/2% Series B Senior
Subordinated Notes due 2005 of the Company (the "Notes"). We have also
-----
participated in the preparation and filing with the Securities and Exchange
Commission of a registration statement on Form S-4 as amended (the "Registration
------------
Statement") relating to the Notes.
- ---------
In connection therewith, we have examined or are otherwise familiar with
the Company's Amended and Restated Certificate of Incorporation, the Company's
By-Laws, as amended to date, the Registration Statement, the Indenture, dated as
of April 22, 1998, between the Company and State Street Bank and Trust Company
(the "Indenture"), relevant resolutions of the Board of Directors of the
---------
Company, and such other documents and instruments as we have deemed necessary
for the purposes of this opinion.
We have assumed the authenticity and completeness of all records,
certificates and other instruments submitted to us as originals, the conformity
to original documents of all records, certificates and other instruments
submitted to us as copies, the authenticity and completeness of the originals of
those records, certificates and other instruments submitted to us as copies and
the correctness of all statements of fact contained in all records, certificates
and other instruments that we have examined.
Based on and in reliance upon the foregoing, we are of the opinion that
upon completion of the Corporate Proceedings, the Notes will be duly authorized
for issuance and when delivered in accordance with the terms of the exchange
offer described in the Registration Statement, the Indenture and the Corporate
Proceedings, will be validly issued and enforceable in accordance with the
Indenture. Furthermore, we hereby confirm that the discussion set forth under
the "Certain Tax Considerations" in the prospectus (the "Prospectus") forming a
----------
part of the Registration Statement represents our opinion as to the material
U.S. federal income consequences of the receipt, ownership and disposition of
the Notes.
<PAGE>
We hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement and to the reference to us under the caption "Legal
Matters" in the Prospectus.
Very truly yours,
/s/ Mayer, Brown & Platt
------------------------------
Mayer, Brown & Platt
<PAGE>
EXHIBIT 10.43
-------------
INTERCOMPANY MANAGEMENT CONSULTING AGREEMENT
THIS MANAGEMENT CONSULTING AGREEMENT ("Agreement"), is executed as of the
16th day of August, 1995, between FLEX-O-LITE, INC., a Delaware corporation (the
"Company"), and JACKSON PRODUCTS, INC., a Delaware corporation ("Consultant").
W I T N E S S E T H:
-------------------
WHEREAS, the Consultant has and/or has access to personnel who are highly
skilled in the field of rendering advice to businesses such as the Company; and
WHEREAS, the Company desires to retain Consultant to provide business and
financial advice to the Company;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements herein set forth, the parties hereto do hereby agree as follows:
1. The Company hereby retains the Consultant, through the Consultant's own
personnel or through personnel available to the Consultant, to render consulting
services from time to time to the Company and its subsidiaries (whether now
existing or hereafter acquired), in connection with their financial and business
affairs, their relationships with their lenders, stockholders and other third-
party associates or affiliates, and the expansion of their businesses. The term
of this Agreement shall commence the date hereof and continue until August 16,
2005, unless extended, or sooner terminated, as provided in paragraph 4 below.
The Consultant's personnel shall be reasonably available to the Company's
managers, auditors and other personnel for consultation and advice, subject to
Consultant's reasonable convenience and scheduling. Services may be rendered at
the Consultant's offices or at such other locations selected by the Consultant
as the Company and the Consultant shall from time to time agree.
2. The Company shall pay the Consultant an annual fee as shall be agreed
to by the parties (and, in the event of no agreement by the parties, the amount
paid in the immediately preceding year), in each case payable in quarterly
installments on the 30th day of March, June, September and December of each
year, starting September 30, 1995.
3. Out-of-pocket expenses (including, without limitation, an allocable
amount of the Consultant's overhead expenses, as determined by the Consultant in
its sole discretion) incurred by the Consultant and its personnel in performing
services hereunder to the Company and its subsidiaries shall be promptly
reimbursed to it by the Company upon the Consultant's rendering of a statement
therefor, together with supporting data as the Company shall reasonably require.
<PAGE>
4. Notwithstanding the foregoing, the Company shall not be required to pay
the fees under Section 3 (without limiting the obligation for payment of the
fees, reimbursements and payments provided under Sections 7 and 8 of this
Agreement which shall be due and payable in all events), (a) if and to the
extent expressly prohibited by the provisions of any credit, stock, financing or
other agreements or instruments binding upon the Company, its subsidiaries or
properties, (b) if the Company, or any of its subsidiaries, has not paid
interest on any interest payment date or has postponed or not made any principal
payments with respect to any of their indebtedness on any scheduled payment
dates, or (c) if the Company has not paid dividends on any dividend payment date
as set forth in its certificate of incorporation or as declared by its Board of
Directors, or has postponed or not made any redemptions on any redemption date
as set forth in its certificate of incorporation or any certificate of
designation with respect to its preferred stock, if any. Any payments otherwise
owed hereunder, which are not made for any of the above-mentioned reasons, shall
not be cancelled but rather shall accrue, and shall be payable by the Company
promptly when, and to the extent, that the Company is no longer prohibited from
making such payments and when the Company has become current with respect to
such principal or interest payments, has become current with respect to such
dividends and has made such redemptions with respect to such preferred stock, if
any. Any payment required hereunder which is not paid when due shall bear
interest at the rate of ten percent (10%) per annum.
5. This Agreement shall be automatically renewed for successive one-year
terms starting August 16, 2005 unless either party hereto, within sixty (60)
days prior to the scheduled renewal date, notifies the other party as to its
election to terminate this Agreement. Notwithstanding the foregoing, this
Agreement may be terminated by not less than ninety (90) days' prior written
notice from the Company to the Consultant at any time after (i) substantially
all of the stock or substantially all of the assets of the Company are sold to
any entity unaffiliated with the Consultant and/or a majority of the Company's
stockholders immediately prior to such sale, or (ii) the Company is merged or
consolidated into another entity unaffiliated with the Consultant and/or a
majority of the Company's stockholders immediately prior to such merger and the
Company is not the survivor of such transaction.
6. The Consultant shall have no liability to the Company on account of (i)
any advice which it renders to the Company, provided the Consultant believed in
good faith that such advice was useful or beneficial to the Company at the time
it was rendered, or (ii) the Consultant's inability to obtain financing or
achieve other results desired by the Company or Consultant's failure to render
services to the Company at any particular time or from time to time, or (iii)
the failure of any transaction to meet the financial, operating or other
expectations of the Company. The Company's sole remedy for any claim under this
Agreement shall be termination of this Agreement.
7. The Company will, to the fullest extent permitted by applicable law,
indemnify and hold harmless the Consultant, its affiliates and associates, and
each of the respective owners, partners, officers, directors, employees and
agents of each of the foregoing, from and against any loss, liability, damage,
claim or expenses (including the fees and expenses of counsel) arising as a
result or in connection with this Agreement, the Consultant's services hereunder
or other activities on behalf of the Company and its subsidiaries.
-2-
<PAGE>
8. The amount of any payments paid by the Company under this Agreement
shall be increased by the amount, if any, of any taxes (other than income taxes)
or other governmental charges levied in respect of such payments, so that the
Consultant is made whole for such taxes or charges.
9. a. This Agreement sets forth the entire understanding of the parties
with respect to the Consultant's rendering of services to the Company. This
Agreement may not be modified, waived, terminated or amended except expressly by
an instrument in writing signed by the Consultant and the Company.
b. This Agreement may not be assigned by the Company without the
consent of the Consultant, but may be assigned by the Consultant to any
affiliate of the Consultant, as the term "affiliate" is used in the federal
securities laws, and may be assigned or pledged by the Consultant to any
financial institution or other lender. Any permitted assignment of this
Agreement shall be binding upon and inure to the benefit of the parties and
their respective successors and assigns.
c. In the event that any provision of this Agreement shall be held
to be void or unenforceable in whole or in part, the remaining provisions of
this Agreement and the remaining portion of any provision held void or
unenforceable in part shall continue in full force and effect.
d. Except as otherwise specifically provided herein, notice given
hereunder shall be deemed sufficient if delivered personally or sent by
registered or certified mail to the address of the party for whom intended at
the principal executive offices of such party, or at such other address as such
party may hereinafter specify by written notice to the other party.
e. No waiver by any party of any breach of any provision of this
Agreement shall be deemed a continuing waiver or a waiver of any preceding or
succeeding breach of such provision or of any other provision herein contained.
f. The Consultant and its personnel shall, for purposes of this
Agreement, be independent contractors with respect to the Company.
g. This Agreement shall be governed by the internal laws (and not
the law of conflicts) of the State of New York.
-3-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
FLEX-O-LITE, INC.
By /s/ Christopher T. Paule
-------------------------------
Name: Christopher T. Paule
Title: Vice President
JACKSON PRODUCTS, INC.
By /s/ Christopher T. Paule
-------------------------------
Name: Christopher T. Paule
Title: Vice President
-4-
<PAGE>
EXHIBIT 23.2
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Jackson Products, Inc.
We consent to the use of our reports on the consolidated financial
statements of (i) Jackson Products, Inc. and subsidiaries dated April 16, 1998
and (ii) Jackson Holding Company and subsidiary dated March 27, 1998 included
herein and to the reference to our firm under the heading "Experts" in the
prospectus.
/s/ KPMG Peat Marwick LLP
-------------------------------
KPMG Peat Marwick LLP
St. Louis, Missouri
July 24, 1998
<PAGE>
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
NCH Corporation
We consent to the use of our report dated March 6, 1998 included herein and
to the reference to our firm under the heading "Experts" in the prospectus.
/s/ KPMG Peat Marwick LLP
-------------------------------
KPMG Peat Marwick LLP
Dallas, Texas
July 25, 1998
<PAGE>
EXHIBIT 25
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM T-1
_________
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
Check if an Application to Determine Eligibility
of a Trustee Pursuant to Section 305(b)(2)
STATE STREET BANK AND TRUST COMPANY
(Exact name of trustee as specified in its charter)
Massachusetts 04-1867445
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification No.)
225 Franklin Street, Boston, Massachusetts 02110
(Address of principal executive offices) (Zip Code)
Maureen Scannell Bateman, Esq. Executive Vice President and General Counsel
225 Franklin Street, Boston, Massachusetts 02110
(617) 654-3253
(Name, address and telephone number of agent for service)
JACKSON PRODUCTS, INC.
(Exact name of obligor as specified in its charter)
Delaware 75-2470881
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2997 Clarkson Road, Chesterfield, Missouri 63017
(Address of principal executive offices) (Zip Code)
9 1/2 % Senior Subordinated Notes due 2005
(Title of indenture securities)
<PAGE>
GENERAL
ITEM 1. GENERAL INFORMATION.
FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISORY AUTHORITY TO
WHICH IT IS SUBJECT.
Department of Banking and Insurance of The Commonwealth of
Massachusetts, 100 Cambridge Street, Boston, Massachusetts.
Board of Governors of the Federal Reserve System, Washington,
D.C., Federal Deposit Insurance Corporation, Washington, D.C.
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
The obligor is not an affiliate of the trustee or of its parent, State
Street Corporation.
(See note on page 2.)
ITEM 3.THROUGH ITEM 15. NOT APPLICABLE.
ITEM 16. LIST OF EXHIBITS.
LIST BELOW ALL EXHIBITS FILED AS PART OF THIS STATEMENT OF ELIGIBILITY.
1. A COPY OF THE ARTICLES OF ASSOCIATION OF THE TRUSTEE AS NOW IN EFFECT.
A copy of the Articles of Association of the trustee, as now in
effect, is on file with the Securities and Exchange Commission as
Exhibit 1 to Amendment No. 1 to the Statement of Eligibility and
Qualification of Trustee (Form T-1) filed with the Registration
Statement of Morse Shoe, Inc. (File No. 22-17940) and is incorporated
herein by reference thereto.
2. A COPY OF THE CERTIFICATE OF AUTHORITY OF THE TRUSTEE TO COMMENCE
BUSINESS, IF NOT CONTAINED IN THE ARTICLES OF ASSOCIATION.
A copy of a Statement from the Commissioner of Banks of Massachusetts
that no certificate of authority for the trustee to commence business
was necessary or issued is on file with the Securities and Exchange
Commission as Exhibit 2 to Amendment No. 1 to the Statement of
Eligibility and Qualification of Trustee (Form T-1) filed with the
Registration Statement of Morse Shoe, Inc. (File No. 22-17940) and is
incorporated herein by reference thereto.
3. A COPY OF THE AUTHORIZATION OF THE TRUSTEE TO EXERCISE CORPORATE TRUST
POWERS, IF SUCH AUTHORIZATION IS NOT CONTAINED IN THE DOCUMENTS SPECIFIED
IN PARAGRAPH (1) OR (2), ABOVE.
A copy of the authorization of the trustee to exercise corporate trust
powers is on file with the Securities and Exchange Commission as
Exhibit 3 to Amendment No. 1 to the Statement of Eligibility and
Qualification of Trustee (Form T-1) filed with the Registration
Statement of Morse Shoe, Inc. (File No. 22-17940) and is incorporated
herein by reference thereto.
4. A COPY OF THE EXISTING BY-LAWS OF THE TRUSTEE, OR INSTRUMENTS
CORRESPONDING THERETO.
A copy of the by-laws of the trustee, as now in effect, is on file
with the Securities and Exchange Commission as Exhibit 4 to the
Statement of Eligibility and Qualification of Trustee (Form T-1) filed
with the Registration Statement of Eastern Edison Company (File No.
33-37823) and is incorporated herein by reference thereto.
1
<PAGE>
5. A COPY OF EACH INDENTURE REFERRED TO IN ITEM 4. IF THE OBLIGOR IS IN
DEFAULT.
Not applicable.
6. THE CONSENTS OF UNITED STATES INSTITUTIONAL TRUSTEES REQUIRED BY
SECTION 321(B) OF THE ACT.
The consent of the trustee required by Section 321(b) of the Act
is annexed hereto as Exhibit 6 and made a part hereof.
7. A COPY OF THE LATEST REPORT OF CONDITION OF THE TRUSTEE PUBLISHED
PURSUANT TO LAW OR THE REQUIREMENTS OF ITS SUPERVISING OR EXAMINING
AUTHORITY.
A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or
examining authority is annexed hereto as Exhibit 7 and made a
part hereof.
NOTES
In answering any item of this Statement of Eligibility which relates to
matters peculiarly within the knowledge of the obligor or any underwriter of the
obligor, the trustee has relied upon the information furnished to it by the
obligor and the underwriters, and the trustee disclaims responsibility for the
accuracy or completeness of such information.
The answer to Item 2. of this statement will be amended, if necessary, to
reflect any facts which differ from those stated and which would have been
required to be stated if known at the date hereof.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, State Street Bank and Trust Company, a corporation duly
organized and existing under the laws of The Commonwealth of Massachusetts, has
duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of Boston and The
Commonwealth of Massachusetts, on the 28/th/ of May, 1998.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Jacqueline Connor
----------------------------
Jacqueline Connor
Assistant Vice President
2
<PAGE>
EXHIBIT 6
CONSENT OF THE TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act
of 1939, as amended, in connection with the proposed issuance by Jackson
Products, Inc. of its 9 1/2% Senior Subordinated Notes due 2005 we hereby
consent that reports of examination by Federal, State, Territorial or District
authorities may be furnished by such authorities to the Securities and Exchange
Commission upon request therefor.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Jacqueline Connor
-----------------------------------------
Jacqueline Connor
Assistant Vice President
Dated: May 28, 1998
<PAGE>
EXHIBIT 7
Consolidated Report of Condition of State Street Bank and Trust Company,
Massachusetts and foreign and domestic subsidiaries, a state banking institution
organized and operating under the banking laws of this commonwealth and a member
of the Federal Reserve System, at the close of business December 31, 1997,
-----------------
published in accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act and in accordance
with a call made by the Commissioner of Banks under General Laws, Chapter 172,
Section 22(a).
<TABLE>
<CAPTION>
Thousands of
ASSETS Dollars
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin................................................ 2,220,829
Interest-bearing balances......................................................................... 10,076,045
Securities........................................................................................... 10,373,821
Federal funds sold and securities purchased
under agreements to resell in domestic offices
of the bank and its Edge subsidiary............................................................... 5,124,310
Loans and lease financing receivables:
Loans and leases, net of unearned income ......................................................... 6,270,348
Allowance for loan and lease losses............................................................... 82,820
Allocated transfer risk reserve................................................................... 0
Loans and leases, net of unearned income and allowances........................................... 6,187,528
Assets held in trading accounts...................................................................... 1,241,555
Premises and fixed assets............................................................................ 410,029
Other real estate owned.............................................................................. 100
Investments in unconsolidated subsidiaries........................................................... 38,831
Customers' liability to this bank on acceptances outstanding......................................... 44,962
Intangible assets.................................................................................... 224,049
Other assets......................................................................................... 1,507,650
----------
Total assets......................................................................................... 37,449,709
==========
LIABILITIES
Deposits:
In domestic offices............................................................................... 10,115,205
Noninterest-bearing........................................................................... 7,739,136
Interest-bearing.............................................................................. 2,376,069
In foreign offices and Edge subsidiary............................................................ 14,791,134
Noninterest-bearing........................................................................... 71,889
Interest-bearing.............................................................................. 14,719,245
Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of
the bank and of its Edge subsidiary............................................................... 7,603,920
Demand notes issued to the U.S. Treasury and Trading Liabilities..................................... 194,059
Trading liabilities.................................................................................. 1,036,905
Other borrowed money................................................................................. 459,252
Subordinated notes and debentures.................................................................... 0
Bank's liability on acceptances executed and outstanding............................................. 44,962
Other liabilities.................................................................................... 972,782
Total liabilities.................................................................................... 35,218,219
----------
EQUITY CAPITAL
Perpetual preferred stock and related surplus........................................................ 0
Common stock......................................................................................... 29,931
Surplus.............................................................................................. 444,620
Undivided profits and capital reserves/Net unrealized holding gains (losses)......................... 1,763,076
Cumulative foreign currency translation adjustments.................................................. (6,137)
Total equity capital................................................................................. 2,231,490
----------
Total liabilities and equity capital................................................................. 37,449,709
----------
</TABLE>
4
<PAGE>
I, Rex S. Schuette, Senior Vice President and Comptroller of the above named
bank do hereby declare that this Report of Condition has been prepared in
conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.
Rex S. Schuette
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
David A. Spina
Marshall N. Carter
Truman S. Casner
5
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FISCAL
1997 CONSOLIDATED FINANCIAL STATEMENTS OF JACKSON PRODUCTS, INC. AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000906737
<NAME> O
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1<F1>
<CASH> 523
<SECURITIES> 0
<RECEIVABLES> 14,888<F2>
<ALLOWANCES> 0
<INVENTORY> 22,837
<CURRENT-ASSETS> 38,657<F3>
<PP&E> 29,120
<DEPRECIATION> 8,302
<TOTAL-ASSETS> 125,047<F4>
<CURRENT-LIABILITIES> 25,389<F5>
<BONDS> 106,381<F6>
0
20,951<F7>
<COMMON> 0<F8>
<OTHER-SE> 7,102<F9>
<TOTAL-LIABILITY-AND-EQUITY> 125,047
<SALES> 123,417
<TOTAL-REVENUES> 123,417<F10>
<CGS> 87,466
<TOTAL-COSTS> 119,049<F11>
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 335<F12>
<INTEREST-EXPENSE> 13,311<F13>
<INCOME-PRETAX> (9,679)
<INCOME-TAX> 684
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (10,363)
<EPS-PRIMARY> 0<F14>
<EPS-DILUTED> 0<F15>
<FN>
<F1>NOT APPLICABLE. ALL FIGURES FOR JACKSON PRODUCTS, INC. ARE IN U.S. DOLLARS.
<F2>FIGURE FOR RECEIVABLES IS NET OF ALLOWANCES OF $404 FOR DOUBTFUL ACCOUNTS.
<F3>INCLUDES PREPAID EXPENSES OF $409.
<F4>INCLUDES INTANGIBLES (CONSISTING OF GOODWILL, CUSTOMER LISTS, PATENTS,
TECHNOLOGY AGREEMENTS AND OTHER) OF $60,050 (NET OF AMORTIZATION), DEFERRED
FINANCING COSTS OF $5,180 AND OTHER NON-CURRENT ASSETS OF $342.
<F5>INCLUDES CURRENT PORTION OF LONG-TERM DEBT OF $6,120 AS OF DECEMBER 31,
1997.
<F6>INCLUDES LONG-TERM DEBT OF $106381 (NET OF THE CURRENT PORTION). FOR A
DESCRIPTION OF THE TERMS OF JACKSON PRODUCTS' LONG-TERM DEBT, SEE FOOTNOTE 8 TO
JACKSON PRODUCTS' FISCAL 1997 CONSOLIDATED FINANCIAL STATEMENTS.
<F7>AS OF DECEMBER 31, 1997, JACKSON PRODUCTS HAD 1,700 SHARES OF EXCHANGEABLE
PREFERRED STOCK, $.01 PAR VALUE PER SHARE OUTSTANDING WITH A LIQUIDATION VALUE
OF $23,065. FOR A DESCRIPTION OF JACKSON PRODUCTS' EXCHANGEABLE PREFERRED STOCK
OF DECEMBER 31, 1997, SEE FOOTNOTE 9 TO JACKSON PRODUCTS' FISCAL 1997
CONSOLIDATED FINANCIAL STATEMENTS.
<F8>AS DECEMBER 31, 1997, JACKSON PRODUCTS HAD 40,000 SHARES OF CLASS A COMMON
STOCK, $.01 PAR VALUE PER SHARE, AND 8,526 SHARES OF CLASS C COMMON STOCK, $.01
PAR VALUE PER SHARE, OUTSTANDING. FOR A DESCRIPTION OF JACKSON PRODUCTS' COMMON
STOCK AS DECEMBER 31, 1997, SEE FOOTNOTE 9 TO JACKSON PRODUCTS' FISCAL 1997
CONSOLIDATED FINANCIAL STATEMENTS.
<F9>CONSISTS OF $7,102 OF ADDITIONAL PAID IN CAPITAL.
<F10>IN FISCAL 1997, JACKSON PRODUCTS' TOTAL REVENUES WERE DERIVED EXCLUSIVELY
FROM SALES GENERATED BY ITS MANUFACTURING BUSINESS.
<F11>IN FISCAL 1997, JACKSON PRODUCTS' TOTAL COSTS OF (I) COST OF SALES OF
$87,466, (II) SELLING, GENERAL AND ADMINISTRATIVE EXPENSES OF $15,205, AND (III)
AMORTIZATION OF INTANGIBLES OF $16,378. FOR A DESCRIPTION OF JACKSON PRODUCTS'
OPERATING COSTS, SEC JACKSON PRODUCTS' FISCAL 1997 CONSOLIDATED STATEMENT OF
OPERATIONS.
<F12>CONSISTS OF $335 LOSS ON THE WRITE-DOWN OF ASSETS. FOR A DESCRIPTION OF
JACKSON PRODUCTS' LOSSES, SEE FOOTNOTE 13 OF JACKSON PRODUCTS' FISCAL 1997
CONSOLIDATED FINANCIAL STATEMENTS.
<F13>CONSISTS OF $12,050 OF INTEREST EXPENSE AND $1,261 OF AMORTIZATION OF
DEFERRED COSTS DURING FISCAL 1997.
<F14>NOT APPLICABLE.
<F15>NOT APPLICABLE.
</FN>
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FISCAL
1997 CONSOLIDATED FINANCIAL STATEMENTS OF JACKSON PRODUCTS, INC. FOR THE THREE
MONTHS ENDED MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000906737
<NAME> O
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<EXCHANGE-RATE> 1<F1>
<CASH> 522
<SECURITIES> 0
<RECEIVABLES> 18,804<F2>
<ALLOWANCES> 0
<INVENTORY> 24,785
<CURRENT-ASSETS> 44,408<F3>
<PP&E> 29,566
<DEPRECIATION> 9,306
<TOTAL-ASSETS> 128,727<F4>
<CURRENT-LIABILITIES> 25,304<F5>
<BONDS> 111,723<F6>
0
21,389<F7>
<COMMON> 0<F8>
<OTHER-SE> 7,102<F9>
<TOTAL-LIABILITY-AND-EQUITY> 128,727
<SALES> 31,106
<TOTAL-REVENUES> 31,106<F10>
<CGS> 21,849
<TOTAL-COSTS> 28,869<F11>
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0<F12>
<INTEREST-EXPENSE> 3,305<F13>
<INCOME-PRETAX> (1,240)
<INCOME-TAX> 159
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (0,399)
<EPS-PRIMARY> 0<F14>
<EPS-DILUTED> 0<F15>
<FN>
<F1>NOT APPLICABLE. ALL FIGURES FOR JACKSON PRODUCTS, INC. ARE IN U.S. DOLLARS.
<F2>FIGURE FOR RECEIVABLES IS NET OF ALLOWANCES OF $404 FOR DOUBTFUL ACCOUNTS.
<F3>INCLUDES PREPAID EXPENSES OF $567.
<F4>INCLUDES INTANGIBLES (CONSISTING OF GOODWILL, CUSTOMER LISTS, PATENTS,
TECHNOLOGY AGREEMENTS AND OTHER) OF $58,837 (NET OF AMORTIZATION), DEFERRED
FINANCING COSTS OF $4,870 AND OTHER NON-CURRENT ASSETS OF $352.
<F5>INCLUDES CURRENT PORTION OF LONG-TERM DEBT OF $6,118 AS OF MARCH 31, 1998.
<F6>INCLUDES LONG-TERM DEBT OF $117,723 (NET OF THE CURRENT PORTION). FOR A
DESCRIPTION OF THE TERMS OF JACKSON PRODUCTS' LONG-TERM DEBT, SEE FOOTNOTE 8 TO
JACKSON PRODUCTS' FISCAL 1997 CONSOLIDATED FINANCIAL STATEMENTS.
<F7>AS OF MARCH 31, 1997, JACKSON PRODUCTS HAD 1,700 SHARES OF EXCHANGEABLE
PREFERRED STOCK, $.01 PAR VALUE PER SHARE OUTSTANDING WITH A LIQUIDATION VALUE
OF $23,810. FOR A DESCRIPTION OF JACKSON PRODUCTS' EXCHANGEABLE PREFERRED STOCK
OF MARCH 31, 1997, SEE FOOTNOTE 9 TO JACKSON PRODUCTS' FISCAL 1997
CONSOLIDATED FINANCIAL STATEMENTS.
<F8>AS MARCH 31, 1997, JACKSON PRODUCTS HAD 40,000 SHARES OF CLASS A COMMON
STOCK, $.01 PAR VALUE PER SHARE, AND 8,526 SHARES OF CLASS C COMMON STOCK, $.01
PAR VALUE PER SHARE, OUTSTANDING.
<F9>CONSISTS OF $7,102 OF ADDITIONAL PAID IN CAPITAL.
<F10>IN THE THREE MONTHS ENDED MARCH 31, 198, JACKSON PRODUCTS' TOTAL COSTS
JACKSON PRODUCTS' REVENUES WERE DERIVED EXCLUSIVELY FROM SALES GENERATED BY ITS
MANUFACTURING BUSINESS.
<F11>IN THREE MONTHS ENDED MARCH 31, 1998, JACKSON PRODUCTS' TOTAL COSTS OF (I)
COST OF SALES OF $21,849, (II) SELLING, GENERAL AND ADMINISTRATIVE EXPENSES OF
$5M256, AND (III) AMORTIZATION OF INTANGIBLES OF $1764.
<F12>NOT APPLICABLE.
<F13>CONSISTS OF $2,996 OF INTEREST EXPENSE AND $309 OF AMORTIZATION OF DEFERRED
COSTS DURING THE THREE MONTHS ENDED MARCH 31, 1998
<F14>NOT APPLICABLE.
<F15>NOT APPLICABLE.
</FN>
</TABLE>
<PAGE>
EXHIBIT 99.1
------------
LETTER OF TRANSMITTAL
FOR TENDERS OF
$115,000,000 Aggregate Principal Amount of
9 1/2% Senior Subordinated Notes due 2005
JACKSON PRODUCTS, INC.
Pursuant to the Prospectus
dated ________ __, 1998 of Jackson Products, Inc.
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY TIME, ON THE EARLIER
OF ________ __, 1998 (UNLESS EXTENDED) OR THE DATE ON WHICH 100% OF THE OLD
NOTES ARE VALIDLY TENDERED AND NOT WITHDRAWN (THE "EXPIRATION DATE"). TENDERED
OLD SECURITIES MAY BE WITHDRAWN AT ANY TIME ON OR PRIOR TO THE EXPIRATION DATE
OF THE EXCHANGE OFFER.
- --------------------------------------------------------------------------------
Deliver to: State Street Bank and Trust Company, Exchange Agent:
By Registered or Certified Mail: By Overnight Courier or Hand:
State Street Bank and Trust Company State Street Bank and Trust Company
P.O. Box 778 Two International Place
Boston, MA 02102-0078 Boston, MA 02110
Attn: Kellie Mullen Attn: Kellie Mullen
Telephone Number:
(617) 664-5587
By Facsimile for Eligible Institutions:
(617) 664-5395
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR
TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE, WILL
NOT CONSTITUTE A VALID DELIVERY.
The undersigned (the "Holder") acknowledges that he or she has received the
Prospectus, dated ________ __, 1998 (the "Prospectus"), of Jackson Products,
Inc., a Delaware corporation (the "Company"), and this Letter of Transmittal,
which may be amended from time to time (this "Letter"), which together
constitute the Company's offer (the "Exchange Offer") to exchange an aggregate
principal amount of up to $115,000,000 of its 9 1/2% Series B Senior
Subordinated Notes due 2005 (the "Exchange Notes"), which have been registered
under the Securities Act of 1933 (the "Securities Act"), pursuant to a
Registration Statement of which the Prospectus constitutes a part, for a like
principal amount of the issued and outstanding 9 1/2% Series A Senior
Subordinated Notes due 2005 (the "Old Notes") of which $115,000,000 aggregate
principal amount is outstanding.
For each Old Note accepted for exchange, the Holder of such Old Note will
receive an Exchange Note having a principal amount equal to that of the
surrendered Old Note. The Exchange Notes will bear interest from the most
recent date to which interest has been paid on the Old Notes or, if no interest
has been paid on the Old Notes, from April 22, 1998. Old Notes accepted for
exchange will cease to accrue interest from and after the date
<PAGE>
of consummation of the Exchange Offer. Holders of Old Notes whose Old Notes are
accepted for exchange will not receive any payment in respect of interest on
such Old Notes otherwise payable on any interest payment date the record date
for which occurs on or after consummation of the Exchange Offer.
This Letter is to be used: (i) by all Holders who are not members of the
Automated Tender Offering Program ("ATOP") at the Depository Trust Company
("DTC"), (ii) by Holders who are ATOP members but choose not to use ATOP or
(iii) if the Old Securities are to be tendered in accordance with the guaranteed
delivery procedures set forth in "The Exchange Offer--Guaranteed Delivery
Procedures" section of the Prospectus. See Instruction 2 hereto. Delivery of
this Letter to DTC does not constitute delivery to the Exchange Agent.
Notwithstanding anything to the contrary in the Registration Rights
Agreement, dated April 22, 1998, among the Company and the initial purchasers of
Old Notes (the "Registration Rights Agreement"), the Company will accept for
exchange any and all Old Notes validly tendered on or prior to 5:00 p.m., New
York City time, on the earlier of _________ __, 1998 (unless the Exchange Offer
is extended by the Company) or the date on which 100% of the Old Notes are
validly tendered and not withdrawn (the "Expiration Date"). Tenders of Old
Notes may be withdrawn at any time prior to 5:00 p.m., New York City time, on
the Expiration Date.
IMPORTANT: HOLDERS WHO WISH TO TENDER OLD NOTES IN THE EXCHANGE OFFER MUST
COMPLETE THIS LETTER OF TRANSMITTAL AND TENDER THE OLD NOTES TO THE EXCHANGE
AGENT AND NOT TO THE COMPANY.
The Exchange Offer is not conditioned upon any minimum principal amount of
Old Notes being tendered for exchange. However, the Exchange Offer is subject
to certain conditions. Please see the Prospectus under the section titled "The
Exchange Offer--Certain Conditions to the Exchange Offer."
The Exchange Offer is not being made to, nor will tenders be accepted from
or on behalf of, Holders of Old Notes in any jurisdiction in which the making or
acceptance of the Exchange Offer would not be in compliance with the laws of
such jurisdiction.
The instructions included with this Letter of Transmittal must be followed
in their entirety. Questions and request for assistance or for additional copies
of the Prospectus or this Letter of Transmittal may be directed to the Exchange
Agent at the address listed above.
-2-
<PAGE>
APPROPRIATE SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
LADIES AND GENTLEMEN:
The undersigned hereby tenders to the Company the principal amount of Old
Notes indicated below under "Description of Old Notes," in accordance with and
upon the terms and subject to the conditions set forth in the Prospectus,
receipt of which is hereby acknowledged, and in this Letter of Transmittal, for
the purpose of exchanging the principal amount of Old Notes designated herein
held by the undersigned and tendered hereby for the equal principal amount of
the Exchange Notes. Exchange Notes will be issued only in integral multiples of
$1,000 to each tendering Holder of Old Notes whose Old Notes are accepted in the
Exchange Offer. Subject to the foregoing, Holders may tender all or a portion
of their Old Notes pursuant to the Exchange Offer.
Subject to, and effective upon, the acceptance for exchange of the Old
Notes tendered herewith in accordance with the terms of the Exchange Offer, the
undersigned hereby sells, assigns and transfers to, or upon the order of, the
Company all right, title and interest in and to all such Old Notes that are
being tendered hereby and that are being accepted for exchange pursuant to the
Exchange Offer. The undersigned hereby irrevocably constitutes and appoints the
Exchange Agent as the true and lawful agent and attorney-in-fact of the
undersigned (with full knowledge that the Exchange Agent also acts as the agent
of the Company), with respect to the Old Notes tendered hereby and accepted for
exchange pursuant to the Exchange Offer with full power of substitution (such
power of attorney being deemed to be an irrevocable power coupled with an
interest) to deliver the Old Notes tendered hereby to the Company (together with
all accompanying evidences of transfer and authenticity) for transfer or
cancellation by the Company.
All authority conferred or agreed to be conferred in this Letter of
Transmittal shall not be affected by, and shall survive, the death or incapacity
of the undersigned and any obligation of the undersigned hereunder shall be
binding upon the heirs, executors, administrators, legal representatives,
successors and assigns of the undersigned. Any tender of Old Notes hereunder may
be withdrawn only in accordance with the procedures set forth in the
instructions contained in this Letter of Transmittal. See Instruction 4 hereto.
The undersigned hereby represents and warrants that he or she has full
power and authority to tender, exchange, assign and transfer the Old Notes
tendered hereby and that the Company will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances and
not subject to any adverse claim. The undersigned will, upon request, execute
and deliver any additional documents deemed by the Company to be necessary or
desirable to complete the assignment and transfer of the Old Notes tendered. The
undersigned has read and agrees to all of the terms of the Exchange Offer.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Company to be necessary or desirable to complete the
sale, assignment and transfer of the Old Notes tendered hereby. All authority
conferred or agreed to be conferred in this Letter and every obligation of the
undersigned hereunder shall be binding upon the successors, assigns, heirs,
executors, administrators, trustees in bankruptcy and legal representatives of
the undersigned and shall not be affected by, and shall survive, the death or
incapacity of the undersigned. This tender may be withdrawn only in accordance
with the procedures set forth in "The Exchange Offer--Withdrawal Rights" section
of the Prospectus and the instructions contained in this Letter of Transmittal.
See Instruction 4 hereto.
The name(s) and address(es) of the registered Holder(s) should be printed
herein under "Description of Old Notes" (unless a label setting forth such
information appears thereunder), exactly as they appear on the Old Notes
tendered hereby. The certificate number(s) and the principal amount of Old
Notes to which this Letter relates, together with the principal amount of such
Old Notes that the undersigned wishes to tender, should be indicated in the
appropriate boxes herein under "Description of Old Notes."
-3-
<PAGE>
The undersigned agrees that acceptance of any tendered Old Notes by the
Company and the issuance of Exchange Notes in exchange therefor shall constitute
performance in full by the Company of its obligations under the Registration
Rights Agreement and that, upon the issuance of the Exchange Notes, the Company
will have no further obligations or liabilities thereunder.
The undersigned understands that the tender of Old Notes pursuant to one of
the procedures described in the Prospectus under "The Exchange Offer -- Exchange
Offer Procedures" and the Instructions hereto will constitute the tendering
Holder's acceptance of the terms and the conditions of the Exchange Offer. The
undersigned hereby represents and warrants to the Company that the Exchange
Notes to be acquired by such Holder pursuant to the Exchange Offer are being
acquired in the ordinary course of such Holder's business, that such Holder has
no arrangement or understanding with any person to participate in the
distribution of the Exchange Notes. The Company's acceptance of Old Notes for
exchange tendered pursuant to the Exchange Offer will constitute a binding
agreement between the tendering Holder and the Company upon the terms and
subject to the conditions of the Exchange Offer.
THE UNDERSIGNED HEREBY REPRESENTS AND WARRANTS THAT IT IS NOT ENGAGED IN,
AND DOES NOT INTEND TO ENGAGE IN, A DISTRIBUTION OF THE EXCHANGE NOTES.
The undersigned also acknowledges that this Exchange Offer is being made
based on interpretations by the staff of the Securities and Exchange Commission
(the "Commission") set forth in no-action letters issued to third parties in
other transactions substantially similar to the Exchange Offer, which lead the
Company to believe that the Exchange Notes issued in exchange for the Old Notes
pursuant to the Exchange Offer may be offered for resale, resold and otherwise
transferred by holders thereof (other than (i) any such holder that is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act, (ii) an Initial Purchaser who acquired the Old Notes directly from the
Company solely in order to resell pursuant to Rule 144A of the Securities Act or
any other available exemption under the Securities Act, or (iii) a broker-dealer
who acquired the Old Notes as a result of market making or other trading
activities), without further compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that such Exchange Notes are
acquired in the ordinary course of such holders' business and such holders are
not participating and have no arrangement or understanding with any person to
participate in the distribution (within the meaning of the Securities Act) of
such Exchange Notes. If the undersigned is not a broker-dealer, the undersigned
represents that it is not engaged in, and does not intend to engage in, a
distribution of Exchange Notes and has no arrangement or understanding to
participate in a distribution of Exchange Notes. If any holder is an affiliate
of the Company or is engaged in or has any arrangement or understanding with
respect to the distribution of the Exchange Notes to be acquired pursuant to the
Exchange Offer, such holder (i) could not rely on the applicable interpretations
of the staff of the Commission and (ii) must comply with the registration and
prospectus delivery requirements of the Securities Act, including the
requirement that any such secondary resale transaction be covered by an
effective registration statement containing the selling security holder
information required by Item 507 of Regulation S-K of the Securities Act. If
the undersigned is a broker-dealer that will receive Exchange Notes for its own
account in exchange of Old Notes, it represents that the Old Notes to be
exchanged for the Exchange Notes were acquired by it as a result of market-
making activities or other trading activities and acknowledges that it will
deliver a prospectus in connection with any resale of such Exchange Notes;
however, by so acknowledging and by delivering a prospectus, the undersigned
will not be deemed to admit that it is an "underwriter" within the meaning of
Section 2(11) of the Securities Act.
The undersigned understands that the Exchange Notes issued in consideration
of Old Notes accepted for exchange, and/or any principal amount of Old Notes not
tendered or not accepted for exchange, will only be issued in the name of the
Holder(s) appearing herein under "Description of Old Notes." Unless otherwise
indicated under "Special Delivery Instructions," please mail the Exchange Notes
issued in consideration of Old Notes accepted for exchange, and/or any principal
amount of Old Notes not tendered or not accepted for exchange (and accompanying
documents, as appropriate), to the Holder(s) at the address(es) appearing herein
under "Description of Old Notes." In the event that the Special Delivery
Instructions are completed, please mail the Exchange Notes issued in
-4-
<PAGE>
consideration of Old Notes accepted for exchange, and/or any Old Notes for any
principal amount not tendered or not accepted for exchange, in the name of the
Holder(s) appearing herein under "Description of Old Notes," and send such
Exchange Notes and/or Old Notes to, the address(es) so indicated. Any transfer
of Old Notes to a different holder must be completed, according to the
provisions on transfer of Old Notes contained in the Indenture.
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OLD NOTES"
BELOW AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE OLD NOTES AS
SET FORTH IN SUCH BOX BELOW.
-5-
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER
1. GUARANTEE OF SIGNATURES. Signatures on this Letter of Transmittal or
notice of withdrawal, as the case may be, must be guaranteed by an institution
which falls within the definition of "eligible guarantor institution" contained
in Rule 17Ad-15 as promulgated by the Securities and Exchange Commission under
the Securities Exchange Act of 1934, as amended (hereinafter, an "Eligible
--------
Institution") unless (i) the Old Notes tendered hereby are tendered by the
- ----------- ------
Holder(s) of the Old Notes who has (have) not completed the box entitled
"Special Delivery Instructions" on this Letter of Transmittal or (ii the Old
Notes are tendered for the account of an Eligible Institution.
2. DELIVERY OF THIS LETTER OF TRANSMITTAL AND OLD NOTES; GUARANTEED
DELIVERY PROCEDURES. This Letter of Transmittal is to be used: (i) by all
Holders who are not ATOP members, (ii by Holders who are ATOP members but choose
not to use ATOP or (ii if the Old Notes are to be tendered in accordance with
the guaranteed delivery procedures set forth in the Prospectus under "The
Exchange Offer -- Guaranteed Delivery Procedures." To validly tender Old Notes,
a Holder must physically deliver a properly completed and duly executed Letter
of Transmittal (or facsimile thereof) with any required signature guarantees and
all other required documents to the Exchange Agent at its address set forth on
the cover of this Letter of Transmittal prior to the Expiration Date (as defined
below) or the Holder must properly complete and duly execute an ATOP ticket in
accordance with DTC procedures. Otherwise, the Holder must comply with the
guaranteed delivery procedures set forth in the next paragraph. Notwithstanding
anything to the contrary in the Registration Rights Agreement, the term
"Expiration Date" means 5:00 p.m., New York City time, on the earlier of
- ----------------
_________ __, 1998 (or such later date to which the Company may, in its sole
discretion, extend the Exchange Offer) or the date on which 100% of the Old
Notes are validly tendered and not withdrawn. If this Exchange Offer is
extended, the term "Expiration Date" shall mean the latest time and date to
---------------
which the Exchange Offer is extended. The Company expressly reserves the right,
at any time or from time to time, to extend the period of time during which the
Exchange Offer is open by giving oral (confirmed in writing) or written notice
of such extension to the Exchange Agent and by making a public announcement of
such extension prior to 9:00 a.m., New York City time, on the next business day
after the previously scheduled Expiration Date.
LETTERS OF TRANSMITTAL SHOULD NOT BE SENT TO THE COMPANY OR TO DTC.
If a Holder of the Old Notes desires to tender such Old Notes and time will
not permit such Holder's required documents to reach the Exchange Agent before
the Expiration Date, a tender may be effected if (a) the tender is made through
an Eligible Institution, (b) on or prior to the Expiration Date, the Exchange
Agent receives from such Eligible Institution a properly completed and duly
executed Letter of Transmittal (or a facsimile thereof) and Notice of Guaranteed
Delivery (by telegram, facsimile transmission, mail or hand delivery) setting
forth the name and address of the Holder of the Old Notes and the principal
amount of Old Notes tendered, stating that the tender is being made thereby and
guaranteeing that within three New York Stock Exchange trading days after the
Expiration Date, any documents required by the Letter of Transmittal will be
deposited by the Eligible Institution with the Exchange Agent; and (c) all other
documents required by the Letter of Transmittal are received by the Exchange
Agent within three New York Stock Exchange trading days after the Expiration
Date. See "The Exchange Offer -- Guaranteed Delivery Procedures" as set forth
in the Prospectus.
Only a Holder of Old Notes may tender Old Notes in the Exchange Offer. The
term "Holder" as used herein with respect to the Old Notes means any person in
whose name Old Notes are registered on the books of the Trustee. If the Letter
of Transmittal or any Old Notes are signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity, such persons
-6-
<PAGE>
should so indicate when signing, and, unless waived by the Company, proper
evidence satisfactory to the Company of their authority to so act must be so
submitted.
Any beneficial Holder whose Old Notes are registered in the name of his
broker, dealer, commercial bank, trust company or other nominee and who wishes
to validly surrender those Old Notes in the Exchange Offer should contact such
registered Holder promptly and instruct such registered Holder to tender on his
behalf. If such beneficial Holder wishes to tender on his own behalf, such
beneficial Holder must, prior to completing and executing the Letter of
Transmittal, make appropriate arrangements to register ownership of the Old
Notes in such beneficial holder's name. It is the responsibility of the
beneficial holder to register ownership in his own name if he chooses to do so.
The transfer of record ownership may take considerable time.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL (OR FACSIMILE HEREOF)
AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE EXCHANGING
HOLDER, but, except as otherwise provided below, the delivery will be deemed
made only when actually received or confirmed by the Exchange Agent. If sent by
mail, registered mail with return receipt requested, properly insured, is
recommended. In all cases, sufficient time should be allowed to assure timely
delivery to the Exchange Agent before the Expiration Date. No Letters of
Transmittal or Old Notes should be sent to the Company.
No alternative, conditional or contingent tenders will be accepted. All
tendering Holders, by execution of this Letter of Transmittal (or facsimile
hereof), waive any right to receive notice of acceptance of their Old Notes for
exchange.
3. INADEQUATE SPACE. If the space provided herein is inadequate, the
certificate numbers and principal amount of the Old Notes to which this Letter
of Transmittal relates should be listed on a separate signed schedule attached
hereto.
4. WITHDRAWAL OF TENDER. Tenders of Old Notes may be withdrawn at any
time prior to 5:00 p.m., New York City time, on the Expiration Date.
To be effective, a written or facsimile transmission notice of withdrawal
must (i) be received by the Exchange Agent at the address set forth herein prior
to 5:00 p.m., New York City time, on the Expiration Date, (ii specify the name
of the person having tendered the Old Notes to be withdrawn, (ii identify the
Old Notes to be withdrawn and (iv be (a) signed by the Holder in the same manner
as the original signature on the Letter of Transmittal by which such Old Notes
were tendered (including any required signature guarantees) or (b) accompanied
by evidence satisfactory to the Company that the Holder withdrawing such tender
has succeeded to beneficial ownership of such Old Notes. If Old Notes have been
tendered pursuant to the ATOP procedure with DTC, any notice of withdrawal must
otherwise comply with the procedures of DTC. Old Notes properly withdrawn will
thereafter be deemed not validly tendered for purposes of the Exchange Offer;
provided, however, that withdrawn Old Notes may be retendered by again following
- -------- -------
one of the procedures described herein at any time prior to 5:00 p.m., New York
City time, on the Expiration Date. All questions as to the validity, form and
eligibility (including time of receipt) of notice of withdrawal will be
determined by the Company, whose determinations will be final and binding on all
parties. Neither the Company, the Exchange Agent, nor any other person will be
under any duty to give notification of any defects or irregularities in any
notice of withdrawal or incur any liability for failure to give any such
notification. The Exchange Agent intends to use reasonable efforts to give
notification of such defects and irregularities.
5. PARTIAL TENDERS; PRO RATA EFFECT. Tenders of the Old Notes will be
accepted only in integral multiples of $1,000. If less than the entire
principal amount evidenced by any Old Notes is to be tendered, fill in the
principal amount that is to be tendered in the box entitled "Principal Amount
Tendered" below. The entire principal amount of all Old Notes delivered to the
Exchange Agent will be deemed to have been tendered unless otherwise indicated.
-7-
<PAGE>
6. SIGNATURES ON THIS LETTER OF TRANSMITTAL; BOND POWERS AND
ENDORSEMENTS. If this Letter of Transmittal is signed by the registered
Holder(s) of the Old Notes tendered hereby, the signature must correspond with
the name as written on the face of the certificate representing such Old Notes
without alteration, enlargement or any change whatsoever.
If any of the Old Notes tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If any of the Old Notes tendered hereby are registered in different names,
it will be necessary to complete, sign and submit as many separate copies of
this Letter of Transmittal and any necessary accompanying documents as there are
different registrations.
When this Letter of Transmittal is signed by the Holder(s) of Old Notes
listed and tendered hereby, no endorsements or separate bond powers are
required.
If this Letter of Transmittal is signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity, such persons should so
indicate when signing, and, unless waived by the Company, proper evidence
satisfactory to the Company of their authority to so act must be submitted.
7. SPECIAL DELIVERY INSTRUCTIONS. Tendering Holders should indicate in
the applicable box the name and address to which Exchange Notes issued in
consideration of Old Notes accepted for exchange, or Old Notes for principal
amounts not exchanged or not tendered, are to be sent, if different from the
name and address of the person signing this Letter of Transmittal.
8. WAIVER OF CONDITIONS. The Company reserves the absolute right to
waive any of the specified conditions in the Exchange Offer, in whole at any
time or in part from time to time, in the case of any Old Notes tendered hereby.
See "The Exchange Offer--Certain Conditions to the Exchange Offer" in the
Prospectus.
9. TRANSFER TAXES. The Company will pay all transfer taxes, if any,
applicable to the exchange of Old Notes pursuant to the Exchange Offer. If,
however, Exchange Notes and/or substitute Old Notes for principal amounts not
exchanged are to be delivered to any person other than the Holder of the Old
Notes or if a transfer tax is imposed for any reason other than the exchange of
Old Notes pursuant to the Exchange Offer, the amount of any such transfer taxes
(whether imposed on the registered Holder or any other persons) will be payable
by the tendering Holder. If satisfactory evidence of payment of such taxes or
exemption therefrom is not submitted, the amount of such transfer taxes will be
billed directly to such tendering Holder.
10. IRREGULARITIES. All questions as to validity, form, eligibility
(including time of receipt), acceptance and withdrawal of tendered Old Notes
will be resolved by the Company, in its sole discretion, whose determination
shall be final and binding. The Company reserves the absolute right to reject
any or all tenders of any particular Old Notes that are not in proper form, or
the acceptance of which would, in the opinion of the Company or its counsel, be
unlawful. The Company also reserves the absolute right to waive any defect,
irregularity or condition of tender with regard to any particular Old Notes. The
Company's interpretation of the terms of, and conditions to, the Exchange Offer
(including the instructions herein) will be final and binding. Unless waived,
any defects or irregularities in connection with tenders must be cured within
such time as the Company shall determine. Neither the Company nor the Exchange
Agent shall be under any duty to give notification of defects in such tenders or
shall incur any liability for failure to give such notification. The Exchange
Agent intends to use reasonable efforts to give notification of such defects and
irregularities. Tenders of Old Notes will not be deemed to have been made until
all defects and irregularities have been cured or waived. Any Old Notes received
by the Exchange Agent that are not properly tendered and as to which the
irregularities have not been cured or waived will be returned by the
-8-
<PAGE>
Exchange Agent to the tendering Holder, unless otherwise provided by this Letter
of Transmittal, as soon as practicable following the Expiration Date.
11. INTEREST ON EXCHANGED OLD NOTES. Holders whose Old Notes are accepted
for exchange will not receive accrued interest thereon on the date of exchange.
Instead, interest accruing from April 22, 1998 through the Expiration Date will
be payable on the Exchange Notes on October 1, 1998, in accordance with the
terms of the Exchange Notes. See "The Exchange Offer -- Acceptance of Old Notes
for Exchange; Delivery of New Notes" and "Description of Notes" sections of the
Prospectus.
12. MUTILATED, LOST, STOLEN OR DESTROYED CERTIFICATES. Holders whose
certificates for Old Notes have been mutilated, lost, stolen or destroyed should
contact the Exchange Agent at the address indicated above for further
instructions.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE HEREOF), TOGETHER
WITH ALL REQUIRED DOCUMENTS, OR A NOTICE OF GUARANTEED DELIVERY, MUST BE
RECEIVED BY THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE.
IMPORTANT TAX INFORMATION
Under Federal income tax laws, a registered Holder of Old Notes or Exchange
Notes is required to provide the Trustee (as payer) with such Holder's correct
TIN on Substitute Form W-9 below or otherwise establish a basis for exemption
from backup withholding. If such Holder is an individual, the TIN is his social
security number. If the Trustee is not provided with the correct TIN, a $50
penalty may be imposed by the Internal Revenue Service, and payments made to
such Holder with respect to Old Notes or Exchange Notes may be subject to backup
withholding.
Certain Holders (including, among others, all corporations and certain
foreign persons) are not subject to these backup withholding and reporting
requirements. Exempt Holders should indicate their exempt status on Substitute
Form W-9. A foreign person may qualify as an exempt recipient by submitting to
the Trustee a properly completed Internal Revenue Service Form W-8, signed under
penalties of perjury, attesting to that Holder's exempt status. A Form W-8 can
be obtained from the Trustee.
If backup withholding applies, the Trustee is required to withhold 31% of
any payments made to the Holder or other payee. Backup withholding is not an
additional Federal income tax. Rather, the Federal income tax liability of
persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained from the Internal Revenue Service.
Purpose of Substitute Form W-9
To prevent backup withholding on payments made with respect to Old Notes or
Exchange Notes the Holder is required to provide the Trustee with: (i) the
Holder's correct TIN by completing the form below, certifying that the TIN
provided on Substitute Form W-9 is correct (or that such Holder is awaiting a
TIN) and that (A) such Holder is exempt from backup withholding, (B) the Holder
has not been notified by the Internal Revenue Service that the Holder is subject
to backup withholding as a result of failure to report all interest or dividends
or (C) the Internal Revenue Service has notified the Holder that the Holder is
no longer subject to backup withholding; and (ii if applicable, an adequate
basis for exemption.
-9-
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
PAYER'S NAME: STATE STREET BANK AND TRUST COMPANY
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SUBSTITUTE Part 1 - PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT AND Social Security Number
CERTIFY BY SIGNING AND DATING BELOW
FORM W-9
DEPARTMENT OF THE OR
TREASURY-INTERNAL ----------------------------
REVENUE SERVICE Employer Identification Number
- ------------------------------------------------------------------------------------------------------------------------------------
PART 2 - CERTIFICATION - UNDER PENALTIES OF PERJURY, I CERTIFY THAT:
PAYER'S REQUEST FOR (1) The number shown on this form is my correct Taxpayer Identification Number (or I am waiting for a
TAXPAYER IDENTIFICATION number to be issued to me); and
NUMBER ("TIN") (2) I am not subject to backup withholding because (i) I am exempt from backup withholding, (ii) I
have not been notified by the Internal Revenue Service ("IRS") that I am subject to backup
withholding as a result of failure to report all interest or dividends, or (iii) the IRS has
notified me that I am no longer subject to backup withholding.
CERTIFICATE INSTRUCTION -- You must cross out item (2) in Part 2 above if you have been notified by
the IRS that you are subject to backup withholding because of under reporting interest or dividends
on your tax return. However, if after being notified by the IRS that you were subject to backup
withholding you received another notification from the IRS stating that you are no longer subject
to backup withholding, do not cross out item (2).
-------------------------------------------------------------------------------------------------------------
Part 3
SIGNATURE..........................DATE................., 1998
Awaiting TIN [_]
NAME (Please Print)...........................................
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER.
PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN
PART 3 OF SUBSTITUTE FORM W-9.
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has
not been issued to me, and either (i) I have mailed or delivered an application
to receive a taxpayer identification number to the appropriate Internal Revenue
Service Center or Social Security Administration Office or (ii) I intend to
mail or deliver an application in the near future. I understand that if I do
not provide a taxpayer identification number within 60 days, 31% of all
reportable payments made to me thereafter will be withheld until I provide a
number.
Signature..............................................Date.....................
Name (Please Print).............................................................
- --------------------------------------------------------------------------------
-10-
<PAGE>
PLEASE READ ACCOMPANYING INSTRUCTIONS CAREFULLY
================================================================================
SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 1 and 7)
To be completed ONLY if the Exchange Notes issued in consideration of Old Notes
exchanged, or certificates for Old Notes in a principal amount not surrendered
for exchange are to be mailed to someone other than the undersigned or to the
undersigned at an address other than that below.
Mail to:
Name:
--------------------------------------------------------------------------
(Please Print)
Address:
-----------------------------------------------------------------------
(Zip Code)
================================================================================
DESCRIPTION OF OLD NOTES
(See Instructions 2 and 7)
<TABLE>
<CAPTION>
========================================================================================================================
Name(s) and Address(es) of Certificate(s)
Registered Holder(s) (Attach additional signed list, if necessary)
(Please fill in, in blank)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
--------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
Certificate Number(s)* Aggregate Principal Amount Principal Amount of Old Notes
of Old Notes Evidenced by Tendered** (must be integral
Certificate(s) multiples of $1,000)
--------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
Total
========================================================================================================================
</TABLE>
- ---------------------------------------
* Need not be completed if Old Notes are being tendered by book-entry
transfer.
** Unless otherwise indicated, the entire principal amount of Old Notes
evidenced by any certificate will be deemed to have been tendered.
-11-
<PAGE>
(Boxes below to be checked by Eligible Institutions only)
[_] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE
BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution
-------------------------------------------
DTC Account Number
-------------------------------------------------------
Transaction Code Number
--------------------------------------------------
[_] CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY IF
TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s)
-------------------------------------------
Window Ticket Number (if any)
---------------------------------------------
Date of Execution of Notice of Guaranteed Delivery
------------------------
Name of Institution which Guaranteed Delivery
-----------------------------
If Guaranteed Delivery is to be made by Book-Entry Transfer:
Name of Tendering Institution
---------------------------------------------
DTC Account Number
--------------------------------------------------------
Transaction Code Number
---------------------------------------------------
[_] CHECK HERE IF TENDERED BY BOOK-ENTRY TRANSFER AND NON-EXCHANGED OLD NOTES
ARE TO BE RETURNED BY CREDITING THE DTC ACCOUNT NUMBER SET FORTH ABOVE.
[_] CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED THE OLD NOTES FOR ITS
OWN ACCOUNT AS A RESULT OF MARKET MAKING OR OTHER TRADING ACTIVITIES (A
"PARTICIPATING BROKER-DEALER") AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF
THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.
Name
----------------------------------------------------------------------------
Address
-------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
-12-
<PAGE>
PLEASE SIGN HERE
WHETHER OR NOT OLD NOTES ARE BEING
PHYSICALLY TENDERED HEREBY
X
------------------------------ -------------------------
X
------------------------------ -------------------------
SIGNATURE(S) OF OWNER(S) DATED
OF AUTHORIZED SIGNATORY
Area Code and Telephone Number:
-------------------------------------------------
This box must be signed by registered holder(s) of Old Notes as their
name(s) appear(s) on certificate(s) for Old Notes hereby tendered or on a
security position listing, or by any person(s) authorized to become registered
holder(s) by endorsement and documents transmitted with this Letter (including
such opinions of counsel, certifications and other information as may be
required by the Company or the Trustee for the Old Notes to comply with the
restrictions on transfer applicable to the Old Notes). If signature is by an
attorney-in-fact, trustee, executor, administrator, guardian, officer or other
person acting in a fiduciary or representative capacity, such person must set
forth his or her full title below.
Name(s)
-------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT)
Capacity (full title)
-----------------------------------------------------------
Address
-------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Tax Identification or Social Security Number(s)
---------------------------------
- --------------------------------------------------------------------------------
GUARANTEE OF SIGNATURE(S)
(See Instructions 1 and 6 to determine if required)
Authorized Signature
------------------------------------------------------------
Name
----------------------------------------------------------------------------
Name of Firm
--------------------------------------------------------------------
Title
---------------------------------------------------------------------------
Address
-------------------------------------------------------------------------
Area Code and Telephone Number
--------------------------------------------------
Dated
---------------------------------------------------------------------------
-13-
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER.
Social Security numbers have nine digits separated by two hyphens: i.e., 000-00-
0000. Employer identification numbers have nine digits separated by only one
hyphen: i.e., 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<CAPTION>
---------------------------------------------- -----------------------------------------------------
FOR THIS TYPE GIVE THE SOCIAL FOR THIS TYPE GIVE THE EMPLOYER
OF ACCOUNT: SECURITY NUMBER OF ACCOUNT: IDENTIFICATION
OF-- NUMBER OF--
---------------------------------------------- -----------------------------------------------------
<S> <C> <C> <C>
1. Individual The individual 6. Sole proprietorship The owner/1/
2. Two or more The actual owner of 7. A valid trust, estate, Legal entity/3/
individuals (joint the account or, if or pension trust
account) combined funds, the
first individual on the
account./2/
8. Corporate The corporation
3. Custodian account of The minor/4/ 9. Association, club, The organization
a minor (Uniform religious, charitable,
Gift to Minors Act) educational or other
tax-exempt organization
10. Partnership The partnership
4.a. The usual revocable The grantor-trustee 11. A broker or The broker or
savings trust (grantor registered nominee nominee
is also trustee)
b. So-called trust The actual owner 12. Account with the The public entity
account that is not a Department of
legal or valid trust Agriculture in the
under State law name of a public
entity (such as a State
or local government,
school district, or
prison) that receives
agricultural program
5. Sole proprietorship The owner/1/ payments
</TABLE>
- --------------------------------------
/1/ You must show your individual name, but you may also enter your business
or "doing business as" name. You may use either your SSN or EIN.
/2/ List first and circle the name of the person whose number you furnish.
/3/ List first and circle the name of the legal trust, estate, or pension
trust. (Do not furnish the identifying number of the personal
representative or trustee unless the legal entity itself is not designated
in the account title.)
/4/ Circle the minor's name and furnish the minor's social security number.
-14-
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
The following is a list of payees exempt from backup withholding and for which
no information reporting is required. For interest and dividends, all listed
payees are exempt except item (9). For broker transactions, payees listed in
items (1) through (13) and a person registered under the Investment Advisers Act
of 1940 U.C. who regularly acts as a broker are exempt. Payments subject to
reporting under sections 6041 and 6041A are generally exempt from backup
withholding only if made to payees described in items (1) through (7), except a
corporation that provides medical and health care services or bills and collects
payments for such services is not exempt from backup withholding or information
reporting. Only payees described in items (2) through (6) are exempt from
backup withholding for barter exchange transactions, patronage dividends, and
payments by certain fishing boat operators.
(1) A corporation.
(2) An organization exempt from tax under section 501(a), or an individual
retirement plan or custodial account under section 403(b)(7).
(3) The United States or any agency or instrumentality thereof.
(4) A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
(5) A foreign government, a political subdivision of a foreign government, or
an agency or instrumentality thereof.
(6) An international organization or any agency or instrumentality thereof.
(7) A foreign central bank of issue.
(8) A dealer in securities or commodities required to register in the U.S. or a
possession of the U.S.
(9) A futures commission merchant registered with the Commodity Futures Trading
Commission.
(10) A real estate investment trust.
(11) An entity registered at all times under the Investment Company Act of 1940.
(12) A common trust fund operated by a bank under section 584(a).
(13) A financial institution.
(14) A middleman known in the investment community as a nominee or listed in the
most recent publication of the American Society of Corporate Secretaries,
Inc. Nominee List.
(15) An exempt charitable remainder trust, or a non-exempt trust described in
section 4947.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
. Payments to nonresident aliens subject to withholding under section 1441.
. Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident partner.
. Payments of patronage dividends not paid in money.
. Payments made by certain foreign organizations.
NOTE: You may be subject to backup withholding if this interest is $600 or
more and is paid in the course of the payer's trade or business and you
have not provided your correct taxpayer identification number to the payer.
. Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
. Payments described in section 6049(b)(5) to nonresident aliens.
. Payments on tax-free covenant bonds under section 1451.
. Payments made by certain foreign organizations.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER. FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER. WRITE "EXEMPT" ON THE FACE OF THE FORM AND RETURN IT TO
THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS,
ALSO SIGN AND DATE THE FORM.
Certain payments other than interest, royalties, and patronage dividends that
are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
PRIVACY ACT NOTICE. Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Payers must generally withhold 31% of taxable
interest,dividend, and certain other payments to a payee who does not furnish a
taxpayer identification number to a payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS. If you fail to
include any portion of an includible payment for interest, dividends, or
patronage dividends in gross income, such failure will be treated as being due
to negligence and will be subject to a penalty of 5% on any portion of an under-
payment attributable to that failure unless there is clear and convincing
evidence to the contrary.
(3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
-15-
<PAGE>
EXHIBIT 99.2
------------
JACKSON PRODUCTS, INC.
OFFER FOR ALL OUTSTANDING
9 1/2% SERIES A SENIOR SUBORDINATED NOTES DUE 2005
IN EXCHANGE FOR
9 1/2% SERIES B SENIOR SUBORDINATED NOTES DUE 2005
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY TIME, ON
THE EARLIER OF _________, 1998 (UNLESS EXTENDED) OR THE DATE ON WHICH 100% OF
THE OLD NOTES ARE VALIDLY TENDERED AND NOT WITHDRAWN (THE "EXPIRATION
DATE"). TENDERED OLD NOTES MAY BE WITHDRAWN AT ANY TIME ON OR PRIOR TO
THE EXPIRATION DATE OF THE EXCHANGE OFFER.
To Our Clients:
Enclosed for your consideration is a Prospectus, dated ________, 1998 (as
the same may be amended or supplemented from time to time, the "Prospectus"),
and the related Letter of Transmittal (the "Letter of Transmittal"), relating to
the offer (the "Exchange Offer") of Jackson Products, Inc. (the "Company") to
exchange its 9 1/2% Series B Subordinated Notes Due 2005 (the "Exchange Notes")
for its outstanding 9 1/2% Series A Senior Subordinated Notes due 2005 (the "Old
Notes"), upon the terms and subject to the conditions described in the
Prospectus and the Letter of Transmittal. The Exchange Offer is being made in
order to satisfy certain obligations of the Company contained in the
Registration Rights Agreement dated April 22, 1998 by and among the Company,
Jefferies & Company, Inc., and Goldman, Sachs & Co.
Holders of Old Notes who cannot deliver all required documents to the
Exchange Agent on or prior to the Expiration Date (as defined below), or who
cannot complete the procedures for book-entry transfer on a timely basis, must
follow guaranteed delivery described in the Prospectus under "The Exchange Offer
- -- Guaranteed Delivery Procedures."
This material is being forwarded to you as the beneficial owner of the Old
Notes carried by us in your account but not registered in your name. A tender
of such Old Notes may only be made by us as the holder of record and pursuant to
your instructions.
Accordingly, we request instructions as to whether you wish us to tender on
your behalf the Old Notes held by us for your account, pursuant to the terms and
conditions set forth in the enclosed Prospectus and Letter of Transmittal.
Your instructions should be forwarded to us as promptly as possible in
order to permit us to tender the Old Notes on your behalf in accordance with the
provisions of the Exchange Offer. The Exchange Offer will expire at 5:00 p.m.,
New York City time, on _________, 1998, unless extended by the Company. Any Old
Notes tendered pursuant to the Exchange Offer may be withdrawn at any time
before the Expiration Date.
Your attention is directed to the following:
1. The Exchange Offer is for any and all Old Notes.
<PAGE>
2. The Exchange Offer is subject to certain conditions set forth in
the Prospectus in the section captioned "The Exchange Offer--Certain Conditions
to the Exchange Offer."
3. Any transfer taxes incident to the transfer of Old Notes from the
holder to the Company will be paid by the Company, except as otherwise provided
in Instruction 9 of the Letter of Transmittal.
4. The Exchange Offer expires at 5:00 p.m., New York City time, on
_______, 1998 (unless extended by the Company) or the date on which 100% of the
Old Notes are validly tendered and not withdrawn.
If you wish to have us tender your Old Notes, please so instruct us by
completing, executing and returning to us the instruction form on the back of
this letter. The letter of Transmittal is furnished to you for informational
purposes only and may not be used directly by you to tender Old Notes held by us
and registered in our name for your account or benefit.
<PAGE>
INSTRUCTIONS WITH RESPECT TO
THE EXCHANGE OFFER
The undersigned acknowledge(s) receipt of your letter and the enclosed
material referred to therein relating to the Exchange Offer made by Jackson
Products, Inc. with respect to its Old Notes.
This will instruct you to tender the Old Notes held by you for the account
of the undersigned, upon and subject to the terms and conditions set forth in
the Prospectus and the related Letter of Transmittal.
Please tender the Old Notes held by you for my account as indicated below:
Aggregate Principal Amount Of Old Notes
---------------------------------------
9 1/2% Series A Senior Subordinated
Notes Due 2005 ..........................
---------------------------------------
[_] Please do not tender any Old Notes
held by you for my account.
Dated: , 1998
------------------------ ---------------------------------------
---------------------------------------
Signature(s)
---------------------------------------
---------------------------------------
---------------------------------------
Please print name(s) here
---------------------------------------
---------------------------------------
Address(es)
---------------------------------------
Area Code and Telephone Number
---------------------------------------
Tax Identification or Social
Security No(s).
None of the Old Notes held by us for your account will be tendered unless
we receive written instructions from you to do so. Unless a specific contrary
instruction is given in the space provided, your signature(s) hereon shall
constitute an instruction to us to tender all the Old Notes held by us for your
account.
<PAGE>
EXHIBIT 99.3
------------
NOTICE OF GUARANTEED DELIVERY
FOR
JACKSON PRODUCTS, INC.
This Notice of Guaranteed Delivery, or one substantially equivalent to this
form, must be used to accept the Exchange Offer (as defined below) of Jackson
Products, Inc. (the "Company") made pursuant to the Prospectus, dated _________,
1998 (as the same may be amended or supplemented from time to time, the
"Prospectus"), and the related Letter of Transmittal (the "Letter of
Transmittal") if the Letter of Transmittal and all other required documents
cannot be delivered or transmitted by facsimile transmission, mail or hand
delivery to State Street Bank and Trust Company (the "Exchange Agent") on or
prior to 5:00 p.m., New York City time, on the Expiration Date (as defined in
the Prospectus) or the procedures for delivery by book-entry transfer cannot be
completed on a timely basis. See "The Exchange Offer -- Guaranteed Delivery
Procedures" section in the Prospectus. The term "Old Notes" means the Company's
outstanding 9 1/2% Series A Senior Subordinated Notes due 2005.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY
TIME, ON THE EARLIER OF ________, 1998 (UNLESS EXTENDED) OR THE DATE
ON WHICH 100% OF THE OLD NOTES ARE VALIDLY TENDERED AND
NOT WITHDRAWN (THE "EXPIRATION DATE"). TENDERED OLD NOTES MAY
BE WITHDRAWN AT ANY TIME ON OR PRIOR TO THE EXPIRATION DATE OF
THE EXCHANGE OFFER.
Deliver to: State Street Bank and Trust Company, Exchange Agent:
By Registered or Certified Mail: By Overnight Courier:
State Street Bank and Trust Company State Street Bank and Trust Company
P.O. Box 778 Two International Place
Boston, MA 02102-0078 Boston, MA 02110
Attn: Kellie Mullen Attn: Kellie Mullen
Telephone Number:
(617) 664-5587
By Facsimile for Eligible Institutions:
(617) 664-5395
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION OF THIS NOTICE OF GUARANTEED DELIVERY VIA
FACSIMILE TO A NUMBER OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID
DELIVERY.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an "Eligible Institution" under the instructions thereto, such
signature guarantee must appear in the applicable space provided in the
signature box on the Letter of Transmittal.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to the Company, upon the terms and
conditions set forth in the Prospectus and the Letter of Transmittal (which
together constitute the "Exchange Offer"), receipt of which are hereby
acknowledged, the aggregate principal amount of Old Notes set forth below
pursuant to the guaranteed delivery procedure described in "The Exchange Offer -
- -Guaranteed Delivery Procedures" section in the Prospectus and the Letter of
Transmittal.
Principal Amount of Old Notes Signature(s)
--------------------------
Tendered $
----------------------- --------------------------------------
Certificate Nos. Please Print the Following Information
(if available) Names(s) of Registered Holders
----------------- --------
Total Principal Amount
--------------------------------------
Represented by Old Notes Address
-------------------------------
Certificate(s)
----------------- --------------------------------------
If Old Notes will be Area Code and Telephone Number(s)
tendered by book-entry -----
transfer, provide the --------------------------------------
following information:
DTC Account Number
---------------
Dated:____________________ , 1998
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm or entity identified in Rule 17Ad-15 under the
Securities Exchange Act of 1934, as amended, as an "eligible guarantor
institution," hereby guarantees to deliver to the Exchange Agent, at its address
set forth above, either the Old Notes tendered hereby in proper form for
transfer, or confirmation of the book-entry transfer of such Old Notes pursuant
to the procedures for book-entry transfer set forth in the Prospectus, in either
case together with a properly completed and duly executed Letter of Transmittal
(or facsimile thereof), with any required signature guarantees, and any other
documents required by the Letter of Transmittal within three New York Stock
Exchange trading days after the date of execution of this Notice of Guaranteed
Delivery.
Name of Firm
--------------------- --------------------------------------
(Authorized Signature)
Address Name
-------------------------- ----------------------------------
Date
- --------------------------------- ----------------------------------
Zip Code
Area Code and
Telephone Number
---------------
<PAGE>
EXHIBIT 99.4
------------
JACKSON PRODUCTS, INC.
OFFER FOR ALL OUTSTANDING
9 1/2% SERIES A SENIOR SUBORDINATED NOTES DUE 2005
IN EXCHANGE FOR
9 1/2% SERIES B SENIOR SUBORDINATED NOTES DUE 2005
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY TIME, ON THE
EARLIER OF _______, 1998 (UNLESS EXTENDED) OR THE DATE ON WHICH 100% OF THE OLD
NOTES ARE VALIDLY TENDERED AND NOT WITHDRAWN (THE "EXPIRATION DATE"). TENDERED
OLD NOTES MAY BE WITHDRAWN AT ANY TIME ON OR PRIOR TO THE EXPIRATION DATE OF THE
EXCHANGE OFFER.
- --------------------------------------------------------------------------------
To: Brokers, Dealers, Commercial Bank,
Trust Companies and Other Nominees:
Jackson Products, Inc. (the "Company") is offering, upon and subject to the
terms and conditions set forth in the Prospectus, dated _______, 1998 (as the
same may be amended or supplemented from time to time, the "Prospectus"), and
the enclosed Letter of Transmittal (the "Letter of Transmittal"), to exchange
(the "Exchange Offer") its 9 1/2% Series B Senior Subordinated Notes Due 2005
(the "Exchange Notes") for its outstanding 9 1/2% Series A Senior Subordinated
Notes Due 2005 (the "Old Notes"). The Exchange Offer is being made in order to
satisfy certain obligations of the Company contained in the Registration Rights
Agreement dated April 22, 1998 by and among the Company, Jefferies & Company,
Inc., and Goldman, Sachs & Co.
We are requesting that you contact your clients for whom you hold Old Notes
registered in your name or in the name of your nominee regarding the Exchange
Offer. For your information and for forwarding to your clients for whom you
hold Old Notes registered in your name or in the name of your nominee, or who
hold Old Notes registered in their own names, we are enclosing the following
documents:
1. Prospectus dated ________, 1998;
2. The Letter of Transmittal for your use and for the information of
your clients, including Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9;
3. A Notice of Guaranteed Delivery to be used to accept the Exchange
Offer if time will not permit all required documents to reach the Exchange
Agent (as defined below) prior to the Expiration Date (as defined below) or
if the procedures for book-entry transfer cannot be completed on a timely
basis;
4. A form of letter which may be sent to your clients for whose
account you hold Old Notes registered in your name or the name of your
nominee, with space provided for obtaining such clients' instructions with
regard to the Exchange Offer;
5. Return envelopes addressed to State Street Bank and Trust
Company, the Exchange Agent (the "Exchange Agent") for the Old Notes.
Your prompt action is requested. The Exchange Offer will expire at 5:00
p.m., New York City time, on _______, 1998 (unless extended by the Company) or
the date on which 100% of the Old Notes are validly tendered
<PAGE>
and not withdrawn (the "Expiration Date"). Old Notes tendered pursuant to the
Exchange Offer may be withdrawn, subject to the procedures described in the
Prospectus, at any time prior to 5:00 p.m., New York City time, on the
Expiration Date.
To participate in the Exchange Offer, a duly executed and properly
completed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees and any other required documents, should be sent to the
Exchange Agent, all in accordance with the instructions set forth in the Letter
of Transmittal and the Prospectus.
If holders of Old Notes wish to tender but time will not permit all
required documents to reach the Exchange Agent prior to the Expiration Date or
to comply with the book-entry transfer procedures on a timely basis, a tender
may be effected by following the guaranteed delivery procedures described in the
Prospectus under "The Exchange Offer--Guaranteed Delivery Procedures."
The Company will, upon request, reimburse brokers, dealers, commercial
banks and trust companies for reasonable and necessary costs and expenses
incurred by them in forwarding the Prospectus and the related documents to the
beneficial owners of Old Notes held by them as nominee or in a fiduciary
capacity. The Company will pay or cause to be paid all stock transfer taxes
applicable to the exchange of Old Notes pursuant to the Exchange Offer, except
as set forth in Instruction 9 of the Letter of Transmittal.
Any inquiries you may have with respect to the Exchange Offer, or requests
for additional copies of the enclosed materials, should be directed to State
Street Bank and Trust Company, the Exchange Agent for the Old Notes, at its
address set forth on the front of the Letter of Transmittal.
Very truly yours,
JACKSON PRODUCTS, INC.
NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY
PERSON AS AN AGENT OF THE COMPANY OR THE EXCHANGE AGENT, OR AUTHORIZE YOU OR ANY
OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENTS ON BEHALF OF EITHER OF
THEM WITH RESPECT TO THE EXCHANGE OFFER, EXCEPT FOR STATEMENTS EXPRESSLY MADE IN
THE PROSPECTUS OR THE LETTER OF TRANSMITTAL.
Enclosures
